---
title: "Reasonable Channel Policies Are the Cornerstone of Deep Distribution"
description: "The article discusses the importance of designing reasonable channel policies for deep distribution, emphasizing that overly detailed policies can be counterproductive. It provides principles for policy formulation, the need for effective communication and execution, and the importance of collecting feedback from the field."
author: "高级研究员 海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-08-06"
language: "en"
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# Reasonable Channel Policies Are the Cornerstone of Deep Distribution

> The article discusses the importance of designing reasonable channel policies for deep distribution, emphasizing that overly detailed policies can be counterproductive. It provides principles for policy formulation, the need for effective communication and execution, and the importance of collecting feedback from the field.

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Even the wisest can make mistakes, and the foolish can sometimes be right. Recently, while visiting the market, I gained a profound understanding of this saying.
**Many companies continuously pursue finer policy granularity, considering factors such as existing volume, incremental volume, targets, regions, time, and objects. In essence, there is no problem with this, but they overlook the fact that the closer to the grassroots, the weaker the ability to absorb and understand.**
In leading companies, frontline staff are employees, so policies can be communicated through multiple channels like WeChat, email, and meetings. For companies below the top tier, frontline teams rely mainly on distributor salespeople, and policy communication often only reaches the distributor owner level, leading to misunderstandings. The direct result is that at month-end, when asked about the month's policy, the response is "not clear" and "execution was not in place." Today, let's talk about some aspects of channel policies.

**01 A policy that tries to cover everything is not a good policy**
When I was a channel manager at a company, I was very strict about policy control. Monthly policies required constant revision, considering various market competition factors, income growth for all levels under channel incentives, channel profit margins and inventory pressure, comparing with last year's same period and this year's budget targets, and respecting feedback from regional managers. As a result, policies became increasingly complex with more conditions. They seemed foolproof but were actually full of loopholes, and market results did not develop as I had expected.
The reason is simple: a policy that tries to cover everything is not a good policy. Let's briefly analyze the principles for formulating channel policies.

**1. There is only one bottleneck.** Let's take an example: a four-lane road has three traffic accidents. The first accident blocks one lane, the second blocks two lanes, and the third blocks three lanes. To quickly clear the road, what should we do?
The answer is obvious: with limited resources (limited repair personnel and equipment), we should prioritize repairing the third accident, because repairing the others won't immediately clear the road.
Applying this to our policies, the market is like the three accidents—there are many problems, but company resources are limited. How should we allocate them? We have several options:
a. Spread resources across all three accidents (unfocused, minimal effect); b. Invest in the first or second accident (solves local problems but not the overall issue; the third accident still blocks three lanes); c. Invest in the third accident (focused resources, two lanes become clear, immediate effect).
So for policies, the priority is to solve the most critical core problem. The market is constantly changing, and there are many issues. Every decision has priorities. Policies should address urgent and important matters first, and use remaining resources for others.

**2. Existing volume vs. incremental volume policies:** There is a universal logic: if last year's sales were 1 million and this year's target is 1.2 million, with an increment of 200,000, companies believe the 1 million is a given, so policies only cover the incremental part, or different policies apply to existing and incremental volumes.
Is this scientific? It was 10 years ago, but now it's somewhat unreasonable.
Ten years ago, it was an incremental market. As long as the company didn't have major changes, maintaining existing volume was relatively easy. Everyone competed for incremental share. Today, it's an existing or even shrinking market. Your growth comes at the expense of others, and no one wants to lose, so competition is fierce.
Now, maintaining last year's existing volume is not easy. Investment in policies for existing volume cannot be relaxed. Companies should adopt an "empty cup" mindset and design this year's policies based on the competitive landscape.

**3. Recognize region-specific policies:** For leading brands, a nationwide approach can work, like Nongfu Spring or Coca-Cola, which sell everywhere and have basically eliminated north-south and regional differences. Policies can be rolled out uniformly.
For second-tier brands, a regional approach can work, considering market share and competitive dynamics across regions. A region covering several provinces can design policies closer to their channel strategy and better match market demand.
For third-tier brands, channel policy granularity needs to be finer, even designing tailored channel strategies for specific prefecture-level cities.
The finer the policy granularity, the stronger the capability required of the channel management department. What if the department's capability doesn't match? There's a convenient method: **Set targets + set fee rates + local policies + headquarters approval.**
Policy is a resource. Those closest to the gunfire know best how to use it. So headquarters should tell them: What is the target? What resources will you get for achieving it? How you plan to use these resources needs to be reported to me, and after approval, you can execute. The core of approval should focus on matching targets and fee rates, not the policy format.

