Introduction: Abandon the 'contract and forget' mindset, guide correctly, and achieve win-win cooperation. Author | Hai You Recently, I provided channel operation optimization consulting for a betel nut company, conducting in-depth research on the industry, brand owners, and distributors. In the betel nut industry, many brand owners have maximized the model of contracting out regional markets to 'small bosses' during the market expansion phase. However, it is harder to defend territory than to conquer it. Once a 'small boss' grows, standardized operations, process and system support, and performance assessments become necessary. Otherwise, in today's fiercely competitive environment, those who rose quickly may fall just as quickly. Regarding the assessment requirements for regional contractors, some may ask: since the distributor has already contracted out the regional market, the relationship with the 'small boss' is one of cooperation, so why talk about assessment? Or if assessment is imposed, it implies that the 'small boss' is still within the distributor's control system—is it just a change in name without a change in substance? Here, I need to briefly outline the following points:

1. The purpose of contracting out the market is to stimulate the initiative of the 'small boss' to achieve faster and higher market growth. If the 'small boss' consistently fails to meet the distributor's expectations, the distributor may have to replace them to ensure stable market growth. For example, if the 'small boss' has a poor attitude, inadequate management, leading to poor performance in the region, or even persistent instability in market execution, resulting in poor performance and wasted resources, and after repeated communication, there is no improvement, the distributor will inevitably discuss the sustainability of the cooperation.

2. The era of going it alone is long past; collective effort is the guarantee of development. Distributors need 'small bosses' to execute on the ground, and 'small bosses' need guidance and support from distributors and brand management.

3. The so-called assessment is not about deducting the 'small boss's' existing product profits or expenses, but rather turning management into motivation. Distributors allocate additional funds (either in the form of a bet or a joint assessment fund) to incentivize and guide the 'small boss' to complete designated market actions.

4. The purpose of assessment is to require the 'small boss' to truly manage well, making daily progress, not pursuing short-term, high-risk profits, but building a sustainable business.

What exactly should be assessed in regional contracting? I suggest starting from the following three aspects.

Performance Assessment: Not Just Sales Targets Performance indicators are not just sales targets; they must include all process factors necessary to achieve performance goals.

1. Effective Outlet Achievement Rate: Effective outlets must be targeted, generally including five points: the outlet's channel attributes, SKU entry and quantity, display execution compliance, purchase amount, and effective visit frequency for the month. Effective outlets refer to all outlets in the region that meet the five requirements, which are also the outlet targets for grassroots operations. The effective outlet achievement rate = targeted outlets achieved / total target outlets. This is the foundation of market operations and the root of performance.

2. Outlet Visit Success Rate: A successful visit is defined as the terminal outlet accepting goods, with the principle of inventory management (not necessarily 1.5 times, set according to product turnover) to avoid stockouts or overstocking. This effectively monitors outlet quality, as grassroots staff will optimize their outlet portfolio, focusing limited energy on points that better match the product, improving personnel productivity.

3. Outlet Transaction Amount Ratio = Total Outlet Order Amount / Distributor's Total Purchase Amount. This is a necessary condition for healthy distributor warehousing, ensuring fresh product age, maximizing capital utilization in the contracting system, and preventing abnormal operations due to near-expiry pressure. This ratio assesses a safe range, adjustable by season; the contracting team is compliant if within the safe range. Note that data should be reported frequently to prevent malicious overstocking at outlets to meet targets.

4. Sales Achievement Rate: That is, the distributor's payment and shipment amount / monthly performance target amount. Sales are an important means of testing the process. It is worth reminding that for the first three months, it is recommended to treat this as a startup period, allowing the 'small boss' to quickly familiarize themselves with the product, market, and competitive landscape, setting only process assessments, not performance outcome assessments. From the fourth month, gradually introduce sales assessment, and after six months, increase the 'small boss's' profit share and gradually raise the sales achievement assessment targets. Any assessment should be based on stability; do not rush.

Process Indicators: No Process, No Results Process indicators include two parts: daily execution indicators and process execution targets, aimed at standardizing the 'small boss's' market operations.

