By Ren Yuan, Yuanjing Consulting
Preface
"Just make one yuan, that's enough; I don't want more!" This vividly describes the current distribution characteristics of the second-tier wholesale market in W market, G province. As a microcosm of the typical large circulation distribution model in the region, it represents and reflects the current market operation model of local liquor companies: thin margins, high volume, regional cross-selling, and low-price sales.
Channel distributors and manufacturers in W market, G province, are suffering greatly. How can liquor companies in W market avoid the drawbacks of this market model competition? This article analyzes how the regional large circulation distribution model can gradually shift from 'catching fish' to 'raising fish' by transforming marketing models and marketing teams.
01 Part One: The Company's Worry: Increasing Policy Intensity, Decreasing Single-Product Sales
"Previously, the annual sales tasks could be easily completed after being broken down among departments and regions; now, after working hard for most of the year, we haven't even completed half the tasks!" The general manager of H Distillery is clearly worried about the company's marketing situation.
Could it be that products are not moving, requiring consumer guidance and promotional pull? The project team, with preliminary solutions in mind, conducted in-depth terminal visits and found that this was not the case. During the research and visits, the team noticed a strange phenomenon: a tobacco and liquor store in W market had four different purchasing channels and methods (factory sales reps, regional distributors, second-tier wholesale market, and periodic factory ordering meetings), and the purchase prices were all different!
The project team concluded that H Distillery's products in W market were not having major sales issues, especially the main old products which continued to sell well, with supply sometimes falling short of demand. However, the increasingly lower actual transaction prices and shrinking profit margins were causing market sales to show signs of weakness and even resistance. This is the fundamental reason for the year-on-year decline in H Distillery's overall product sales.
02 Part Two: The Key Issue: Pursuing Short-Term Sales, Neglecting Infrastructure [Only Catching Fish, Not Raising Fish]
"How are our sales this year? How is each product performing?" The project team asked a simple question. The answer was: Previously, selling a few good products could complete the task; now, even selling many products still fails to complete it! After studying the company's sales data, the project team concluded that H Distillery's current product structure is chaotic and unclear, with no prominent main products, and old product sales declining year by year; new products are on an upward trend but with small volumes. In summary, the company's product positioning and strategy are inappropriate, especially as new product development is more about solving sales pressure.
Since the goal is short-term sales, strong channel digestion capacity or extensive terminal sales support is needed, but H Distillery currently lacks both. At this point, the wholesale market extended an "olive branch," with second-tier distributors placing orders one after another, resulting in orders of one million, two million yuan. However, H Distillery had to offer more free products, ultimately making the actual bottom price far lower than the ex-factory price! After a while, we found that some terminals couldn't sell products, or even didn't want to sell them! The reason: the actual transaction price at terminals was close to or equal to their purchase price. A terminal owner in T County, W City, said: "I sell a bottle of liquor for 55 yuan (terminal purchase price 50 yuan), and a consumer actually offered 45 yuan! After arguing with him, he finally bought it for 45 yuan and even told me where to buy it!"
After analyzing the market characteristics, the project team proposed a solution: "Control the price system, transform the distribution model, shift from channel promotion to market infrastructure building, and fundamentally solve the channel ecology in W market, G province."
03 Part Three: The Solution: Shift from 'Pressing Sales' to 'Building the Market' [From 'Catching Fish' to 'Raising Fish']
To solve the current problems, companies must change their market approach and not simply release policies to demand volume from the market. Companies need to proactively lead the construction of terminal sales networks and carry out early market infrastructure building. Specific marketing strategies mainly revolve around the following aspects (using H Distillery's wine products as an example):
1. Channel Model: Shift from 'Short-Term Volume' to 'Cultivating the Market.' Change the previous approach of releasing policies to pursue short-term sales. At the distributor level, strictly sort out the number of distributors and divide sales regions, implement flattening operations, and adopt a first-tier distribution model (no second-tier distribution). The manufacturer strengthens control measures and penalty systems for distributors, guides second-tier wholesale customers toward infrastructure building, and reverses the current phenomenon of cross-selling and price undercutting in large circulation distribution.
Table 1: Distributor Layout Plan and Reward Standards
| Region | Number of Distributors (All First-Tier) |
|---|---|
| Market A | 9 |
| Market B | 4 |
| Market C | 2 |
| Market D | 1 |
| Market E | 2 |
| Peripheral Markets | 6 |
| Total | 24 |
2. Market Expense Investment Model: Shift from 'Distributor-Led' to 'Enterprise-Led.' Sort out the product line, stabilize distributor profit margins by stabilizing ex-factory prices, and have the enterprise lead terminal network construction and consumer promotional pull. Change the previous practice of packaging policies to distributors or core customers, which, due to the impact of second-tier market price undercutting, led distributors to passively or actively participate in cross-selling and price undercutting. Achieve an 'enterprise-led' market expense investment model.
Table 2: W Distillery's Market Operation Instructions for Wine Products
| Product | Distributor Margin % | Notes |
|---|---|---|
| Product A | 16% | 1. The manufacturer strictly guarantees distributors a 15-20% profit margin; other market expenses are controlled and invested by the manufacturer. 2. All channel operations are funded by the manufacturer, and the manufacturer dispatches sales personnel for market operations. |
| Product B | 16% | |
| Product C | 18% | |
| Product D | 20% | |
| Product E | 20% | |
| Product F | 20% |
3. Marketing Team: Shift from 'Product Sales Orientation' to 'Market Building Orientation.' Change the marketing personnel's salary system from "basic salary + fixed commission + average performance" to "basic salary + performance salary + sales commission + bonus + benefits." Increase the proportion of commission in the salary system to guide the entire marketing team from a 'sales orientation' to a 'market orientation.'
Table 3: Salesperson A's Salary System (Junior Salesperson)
| Component | Criteria | Details |
|---|---|---|
| Position Salary | Job Responsibilities | 1. Construction/maintenance of terminal outlets, achievement of hotel product sales targets; 2. Expansion/maintenance of key terminal outlets; 3. Implementation of terminal visibility and consumer promotion activities to drive sales. |
| Sales Commission | Task Indicators | 1. If completion is above 80%, the corresponding percentage is paid; below 80%, no commission is paid. 2. Annual commission follows the same standard; if the annual target is met, the deducted portion is paid retroactively. |
| Performance Salary | Outlet Assessment | Maintain more than 100 sales terminal outlets; ensure terminal visibility. |
| Sales Assessment | Based on monthly task breakdown. | |
| Sales Bonus | Sales Competition | Monthly sales competition: top three individuals and teams receive rewards. |
Through the above marketing strategies and methods, coupled with sustained promotion by senior marketing management and guidance through distributor/dealer communication meetings, H Company's business team and core channel customers are now full of confidence and drive, and are jointly working to promote the long-term development of W market.
This article's choice to transform the company's marketing model is based on the current competitive situation in W market and the company's stable volume base. It is suggested to fundamentally break the large circulation distribution model, but it may not be suitable for all companies and is for reference only.
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