Small business

Showing posts with label Small business. Show all posts
Showing posts with label Small business. Show all posts

Tuesday 1 July 2014

Make smooth and fastest Distributor Network, How


Increasingly distributors are replacing direct salesforces in industrial marketing. They cost less, they absolve the manufacturer from the burdens of credit control and they provide a wide geographical spread of stocking points. But in appointing distributors the manufacturer loses control of the sharp end where the sale takes place. How can the principal identify weaknesses in a distribution network and what can be done about them?

The first indication of a weak distributor could be a fall in his sales performance. The manufacturer has the advantage of being able to compare the sales of each distributor and plot all their performances over time. A weak distributor can be spotted as one whose sales performance is out shone by others.Sharpening The Distributor Network

Of course relative sales performance may not tell the whole story. Distributors live in a competitive environment and some may suffer exceptional competition from other firms in their area. Nevertheless the warning bells will be sounded, and the principal will be able to discuss the problem with the distributor in good time.

World of Industrial Distribution changing with B2B Revolutions
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A second indicator of a weak distributor could be the growth of complaints which find their way back to the principal from customers. The nature of the complaints could be significant. Are they concerned with lack of stock, difficulty in obtaining sales service, poor back up, high prices, etc? The complaints can be logged and become an important discussion point for resolving with the distributor.

A third means of assessing the strengths and weaknesses of distributors is to pose as a customer. The Market Research Society sanctions mystery shopping as long as it is carried out within its code of conduct. The depth of investigation which can be undertaken as a supposed buyer can vary from the odd simple telephone call to a nationwide programme of organised visits.

Certainly the principal should telephone distributors from time to time to see how they react to a general enquiry. Things to look for are the speed and efficiency with which the telephone is answered and the ability of the receptionist to direct the call to someone who can handle it. However, if a larger study is to be undertaken, it must be coordinated and carried out in a professional and unbiased way. It will therefore require the services of a team of interviewers who can measure the response of the distributor at each stage of the buying process. The important things to look out for are italicised below.

Reception. This is most important since it is the first contact with the potential buyer. It is an area which tends to be handled badly, with inefficient receptionists who garble the name of the company and show conspicuous indifference to satisfying what may be an enquiry from a customer.

The sales person's initial approach. The prospective buyer is eventually routed to a sales person who should attempt to establish needs. In a recent mystery shop we carried out, the interviewers were told to enter the distributors and record the way in which they were approached by sales people. In one instance it became clear that even after three-quarters of an hour, the sales staff were not going to turn the conversation to business. The potential buyer might be there still if he hadn't finally taken the initiative and stated the nature of his enquiry.

Describing the product. Sales people are most at home when they can describe their products to a customer. However, it is not unusual for them to concentrate on product features at the expense of customer benefits.

Handling the competition. In most markets a customer can be expected to shop around. It is revealing, therefore, in mystery shop to ask the sales person to justify the company’s products. In a commercial vehicle dealer study where interviewers posed as potential buyers, one salesman was so flummoxed by the question, "Why should I buy your vehicle rather than a competitor's?" that he confessed he could not think of an answer!

Getting hold of the product. When a customer decides on the product, quite probably it will be wanted straightaway. Availability is therefore important. If the distributor does not have products in stock or cannot get hold of them quickly, the sale may be lost.

Providing a demonstration. Just as distributors' sales staff can give an acceptable description of their products, so too they are quite good at demonstrations. In the case of office equipment distributors, a demonstration is nearly always part of the standard sales routine. However, in the vehicle research referred to earlier, one-third of the distributors had to be prompted to offer a demonstration.

Offering discounts. Distributors frequently conflict with their principals about the high price of the products they sell. Yet in a recent survey on office equipment a quarter of all distributors offered a discount without being asked. A further half made the same offer after being asked. It seemed that distributors were all too eager to use price as the main sales weapon.

Following up the sale. Once the potential customer has left the distributor's premises, it is important that the enquiry is followed up either personally or in writing with a quotation. In the vehicle dealer study only a half of the "customers" were sent a written quotation even though all had asked for one.

Mystery shopping can expose weaknesses in the many stages of the distributors' selling procedure. It may be a valuable lesson for the principal to extend the research to include some distributors outside the company's network.

