After over three decades of development, China's distributor class has gradually matured. From independent provincial-level general agents to independent municipal-level general agents, and now to independent county-level general agents spread across the country, distributors at all levels have grown and strengthened alongside the prosperity of China's market economy. Especially in recent years, as major brand manufacturers have shifted their sales focus downward, the networks and capabilities of city and county distributors have advanced by leaps and bounds, elevating their status in the eyes of manufacturers.
However, with the increasing maturity of marketing networks at all levels and the high development of logistics, distributors suddenly find business increasingly difficult. A prominent manifestation is declining profits, which severely impacts their enthusiasm for continued investment—a phenomenon no manufacturer wants to see and a common challenge facing both manufacturers and distributors. If not addressed promptly and effectively, some brands may face the situation where distributors, finding no profit, are unwilling to continue and gradually exit the market. Apart from transformation, production enterprises have no other choice.
As the main drivers of the market, how can production enterprises increase distributor profits to enhance their loyalty and enthusiasm for the brand? The author offers the following four suggestions.
1. Sort out operating costs at all levels and establish a rational pricing system
What exactly should be the basis for setting the pricing system? Different enterprises have different views and understandings. In terms of ex-factory prices, some enterprises can set them based on operating costs, but when it comes to the distributor pricing system, some enterprises' considerations are not thorough enough, often referencing competitors' pricing systems more, and rarely considering distributors' operating costs.
The problem often lies here: many enterprises mistakenly choose a "model," or the model's product price itself is a short-lived price, just like using a wrong coordinate to guide navigation—the outcome is predictable.
A few years ago, the author published the view that "competitors are not our standard," which drew sharp criticism. Some argued that enterprises must benchmark against competitors when formulating strategies. However, the author believes that competitors' strategies are not necessarily correct, and when the other party makes mistakes, the enterprise itself must remain calm, always adhere to the principle of market demand orientation; carefully analyze the marketing costs of distributors at all levels, offer distributors higher profits than competitors, fully stimulate their enthusiasm, and it will be impossible for products not to sell well.
Additionally, as a production enterprise, it is essential to clearly understand and remember: consumers are stratified, demands are diverse, and what is popular in the market is actually what distributors sell. No best-selling product can succeed without the strong support of distributors.
2. Avoid channel overlap and price conflicts
Channel overlap is a common problem in most enterprises in recent years. The same product, same packaging, and same specification simultaneously operating in both circulation and supermarket channels may seem feasible on the surface, but in actual operation, most enterprises are out of control. Because ultimately, distributors do not sell at high prices or low prices, but at price differences.
Due to the different costs of supermarket and circulation channels, distributors generally set their prices using a cost-plus method. Obviously, prices in the circulation market will be much lower than those in supermarkets. Such a significant difference can be easily detected by professional supermarket researchers, who will then demand that merchants supply at the lowest market price. If they operate supermarkets with such high costs at circulation prices, I think few merchants can withstand it. If channel overlap occurs, the enterprise's market prices will be extremely chaotic, and distributors will complain. The author believes that if there is not enough market control, it is more appropriate to operate different specifications in supermarkets and circulation, and it is best to establish strict pricing policies to ensure stable profits for channel distributors, achieving a shift from passive to active marketing.
So, can products of the same specification really not enter both circulation and supermarket channels simultaneously? Previously, the author proposed the strategy of "operating circulation with supermarket tactics," which significantly increased the profits of circulation merchants and also enhanced distributors' enthusiasm for a single brand. This strategy requires circulation merchants to set wholesale prices equal to supermarket purchase prices, while also requiring them to deliver products directly to various grassroots stores, and the retail prices in stores and supermarkets should be consistent. This not only avoids price undercutting but also greatly enhances the enthusiasm of circulation merchants to expand their networks, killing two birds with one stone.
3. Adjust product structure and avoid blindly following "new products"
Adjusting channel profits by adjusting product structure and launching new products is a common practice for enterprises. However, in actual operation, due to the overly transparent pricing system of old products, adjustments are difficult to have a substantial effect. At this point, some enterprises try to use new products to rebuild the distributor profit system, but they tend to make another mistake: blind imitation. These so-called new products have already appeared in the market; some enterprises merely change the trademark and packaging, failing to form an independent and stable pricing system, let alone adjust the enterprise's pricing system and distributor profit structure.
The author believes that truly new products should be those that the market needs and that competitors have not generally produced. This requires genuine innovation and great judgment. Practice has proven that no one who imitates Lao Gan Ma has surpassed it; those who imitate Alibaba have not surpassed Ma Yun. Without truly innovative products, they will not be truly accepted by the market, nor can they shoulder the responsibility of adjusting the enterprise's product and profit structure. Only best-selling products can generate sustained profits, attract distributors to increase investment, and fundamentally rebuild the distributor profit system.
4. Flatten channels to concentrate multi-level profits
After years of development, channel flattening has become an inevitable trend. Through flattening, intermediate links can be compressed, a stronger terminal network and service system can be established, and the shortcomings of insufficient grassroots marketing network development can be remedied. In addition, after channel flattening, second- and third-level distributors disappear, and all profits go directly to grassroots general distributors, changing the status quo where limited channel profits are shared, greatly enhancing the enthusiasm of grassroots distributors and rapidly increasing the enterprise's market share.
The core method of channel flattening is to cancel the large distributor model of provincial-level general agents and directly sink the general agency to the county and city market level. In provincial capital markets with concentrated population and sales, general agencies are divided directly by supermarket channels. The previous city-level general distributors are transformed into city-district general distributors, no longer wholesaling to county markets; instead, each county directly establishes its own general distributor.
The author needs to remind enterprises to properly handle the relationship between new and old distributors during the flattening process, and not to "cut with one knife" to cause market turmoil. Currently, most enterprises have adopted the approach of launching a series of new products and stripping distribution rights from old distributors, gradually achieving a smooth transition to a flattened marketing channel. Of course, if old distributors are very cooperative with the company's new channel flattening requirements, it is recommended that enterprises retain their agency qualifications, and not flatten for the sake of flattening, as this would leave an extremely poor reputation for the enterprise.
In summary, to adapt to the changing market situation, it is imperative for enterprises to adjust the gross profits of distributors through various means. Distributor profit adjustment is a massive project; a slight misstep can have the opposite effect and undo all previous efforts. Therefore, enterprises must act with extreme caution.
-END-
Content Selection
Reply with the following keywords to categorize and read related articles: Sales Supervisor, Second-Tier Management, Regional Manager, Distributor Management, New Channels, City Manager, Competition, 2015, Manufacturer-Distributor Game, Product Stagnation, Terminal Visit Management, Route Management, Deep Distribution, Internal Management, Sales Skills, Profit Enhancement, Recruitment, Distribution, Daily Management, Team Motivation, Trade Promotion, Sales Misconceptions, New Product Launch, Township Market, New Product Pricing, Sales Target Achievement, Closing Deals, Market Visit Inspection, Baijiu, Beer, Sales Increase, Agency Products, Cross-Region Sales, KA, Terminal Merchandising, New Market, Market Operation, Learning, Book Recommendations, Inventory Management, Sales Novice, Consumer Promotion, Execution, Old Products, Expired Product Handling, Model Market, Investment Attraction, New Media, Distributor Development, Performance Appraisal, Assessment, Annual Planning, Shopping Guide, Morning Meeting, Display, Transformation, Inventory Pressure, Festivals, Distributor Cost Control, Channel Operation, Marketing Theory and Laws, Brand Truth, Order Meeting, Team Management, Training, Work Report, Work Report Report.