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Many times, manufacturers rarely realize that their frequent policy changes or certain behaviors harm distributors, and only when problems become irreparable do they seriously listen to distributors' thoughts. Needless to say, the harm manufacturers inflict on distributors is a loss for both distributors and manufacturers. So, what exactly causes this harm? And what good strategies do we have to avoid it? Based on years of observation and research, I believe the following phenomena are direct causes of damaging manufacturer-distributor relationships and harming distributors. (Source: China Marketing Communication Network, Author: Liang Shengwei)
First Major Harm: Frequent Salesperson Turnover It's common for manufacturers to change salespeople, especially for companies that like to "innovate." Their thinking is: if sales are poor, change personnel! If a new leader comes, change personnel! If they don't follow orders, change personnel! If execution is poor, change personnel! In some people's eyes, changing personnel seems like the best solution to problems. But is there no other good approach? In my view, poor sales performance isn't solely the salesperson's problem; a new leader doesn't necessarily improve performance by changing staff; not following orders isn't solely the salesperson's fault; and can leaders absolve themselves when execution is poor?
There's a saying: "Stability prevails over everything!" For most small and medium-sized enterprises, as long as they don't stir things up or change too frequently, it's definitely good for the business. Decades of turbulent history tell us that neither a country nor a company can withstand constant upheaval. Especially for startups, there's not much capital to waste on such turmoil.
Changing personnel is neither a clever move nor a good strategy. Frequent personnel changes are a form of turmoil for both the company and distributors, as they lead to negative effects such as: unfamiliarity with business, and by the time they become familiar, market sales have already declined; broken customer relationships, which can't be built overnight; product shortages due to lack of follow-up, which are often caused by frequent salesperson changes. These negative phenomena greatly impact performance, especially in newly developed markets. The lesson from Gold Hongye Paper's experience in the South China region five years ago tells us that frequent salesperson changes caused distributors in South China to lose confidence in the company, and as a result, the South China market never performed as well as other markets. It wasn't until recent years that Gold Hongye realized this mistake. Fortunately, Gold Hongye is financially strong; if it were a smaller company, it would likely have collapsed under such years of turmoil. So, my advice is: don't easily talk about changing personnel unless absolutely necessary!
Second Major Harm: Frequent Product Changes While consulting for a company and interviewing distributors, a distributor told me that the company's biggest problem wasn't the boss or the staff, but frequent product changes. As soon as a product became popular in the market, the manufacturer would immediately change it—reducing quality, reducing weight, or changing packaging. For example, a 1400-gram roll tissue became 1350 grams, three-ply handkerchief paper became two-ply, paper made from bagasse pulp was passed off as virgin wood pulp, and recycled paper products were claimed to be made from virgin pulp. Many bosses enjoy this kind of shoddy substitution to make quick money! I don't oppose making quick money, but deceiving consumers and distributors is self-deception. Recently, I've noticed some famous brands also engaging in such practices; whether it's a gain or loss, only they know!
I conducted a survey and found that among hundreds of household paper companies in Wanjiang, Dongguan, none has built a decent brand. One important reason is that the quick-money approach above has influenced their mindset for building brands. Almost all paper mills in Wanjiang, Dongguan, have this problem: initially, they produce high-quality products because they need to develop the market, and poor products won't sell. But over time, quality deteriorates. For instance, when making three-ply roll toilet paper, the first production run uses fine-textured virgin wood pulp for all three plies, giving a good feel and comfort for consumers. Seeing such a good product with repeat customers, distributors are willing and diligent in promoting it. However, the second time, the manufacturer changes the product so the middle ply is coarse-textured paper, while the top and bottom plies are fine-textured; consumers don't notice anything wrong at first because they're not experts. The third time, the manufacturer might get clever again, making the inner two plies coarse and only the top surface ply fine. The fourth time, they think this method is good and consider themselves smart, so they go all out and make all three plies coarse. Of course, consumers and distributors aren't fools; they say, "Don't fear goods, but compare them." Through use and comparison, they learn the truth and refuse to be fooled. At that point, the manufacturer can only change the product name and launch new packaging. Some manufacturers change products dozens of times a year, others at least a dozen. With all this changing, can they ever create a famous brand?