Making Correcting Weaknesses for Best ROI

The golden rule for helping a distributor improve its operation is "explain and train". Before raising criticisms of the distributor's business, however, the principal should attempt to understand the nuances of each locality. There may well be causes which are temporary or peculiar to a distributor, and these must be taken into account in any recommended changes.

A common weakness among distributors' sales staff is their failure to discover a customer's needs and relate the benefits of products to them. The sales person may fail to probe to find what the customer wants; may concentrate only on selling what the company has to offer. It may be thought easier to sell on price rather than push the benefits. The sales person needs training but this may not be within the facility of a small distributor. The principal should therefore assume the responsibility for both the sales product training and showing how to approach and convert prospects.

The principal may wish to manipulate the performance of the distributors' sales people by offering them sales incentives. Distributors have mixed views on principals' incentives. On the one hand they provide a boost to the sales staff's salary and so allow the distributor to recruit a higher class of personnel. On the other the distributor who allows a principal to make a payment to sales staff must concede a loss of control.

The installation of systems and procedures at dealers can help eliminate some of the weaknesses. For example, if it is important that a follow up takes place after the initial sales call or demonstration, it would not be difficult to set up a system which reminds the sales of this next step.

Systems can be devised for every part of the sales sequence. For example, a rule could be made that the telephone is answered before it rings more than three times; another might ensure that a customer is not kept waiting for more than five minutes in the showroom. Restrictions could be placed on the offering of discounts.

Of course all procedures and rules need policing if they are to be continuously observed. Further, it must be recognized that within a small distributor, overt bureaucracy is unacceptable and often unnecessary. So any procedures suggested to the distributors should be simple. They should be sold-in as ways of helping the distributor improve performance. A heavy hand is unlikely to work.

{{ The Guest Post Blogger organization was not involved in the creation of this content. - Dalvi Prabhakar B., Founder & Digital Manager (SEO,SEM,SMO) }}

World of Industrial Distribution changing with B2B Revolutions


Using distributors as an alternative to selling direct is very far from being a soft option, though it may be inevitable. Here we consider the manufacturer distributor relationship and look at its three commonest problems.

Industrial distribution has grown apace over the last 30 years. It has been driven by pressures of ever increasing selling costs and the demands from users for rapid service. Industrial companies which previously managed their own direct salesforces are having to learn how to pick distributors; and they are finding out the difficulties of training and guiding distributors' selling efforts. The skills which the industrial marketer needs today are not those of motivating reps to seek inquiries and stimulate sales but in pulling the demand through the distributor chain.

The term "distributor" is used loosely to cover a wide range of middlemen. In its strictest sense a distributor should:
  1. Purchase goods from his supplier for stock;
  2. Actively promote and sell this stock to users;
  3. Provide advice and service as appropriate for the product he sells;
  4. Invoice and collect money from his customers.

Usually a distributor is appointed by a manufacturer and may well operate a franchise for just one type of product. Kango hammer distributors could not sell Hilti or Bosch hammers but there is nothing to stop them selling a whole range of compressors and air tools which make a sympathetic product line up. Thus a distributor is very different to a wholly owned company depot, as independence allows it to stock a range of different products to suit customers' demands.

Mostly distributors are not formally appointed and sell whatever brands they like. Electrical wholesalers usually sell three or four brands of cable, and their allegiance to their supplier may stop with the price. The purist distinguishes between this wholesaling activity and the appointed distributor. From the manufacturer's point of view, selling trucks through distributors or lubricants via engineers' merchants pose similar problems of pulling demand through a sales outlet which they do not own.

To understand the motivations of the distributor and the manufacturer it is necessary to consider the driving force which brings them together. First let us consider how distributors begin. Often they start life as sales agencies - someone who has worked in an industry for a period sets up on their own selling a product he/she understands to customers he knows. Usually the product is a consumable or standard equipment costing tens to hundreds of pounds. It is a short step for the agent to add new and complementary products, get a small unit on a trading estate and buy and sell stock rather than take a commission.

The origins of the distributor require characteristics of local specialization and an entrepreneurial culture. The key to everything is stock turn and margins. A fast moving consumable may have a 25 per cent margin (i.e. a 33 per cent mark up) while a piece of kit which turns over at a slower rate may command a 40/50 per cent margin (i.e. a 66 per cent to 100 per cent mark up). - The Changing World of Industrial Distribution

The entrepreneurial distributor, originally the salesman, soon becomes desk bound and spends time on the important function of buying. A sales team is employed and being entrepreneurial the salaries are modest in the hope that commission will provide the incentive to sell.

