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When I was the vice president of marketing at a company, two things gave me headaches: first, the pile of memos on my desk, as over 80% were requests for promotional or price reductions for primary distributors; second, visiting primary distributors, because most of them would not discuss how to grow the market but instead complain about the company's shortcomings and negotiate for better terms and support. I am not unwilling to provide policy support to distributors, but I want to use it where it counts, maximizing its effectiveness rather than simply turning it into a perk for primary distributors.

Every manufacturer faces daily demands and conditions from primary distributors, which is indeed a thorny issue for marketing managers. If you agree casually, company expenses and costs increase, and other distributors will follow suit with similar demands. If you refuse, distributors complain about the company, refuse to cooperate with marketing activities, and even reduce sales of your products. As a marketing manager, when faced with various demands and conditions from primary distributors, you should calmly analyze them and handle them strategically, turning the manufacturer's policy support into a powerful marketing weapon.

What demands and conditions do primary distributors often raise?

Primary distributors sometimes directly, and sometimes through sales representatives, make various demands and conditions to the manufacturer:

  1. Price reductions: They often claim prices are too high, products don't sell, business is tough, or a competitor has lowered prices, or your product is more expensive than a competitor's, or there's no profit in distributing your products.
  2. Monthly discount promotional support: They often cite thin margins for secondary distributors and retail outlets, low enthusiasm for distributing your products, an upcoming sales peak, the need to stimulate inventory, or a competitor's promotional activity.
  3. Gift promotional support: They often mention competitors' buy-one-get-one-free offers, low brand awareness, or that consumers won't buy without gifts.
  4. Advertising support: They often cite competitors' effective advertising, insufficient brand awareness, or aggressive competitor advertising impacting their outlets and sales.
  5. New product additions: They often mention competitors' high-volume products, repeated consumer requests for certain products, low margins on existing products, or the lack of a particular product in your line.
  6. Freight subsidies: They often cite competitors offering freight subsidies, or that the distance from the factory is too far and freight costs are unbearable.
  7. Working capital support: They often mention other manufacturers providing such support, or that they have extended credit to secondary distributors and retail outlets and are facing cash flow difficulties.
  8. Additional manpower: They often cite competitors having more salespeople, or needing help to develop secondary distributors and retail outlets.
  9. Exclusive sales awards: They often mention competitors offering such awards, or that they are close to being exclusive distributors.
  10. Vehicle support: They often cite competitors providing small trucks or dedicated delivery vehicles.
  11. Store rent support: They often mention competitors helping with rent, or that their store primarily sells your products.
  12. Reimbursement for inspection and public relations expenses: They often cite product defects, inspections by industry and commerce or technical supervision departments, and expenses incurred to resolve issues.
  13. Expansion of sales territory: They often claim the designated territory is too small and restricts their growth.

Why are primary distributors demanding more and more?

The demands and conditions listed above are far from exhaustive. Primary distributors are making more demands with bigger appetites. Why? A careful analysis reveals several main reasons:

  1. Competitive manufacturer inducement: To survive intense competition, manufacturers use various tactics to please, attract, and retain distributors and consumers. Frequent promotions and diverse strategies put pressure on primary distributors; if their manufacturer doesn't respond with similar activities, they risk losing customers and market share to competitors. Thus, distributors seek support from their manufacturers to stay competitive.
  2. Thin profit margins: Micromargins are an inevitable trend in market competition. The era of huge distributor profits is history. Many distributors constantly seek policy support to boost their earnings.
  3. Changes in primary distributors: Over years of experience, they have become smarter and more business-savvy. With enhanced network control and financial strength, their negotiation skills and leverage have grown.
  4. Changes in consumers: Consumers are more mature, with diverse, segmented, and complex needs, making it harder for manufacturers and distributors to understand them. To survive, distributors rely on manufacturer support to run promotions that attract and stimulate consumers.

Can primary distributors' demands be met casually?

Mr. Wang, a friend of mine, was once the marketing director of A Beverage Company. Later, he started his own beverage factory. When developing the market, he targeted A Beverage's primary distributors with a combination strategy of low prices, working capital support, promotional policies, and personal relationships. Soon, over 60% of A Beverage's primary distributors switched to him, and his sales soared. His rapid success went to his head: he gave distributors whatever they asked for—promotions, price cuts, funds, entertainment. Later, when raw material prices surged, distributors held large amounts of his capital, preventing him from purchasing cheaper materials, leading to higher costs and severe losses on many products. Raising prices was justified, but distributors resisted. Due to insufficient cash flow and inability to raise prices, the company suffered heavy losses, and his factory eventually went bankrupt. The distributors' unpaid debts remain unrecovered to this day.