**02 Policy communication is a big deal**
Why do I say this? Since last year, I've visited several leading brands in the industry. When I meet market personnel, the first thing I ask is: What is the company's sales policy this month? What is your performance assessment this month?
To be honest, very few can answer. Many are halfway through the policy period but still have a vague understanding. Many distributors even treat some channel policies as benefits—whether or not the company has a policy, they sell as usual. Getting the policy is a bonus; not getting it is normal. Imagine the effect of company policies in such a situation.

**1. Management must understand the policy**
Why understand the policy? Management are employees with "thoughts." They should understand why the company is making this strategy and what the purpose is. Only then can they have a sense of purpose, work together, and execute effectively.
For example: This policy is particularly aggressive to push inventory to channel partners because raw material prices will skyrocket next month, and the factory needs continuous production. Before the price increase, they want to capture channel funds and warehouse space. Once managers understand this, they will organize mobile ordering meetings and create policy flyers for promotion, focusing on inventory push. Other tasks like market visibility or developing new outlets may be slightly delayed.

**2. Execution layer must implement the policy**
What does policy implementation mean? Let me give a simple example: A brand requires that after distributors achieve their monthly tasks, they receive a 5% monthly rebate. Sending such a policy document directly to the execution layer is not implementation. Implementation means: if the distributor's task is 1 million, allocate it to 5 salespeople according to regional conditions, and each salesperson further allocates targets to the top 20% of outlets in their area. How much task is assigned to each outlet, and what rebate is given upon completion? That is policy implementation. The standard is that the smallest unit enjoying the policy understands the task and rebate amount.
If someone fails and affects the overall policy, what to do? This requires process management: Who failed? How much shortfall? Who will fill it? If no one can fill it, the distributor must bear the burden of inventory pressure.
One reminder: Distributors should not frequently bear inventory pressure. If it happens often, reflect on whether execution is poor or targets are unreasonable.

**3. Telephone verification of policies**
I always emphasize: Policies without awareness checks are just benefits. After issuing the monthly policy on the 1st, give 3 days to learn and master it. Starting from the 4th day, conduct telephone spot checks on policy awareness and understanding. The channel management department should create a unified Q&A and conduct random phone checks. Announce the accuracy rates and assess those lagging behind. This serves two purposes: understanding policy awareness and verifying policy feasibility.
Don't overlook this, especially for companies with many policies in a month. If you don't believe me, try a spot check yourself!

**03 Collect policy result feedback**
Achieving sales targets is an important indicator of channel policy feedback, but it's far from enough. We need multi-dimensional insights.

**1. Channel inventory:** How many months of inventory do distributors have? How about sub-distributors and large wholesalers? How about the top 20% outlets? This data is crucial; otherwise, after tasting the sweetness of policies, you might inadvertently overstock the channel.

**2. Channel product age:** Fresh product age will gradually become a core competitiveness. Some brand channel policies involve product display, e.g., to enjoy the company's channel promotion, products must be stacked and displayed in visible positions in the store.

**3. Frontline salesperson feedback:** Are policies conducive to competing with rivals? How do terminal outlets accept them? Without the voice of frontline staff, channel policies will increasingly deviate.

**4. Outlet feedback:** Store owners' feedback and suggestions.
Collecting policy result feedback is very important, especially for second- and third-tier brands. Distributor suggestions can often quickly solve brand pain points and yield twice the result with half the effort.

**04 Is finer policy granularity always better?**
Many companies learn management from Huawei, seeing that Huawei's management granularity is very fine, and thus believe that finer granularity leads to higher management efficiency and stronger organizational performance. But is that really true?
Of course not. **Granularity is not always better; it must match the company's current stage of development.** During the process of increasingly fine granularity, the organization must match. Discussing management granularity without considering the organization can easily lead the company into an abyss of no return.
The same applies to channel policies. At the beginning of the article, I mentioned that many companies continuously pursue finer policy granularity, considering factors like existing volume, incremental volume, targets, regions, time, and objects. But does the company have a corresponding organization to manage and match? If not, granularity becomes a smoke screen, making market execution more confused, losing priorities, and backfiring.

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