Third Major Harm: Excessive Promotional Policy Fluctuations Manufacturers' channel promotions often are designed from the manufacturer's perspective, usually based on production-sales balance and product profitability. For example, when launching a new profit product, they might use bundle promotions, tying the new product with bestsellers. To quickly push the new product to market, they might increase rebate points several-fold. Some distributors, seeing transparent rebate points, might engage in low-price dumping. Another example: if the factory has excess inventory during the off-season, to digest capacity, they suddenly increase promotional intensity from 30+1 last month to 10+1 this month. Large distributors seeing this will immediately stock up, and sales might multiply several times overnight. Most small and medium distributors, limited by market and capital, can only sigh. This inadvertently encourages large distributors to engage in cross-region selling, which threatens and hits most distributors, and also causes small distributors to gradually lose confidence in the manufacturer.
Regardless of the reason, channel promotions shouldn't fluctuate too much in a short period, or they'll harm distributors. Frequent promotional changes lead distributors, secondary wholesalers, supermarkets, and even consumers to wait and see, hoping the manufacturer will lower prices further, creating a vicious cycle of product blockage. A general manager of a household paper company asked me why their products, already sold at low prices, still didn't see sales growth, while Vinda's products, priced higher, sold well. I told him the main reason their products weren't selling well was the lack of a stable price system; distributors didn't know when to stock up or when it was most advantageous. They didn't have stable confidence to promote the products.
Fourth Major Harm: Low-Price Sales in Hypermarkets Recently, a distributor friend complained to me: "RT-Mart's Blue Premium is selling at 16.8 yuan per pack, but our cost from the factory is 17 yuan. How can I sell?" This was a chat between friends, discussing the sales issues of a company we both used to work for. Low-price sales in hypermarkets are common, and because they're common, people have become accustomed to them. In fact, low-price sales are abnormal and seriously affect manufacturers, distributors, and other supermarkets.
From the hypermarket's perspective, low-price sales can bring three benefits: first, pressuring manufacturers to lower prices to establish their own low-price brand, like Walmart's "Everyday Low Prices" strategy; second, creating a "sensation effect" with ultra-low prices to attract consumers, gather foot traffic, and increase sales; third, suppressing weaker competitors. Clearly, from the hypermarket's standpoint, low-price sales are beneficial and harmless.
However, low-price sales greatly impact distributors, even negatively. On one hand, distributors lose their voice in other local retail terminals; on the other hand, they lose their rightful profit margins, and the previously stable price system is disrupted by hypermarkets. Price chaos is the most sensitive and feared issue for distributors, and also the most detested.
Besides hypermarkets themselves, another major reason for low-price sales is that manufacturers fail to clearly include a clause prohibiting "low-price sales" in contracts with hypermarkets, and fail to implement a price system. We know that hypermarkets generally conduct low-price sales during major holidays, new store openings, anniversaries, and other big events, such as discounts, gift promotions, rebates, and bundle sales. But they usually don't decide on such activities rashly; they typically inform suppliers in advance and hope for cooperation. Of course, if negotiations fail, they might proceed unilaterally. But in any case, in my view, the root cause lies with the manufacturer: first, poor manufacturer-distributor relationships; second, lack of a "price warning" system; third, the supply system isn't strictly enforced.
Fifth Major Harm: Unfulfilled Promises Manufacturers' promises to distributors typically include expense support, rebate support, personnel support, advertising and promotion support, and distribution support. There may be three reasons for manufacturers not fulfilling promises: first, salespeople make casual promises without signing specific contracts; second, manufacturers intentionally default on various pretexts; third, manufacturers fail to reconcile accounts in a timely manner. But regardless of the reason, we must fulfill our promises to distributors; otherwise, it will cause distributors to view the manufacturer differently, lose confidence, and lead to declining sales and market chaos. For distributors, unfulfilled promises are certainly painful; they've already incurred expenses and labor, but without compensation from the manufacturer, they have to bear these costs and efforts themselves. From another perspective, if a manufacturer's suppliers also failed to fulfill their promises, would the manufacturer still be willing to cooperate with them? I believe the answer is no.
Unfulfilled promises are a great harm to distributors, and in fact, also harm the manufacturer itself, though the manufacturer might not notice in the short term.
A person without credibility cannot stand; a company without credibility finds it hard to grow and expand. However, in today's Chinese business environment, I think very few companies keep their promises. Our company supplies 389 retail terminals in supermarkets, but fewer than 19% pay on time according to contract terms. So, when evaluating retail supermarkets, we categorize them into A, B, and C classes: A-class supermarkets receive key support, B-class get recovery and supportive assistance, and C-class may be phased out or strictly controlled. Therefore, to gain support from downstream distributors and terminals, manufacturers must fulfill their promises on time and according to regulations.
For these habitual harms to distributors, I think the fewer a manufacturer commits, the more distributor loyalty it will gain, and the closer the manufacturer-distributor relationship will be. Loyalty is priceless; please, bosses of manufacturers, think twice!
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