1. Daily Execution Indicators (two common examples): a. Scoring Accuracy Rate: Many brand owners have developed a scoring system based on market operation requirements, using terminal systems to break down grassroots staff's market actions and assign corresponding scores to check the degree of market action compliance. Scoring accuracy rate = management's operation score / the 'small boss's' self-score. This indicator serves both as a review of the 'small boss's' understanding of the market situation and as management's control and supervision of terminal outlet quality.

b. New Store Inspection Accuracy Rate: No outlets, no sales. As mentioned, new outlet development must be targeted, matching product attributes to suitable outlets, so new store inspection is crucial. New store inspection accuracy rate (new store data must be checked upon entry: channel attributes / correct SKU / display standard score / order amount) = number of outlets approved by management / number of outlets entered by the 'small boss'. This indicator ensures smooth product development during the market introduction phase and lays the foundation for precise expense investment.

2. Process Execution Targets (two common examples): a. New Outlet Rate: Actual new outlets - actual lost outlets / new outlet target. This assessment aims to track outlet development and coverage in real-time. Outlets are dynamic, with additions, losses, and eliminations, so outlet development is a routine task for sales staff, ensuring long-term stable growth.

b. Effective Outlet Visit Compliance Rate: 1. Visits should not be mere formality; they must achieve visit objectives (e.g., for A-class points, certain indicators such as display position, shelf share, material posting, multi-point display, and age management must be met to count as a compliant visit). Simply put, it is the proportion of outlets visited by the 'small boss' where visit objectives are achieved through in-store display and merchandising. 2. Visit frequency must also meet standards, planned according to product seasonality and attributes, with minimum visit frequency requirements per week, ten days, or month. Effective outlet visit compliance rate = number of outlet visits meeting the above two requirements / total outlets covered in the region. The successful visit rate of effective outlets is also an important indicator of standardized grassroots operations, ensuring healthy customer relationships, merchandising, and inventory.

Management Performance: For Managers of Regional Contractors The regional contracting model is not about contracting and forgetting, or even contracting without management. As the scale expands and the number of 'small bosses' increases, it becomes necessary to recruit middle-level personnel to assist distributors in regional performance management. That is, one middle manager will manage several small bosses.

1. Specific job responsibilities can be roughly divided into eight points:

  1. Personnel operation discussions to identify practical problems;
  2. Training support to solve practical problems;
  3. System/operational resources, use of digital tools, and implementation of digital management;
  4. Quarterly/monthly policy mechanisms, formulating different marketing plans based on market competition;
  5. Expense/activity applications, liaising with brand owners for resource support;
  6. Logistics/orders/shipments, ensuring smooth logistical support;
  7. Allowance applications/distribution, reviewing and distributing brand owner support;
  8. Management/assessment/verification operations, continuously optimizing the cooperation team and improving market operation capabilities.

2. Assessment Items: Two common examples: a. Expense Application and Communication Assessment:

  1. Expense settlement: After settlement among distributor, small boss, and outlet, liaise with brand owner for market expenses and support;
  2. Expense reimbursement: Prepare reimbursement materials in the system;
  3. Expense analysis: Evaluate last month's market expense usage and effectiveness, and plan next month's usage;
  4. Expense application: Apply for next month's expenses. Assess the accuracy and compliance of the above.

b. Small Boss Team Performance and Process Assessment: Around performance:

  1. Effective outlet count: Month-over-month analysis of effective visits;
  2. Outlet order count: Month-over-month analysis of ordering outlets;
  3. Outlet distribution: Month-over-month analysis of outlet orders;
  4. Performance achievement: Analysis of purchase amount and sales progress. Around process:
  5. System scoring accuracy rate: Analysis of differences in understanding and execution of display standards;
  6. New store audit accuracy rate: Analysis of differences in understanding and execution of new store audit standards;
  7. New outlet progress: Analysis of new outlet progress and incentive distribution;
  8. Effective transaction outlets: Month-over-month analysis of transaction count/rate.

Final Thoughts I must emphasize again: I have discussed regional contracting with many distributors and their managers. A common characteristic of failures is that they say, 'I'm already not making money; I've given almost all profits to the 'small boss,' yet they still don't work hard, and the market hasn't improved.' This is a typical 'contract and forget' mindset. Often, the 'small boss' is not unwilling to work or earn money; they just lack proper guidance and methods, leading to hard work without long-term returns. The market is never short of products; even products with strong brand power from leading brand owners often fail to launch successfully. What is lacking is the method to operate products and a matching performance assessment plan for 'small bosses' to ensure implementation. If you can't understand this and simply pin hopes on the 'small boss,' you will likely fail.

Further Reading