Case: During our company's tea beverage promotion activities "Open Bottle for Surprise" and "One More Bottle", some distributors held the bottle bottom towards sunlight to "see through" the cap to check if it was a winner, thereby intercepting winning beverages. Due to these "violations" by distributors, our product promotion plan was greatly compromised. We feel distressed by such behavior but often seem to have few solutions. Because the company relies heavily on large distributors, we fear that offending them over such minor issues might allow other manufacturers to take advantage. So usually, we first coordinate internally, and in the end, it often ends up being settled privately. Is there a better way to prevent distributors from intercepting our promotional items? ——Mr. Yang, Jilin Special Guests: Wei Qing (Chief Consultant, Wei Qing Concept to Action Training Institution) Li Hailong (Chief Consultant, Soris Management Consulting Co., Ltd.) Business Representatives Should Correct Their Concepts of Distributor Management Host: Nowadays, companies are increasingly carrying out promotional activities, but when these activities are actually implemented for consumers, due to interception by distributors or even internal staff, the activities are greatly compromised. Do you two guests have good methods to thoroughly eradicate the interception of promotional items in the channel? Wei Qing: Distributors intercepting promotional items, business representatives "cannot manage". The root cause is not just a skill issue, but that they are not clear about their role, and the relationship between the manufacturer and distributor is not properly positioned. This leads to: The extreme left (currently this type of business personnel is decreasing), believing that the relationship between manufacturer and distributor is a buying-selling or trade relationship. Behaviorally, they use every means and sweet talk to make distributors stock up. As long as sales targets are met and payments are collected, everything is fine and they disappear. The other is the extreme right (over 80% of business personnel fall into this category), believing that distributor management is about building relationships, and building relationships is about loyalty and brotherhood; the more alcohol capacity, the greater the sales; the better the relationship, the better the sales. Behaviorally, they: ? When seeing a distributor, they repeat the same three sentences: "How's business? Want to stock up more? This time it's buy 100 get 2 free, how many do you want?" ? They hang around distributors all day, chatting about everything under the sun, running errands, eating and drinking with distributors—building relationships. But they don't discuss the next steps for the market, don't track the distributor's inventory by item, don't help analyze or plan market strategies, and are completely ignorant of the distributor's selling prices and downstream network... ? They suffer from "soft bone disease" in front of distributors, turning a blind eye to various malicious operations (such as price cutting, channel crossing, expense interception, etc.). They even collude with distributors to plead for more policies from the company... Li Hailong: In fact, this phenomenon has existed for a long time and has long troubled manufacturers and suppliers. Some distributors are purely profit-driven with short-term goals, making it difficult for manufacturers' market promotion strategies to be effectively implemented. It is indeed somewhat difficult to completely eradicate this phenomenon. Wei Qing: Obviously, both types of business personnel mentioned above will not achieve good results in distributor management. Ultimately, both approaches lead to the same outcome: ? The manufacturer's sales representative's market work is limited to distributor visits, with no understanding of the distributor's downstream market network, inventory, prices... The market is completely controlled by the distributor. ? The manufacturer's various terminal promotion resources are entirely handed over to distributors for execution, without guidance or monitoring, leading to ineffective implementation of promotions and failure to improve terminal performance. ? Malicious operations such as channel crossing and price cutting by distributors cannot be effectively stopped, causing chaos in market price order. Host: So what should companies do to avoid the behaviors of the two types of business personnel mentioned above? What exactly is the relationship between manufacturers and distributors? What mindset should be established for managing distributors? Wei Qing: The most fashionable view now is that manufacturers and distributors are in a "fish-water relationship", "husband-wife relationship", or "win-win relationship". In reality, the relationship between manufacturers and distributors is not simply a lovely fish-water relationship; in fact, many fundamental interests of the two are contradictory. For example: manufacturers want payment before delivery, while distributors want delivery before payment; manufacturers want exclusive distribution, while distributors want exclusive dealership; manufacturers want distributors to follow prescribed prices, while distributors only want to maximize profits... Companies should educate business representatives to establish correct concepts of distributor management. Li Hailong: Although theoretically, when dealing with these issues, our main approach should be to implement Customer Relationship Management (CRM) strategies for distributors, optimize relationships with distributors as much as possible, and get them to accept the corporate culture's vision of shared goals for the company and all related stakeholders, thereby creating a good cooperative atmosphere. Unfortunately, the vast majority of distributors in China currently have strong speculative psychology: they grab what they can; if you don't let me do it, I won't do it; anyway, there are plenty of manufacturers looking for me. Wei Qing: The relationship between a manufacturer's sales representative and a distributor is like that between a Communist Party (manufacturer) commissioner (sales rep) and local armed forces (distributor). The Party (manufacturer) sends commissioners (sales reps) to the local armed forces (distributor) to influence them through wisdom and professional communication skills, making the local armed forces (distributor) follow the Party (manufacturer). The local armed forces' dozen people and seven or eight guns (the distributor's people, vehicles, goods, money, and network) all strive in the direction of the Party's line (the manufacturer's market strategy). Companies Should Establish a Sound Promotion Management Mechanism Internally Host: Both of you have mentioned that companies need to re-understand their relationship with distributors from a conceptual perspective. Besides that, can companies take preventive measures in terms of the management mechanism for promotional items? Wei Qing: To stop distributors from intercepting market resources, companies should start with their own system construction, improving the process for promotion application, approval, execution, filing, inspection, and reimbursement. First, the communication of promotion policies must be precise. For example: A beverage company launched a policy of buy 4 get 1 free