This case teaches us: success comes from primary distributors, and failure also comes from them. Mr. Wang's success was due to meeting distributors' needs, making them eager to sell his products. His failure was due to overindulging and catering to their demands. Constrained by distributors' control of capital and the market, squeezed by both raw material and product markets, his company collapsed.

Therefore, the conclusion is: primary distributors' demands cannot be casually met. They must be weighed against the company's capital, margins, brand awareness, market share, market control, and market stage, and support should be given according to capability.

How to handle primary distributors' demands and conditions?

1. Clarify responsibilities, rights, and interests; fully delegate authority; strengthen sales representative training; improve their judgment and adaptability.

Frequent policy requests from primary distributors often stem from sales managers. They may not clarify sales representatives' responsibilities or delegate authority, keeping all power to themselves. Or they may not train representatives adequately, leaving them unable to handle distributor demands. As a result, representatives, fearing trouble or offending distributors, avoid giving answers and instead push distributors to go directly to the company or submit memos for leadership decisions. Sales managers should free themselves from trivial tasks, delegate authority to representatives based on their abilities—such as regional operations, customer decisions, promotional activities and budgets, and pricing—and allow them to make preliminary decisions within their authority. Managers should then review, evaluate, and adjust the delegated authority, and train representatives on how to strategically handle distributor demands within their scope. This motivates representatives, who can refuse unreasonable demands and submit necessary policy requests for approval.

2. Sales representatives should thoroughly understand the market and discern the true intentions of primary distributors.

Sometimes distributors exploit the company's lack of market knowledge to exaggerate problems, such as claiming a competitor's promotion with cash discounts is severely impacting the market, to obtain promotional concessions. Of course, sometimes the information is accurate. Therefore, manufacturers should neither fully accept nor reject distributors' policy requests. Sales representatives should stay close to the market, monitor competitors and market dynamics, and objectively analyze each request to discern the true intent before deciding on support. Sales managers, when approving policy memos, should also weigh factors like the distributor's market conditions, product sales, attitude, growth potential, and the policy's likely effectiveness and feasibility.

3. Sales representatives should dare to say "NO" to unreasonable demands.

When it's clear a demand is unreasonable, representatives may react in four ways:

  • First: Cater to the distributor, immediately exaggerate the situation to the company to secure support.
  • Second: Directly say "NO" and refuse the unreasonable demand.
  • Third: Play hide-and-seek, giving no clear answer.
  • Fourth: Verbally agree but never actually implement the policy.

For unreasonable demands, the second and third strategies are appropriate for direct or indirect refusal. The second is suitable for strong brands, where distributors are unlikely to give up the brand easily, as doing so would mean losing their livelihood. Representatives of strong brands can confidently tell distributors that such support is impossible. The third is suitable for weaker brands, where distributors are still important and relationships shouldn't be strained; representatives can use evasive tactics or change the subject without giving a clear answer.

Avoid the first and fourth strategies. The first deceives the company and causes unnecessary expenses, even if it pleases the distributor. The fourth deceives the distributor, and broken promises will increase complaints.

4. For reasonable policy requests, manufacturers should give full consideration and appropriate support.

After analysis, if the true intent of a distributor's request is to expand product awareness and market share, stabilize products and markets, and the policy would benefit the manufacturer's competitiveness, then support can be given. However, support should come with conditions, such as sales targets or the share of the company's products in the distributor's total sales.

How to make distributors understand and accept these conditions? Sales managers can include conditions in the policy memo. Then, sales representatives can present the memo, slightly exaggerating how hard it was to obtain, emphasizing that many distributors applied but only this one was approved, showing the company's high regard. They should also explain the conditions and convince the distributor they are not a problem. Finally, provide a copy of the approved memo to the distributor as the basis for implementation, or if the memo is not specific, formalize the details in a contract signed by both parties.

5. Develop a perfect policy plan to ensure effective implementation.

Often, good policies and plans fail due to lack of measures. First, make thorough preparations, such as implementation plans, activity arrangements, budget allocation, and media and personnel coordination. Second, sales representatives should participate in implementation with distributors to ensure effectiveness and prevent fraud, such as misappropriating activity funds or gifts. Finally, objectively evaluate the implementation, including results, successes, and failures.

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