Counter staff are paid peanuts. The whole essence of the distributorship has become a pipeline with buying and selling as the principal functions.

The manufacturer or principal on the other hand is moving away from being sales orientated. The manufacturer wants to cut back directly employed sales staff and focus on niches of demand. The manufacturer wants to concentrate on creating awareness and demand for the product through advertising. A system is needed for ensuring customers can easily obtain products anywhere in the country. A wholly owned depot is usually expensive and so the move to distribution. Distributors have a deep knowledge of local markets. They buy in bulk and save the manufacturer the trouble of sending out hundreds of invoices (which the law of averages says will have a fair peppering of bad debts). The distributor's stock saves the manufacturer space and money.

Of course, not all industrial products are suited to the distribution route. In general standard products pitched at a large and diverse target market and requiring a low level of technical competence in the salesforce are most readily suited to distributors.

The three most common sources of problems between manufacturers and distributors relate to excessive discounting, territorial disputes and arguments over the lack of distributors’ promotional efforts.

Disputes over excessive discounting by distributors.

Distributors work to a list price set by their principals and offer discounts to their own customers. Sometimes fierce local competition causes these discounts to get out of hand.

For example, since 1980 electrical wholesalers have been forced to offer larger discounts to stop their customers (the electrical contractors) buying from DIY superstores. The pressure on prices spirals backwards to the manufacturers who periodically try to tame the distribution network. Disputes are frequent where products are of high value (or bought in volume) and an extra one per cent is worth a fight. Office equipment, commercial vehicles and compressors have become battlegrounds with discounts the main weapon. Peace is restored if demand rises and the availability of products become restricted.

There is, however, much that manufacturers themselves can do. If Mita promote their copiers as being of a higher quality than others, their distributors do not need to cut prices as fiercely. Volvo trucks with a reputation for reliability and high residual values will not be discounted to the same extent as Renault or Ford.

Disputes About Geographical Areas

Distributors quite naturally want exclusivity in the territory where they sell. Manufacturers may be insensitive to this issue, preferring a multiplicity of distributors in a region - in the hope that the wider spread of sales outlets will ensure more product will hit the target.

If the product is a high turnover consumable such as abrasive discs, plumbers' requisites, cable, cutting tools and the like, the distributor cannot hope to be granted exclusivity. In any case the buyer of the consumable seldom specifies a brand for this type of product, and the distributor wins business by offering a wide range, a high level of availability, excellent service and good prices.

However, where makes or brands are specified, geographical disputes between competing distributors can occur. If buyers buy locally, as in the case of shot blasting equipment, the principal can afford to carve the country into regions. If buyers buy nationally, as in the case of trucks, truck bodies and associated gear, there cannot be any geographical boundaries, and each distributor must accept competition with others. In practice, the franchise of a truck distributor is one of around only 20 to 30 spread across the UK, and in any area a distributor has the advantage of a local following which gives a lead over his fellow franchisees in other regions.

Disputes About Distributors' Selling Efforts And Promotion

Manufacturers soon find out that they have little or no control over their distributors' sales efforts. In fact if a manufacturer tries to encourage a distributor's salesforce with training or incentives, it may well suffer a rebuff. The distributor doesn't want its salesforce locked in to one product. Furthermore a day out on a manufacturer's training course is a day ('off the road") and has to be paid for.

The manufacturer recognising these limitations of the distributor is tempted to adopt a hybrid approach, using its own salesforce to cherry pick the largest and most worthwhile accounts and leave the distributor to sweep up the rest. Distrust arises and the distributor starts to ignore the franchise guidelines and even double deal, offering alternative products even though a franchise agreement may prohibit this.

The manufacturer must be quite clear about the trading arrangements from the start. Amicable solutions can be worked out based on the purchasing power of customers (over a certain size could be handled direct) or by end use (military customers may be handled direct). Introduction fees can be given to distributors to maintain their interest and keep them happy. - B2B-Internet


{{ The Guest Post Blogger organization was not involved in the creation of this content. - Dalvi Prabhakar B., Founder & Digital Manager (SEO,SEM,SMO) }}

Wednesday 17 April 2013

Simple Manual - Cloud Computing Concepts



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