for retail stores to increase store distribution rate: the target channel is retail stores, and the promotion purpose is to increase retail store distribution rate. To prevent sales staff at all levels and distributors from taking advantage of this to boost sales (by pressuring wholesalers with the 4-for-1 policy to stock up) or to embezzle promotional benefits (by reporting normal sales as promotional sales to pocket free items), the company should pay attention to the following when communicating the promotion policy: ? Clarify that the purpose of this promotion is to increase distribution rate, not to boost sales volume. Set a maximum limit for each outlet's promotional purchase: buy 1 case get 6 bottles—any outlet purchasing more than 1 case will not enjoy the free items for the excess; ? Outlets participating in this promotional purchase must register their store name, detailed address, phone number, purchase quantity, and free items, and the store owner must sign to confirm; alterations are invalid. Branches must rely on these records to reimburse free items from the head office; ? All submitted forms must be reviewed, spot-checked, and signed by the branch office manager, who bears responsibility; Li Hailong: For example, to address the issue of distributors intercepting promotional items in unit quantities, companies can consider the following methods: 1. Before the promotion, inform consumers through advertising of the exact quantity and combination of prizes and gifts, so that consumers can immediately negotiate with distributors if they do not receive the promised prizes. The content of promotional items managed by first-tier distributors must be made known to second-tier wholesalers and terminal retailers. Therefore, companies should use multiple promotional methods in the early stage, such as TV, radio, POP, etc., to inform consumers of the discount content and amount. Accurately convey the promotion information to consumers, making them understand when the discount will occur, how much, and for how long. 2. During the promotion, send a co-promotion staff member to help the distributor implement the promotion. This staff member should track the in-and-out of promotional items and their correspondence with daily sales. If discrepancies arise, they should promptly negotiate with the distributor and report to the company. 3. Set up a promotion hotline, print the number on the promotional product packaging, or publish it through advertising, so consumers can report issues to the manufacturer, who will then negotiate with the distributor. Wei Qing: Secondly, the promotion task should be broken down into steps, people, places, times, and resources. Steps: Break the promotion into indivisible steps; People: Each step has an executor and responsible person; Places: Specific locations and target customers for execution; Times: Set completion times for each step, inspection times, and reward/punishment rules; Resources: Materials and resources needed for each task. Third, require the finance and sales departments to establish regulations for promotion application, approval, reimbursement, and filing. Suggested procedures are as follows: a Sales personnel submit a promotion application, specifying target customers, time, location, method, executor, and making cost estimates and effect estimates. b The promotion application is submitted to the superior supervisor for approval, the sales director for approval, and the finance department for filing. c The finance department advances promotion expenses, and the sales department handles the borrowing procedures. d Execution supervision: f The sales department uses the reimbursement vouchers for promotion expenses to settle accounts with the finance department (for the previously borrowed funds). g The finance department keeps special files for each promotion's application, summary, reimbursement vouchers, and settlement documents for future reference. Li Hailong: How to effectively deal with distributors stealing scratch-off cap prizes and other hidden prizes? I think we can consider these methods: 1. Increase the secrecy of hidden prizes, for example, by covering the inner cap with a film that consumers must peel off to claim the prize. 2. Use advertising to remind consumers to scratch and claim prizes immediately upon purchase, implying that consumers should refuse to buy products that have already been scratched. 3. The co-promotion staff sent before the promotion should count the daily promotional product quantity and prize distribution in the region and report daily. If shortages are found, they should first report to the company, which will negotiate with the distributor. 4. After the promotion ends, the manufacturer should reconcile sales volume and prize distribution with the distributor. If major discrepancies occur, they should promptly negotiate, but to maintain a relatively good customer relationship, experienced marketing personnel should handle it. Just clarify the accounts; there is no need to recover the promotional items; they can be converted into other incentive measures. For minor discrepancies, it can be hinted to the distributor that the manufacturer is aware but will not pursue, after all, "too clear water has no fish". In addition, manufacturers should also consider "joint promotions". For large regional distributors with strength and influence, manufacturers should design joint promotion plans, inviting them to participate in planning and implementation, using common existing resources (products whose ownership has already transferred, jointly purchased prizes, etc.) for promotion. To increase distributor enthusiasm, incentive measures for distributors should be designed for the promotion. This can effectively dilute and reduce the distributor's motivation and behavior to steal prizes. At the same time, manufacturers should also have a hard hand. For distributors who blatantly steal prizes in large quantities without regard for consequences, in addition to penalties according to the distribution contract, those with consistently poor sales performance should immediately have their distribution qualifications revoked. Distributors who perform well in sales and strictly follow promotion discipline should be rewarded, effectively deterring other distributors with varying degrees of violations and encouraging compliant ones. Additionally, companies can try to relatively reduce the power of large distributors (first-tier) in managing promotional items during promotions, directly delivering promotional items to sales terminals, solving the problem of promotional item distribution being squeezed at each distribution level (first and second tiers), effectively preventing interception by intermediate distributors. Rewards for the promotion can also be set according to distribution levels, so each level benefits from the promotion and naturally promotes the product more vigorously. Host: The solutions mentioned by the two guests, although seemingly simple, I believe can solve some practical problems. Of course, these suggestions are just some attempts in our operations for companies and are for reference only. In a market where products are similar and operations are alike, novel methods will emerge continuously as marketing personnel explore. Thank you both. 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