Maximising the effectiveness of distributors and agents

MSM SALES MANAGEMENT CONSULTANTS &
SHARP TUDHOPE LAWYERS
THE CLOSEST THING TO CLONING
Maximising the effectiveness of distributors and agents
© COPYRIGHT 2014 MSM SALES MANAGEMENT CONSULTANTS LIMITED. ALL RIGHTS RESERVED.
Aug 2014

FOR MORE INFORMATION CONTACT P.2
Dan Hansen | Managing Director
MSM Sales Management Consultants
D: +64 (0) 7 571 1139 | M: +64 (0) 21 059 6233
Email: dan@msmsalesmanagement.com
Website: www.msmsalesmanagement.co.nz
Kylie van Heerden | Partner
Sharp Tudhope Lawyers
D: +64 (0) 7 928 0777 | M: +64 (0) 21 039 9404
Email: kylie.VanHeerden@sharptudhope.co.nz
Website: www.sharptudhope.co.nz/

AGENDA P.3
• Introducing MSM and Sharp Tudhope Lawyers
• The opportunity
• Identifying the right distribution partners
• Structuring the game rules
• Developing long term relationships that deliver sustainable
sales as if you were there in person

INTRODUCING MSM P.4
• MSM specialises in delivering increased pro#tability through sales in
local and export markets.
• Our expertise is in helping companies develop export sales in;
• Food and beverage
• Health, beauty and nutrition
• Precision manufacturing and electronics
• Innovation, Technology and Media
• This year MSM will support in excess of $130m of gross sales, over $100m
will be related to export

MSM CLIENTS & PARTNERS P.5

TRADITIONAL APPROACH P.6

THE OPPORTUNITY P.7
• The majority of distributor and agent relationships start at
tradeshows
• Very few relationships have clearly identi#ed success factors
• Most relationships will last 12-24 months with little bene#t
to both parties... A Signi#cant opportunity cost
• The challenge is, together how we can #nd more money

PARADIGM SHIFT P.8
Add
value
Nominal
$
Reduce
cost

THE CASE FOR DISTRIBUTORS AND AGENTS P.9
• Distributors and agents are all about leverage
• Distributors work best for levering coverage
• Agents work best for levering depth
• Products that are technically orientated can be difficult to
place in the channel
• Business culture can be difficult to lever
• An appropriate value chain and price point must exist

IDENTIFYING THE RIGHT CHANNEL P.10
• Start with the end in mind...
• The consumer
• The region
• Synergies with existing product mix
• Distributor or agent
• The reach and market involvement
• The outcome (exit plan)

OPERATIONAL GAME RULES P.11
• Agree what success looks like
• Write the distributor into your plans
• Engage distributor resources i.e. sales team, marketing etc
• Trade value i.e. exclusivity, territory etc
• Educate and tool up the distributor
• Extend your hand and your culture

SETTING THE GAME RULES P.12
THE HOW AND THE WHAT
How?
Before putting pen to paper:
• Agree Key Objectives
• Decide on Structure (i.e. agency, sales rep,
distributor)
• Agree key commercial elements in principle.

P.13 Structure Options
2 most common relationship structures:
1. Agent
2. Distributor
Agents:
• The agent acts on your behalf (similar to a sales rep).
• Ownership of goods does not pass to agent.
• Payment is generally by way of commission or a salary type
arrangement.
• You are generally liable for acts of the agent.
Distributors:
• The Distributor acts like an independent contractor, i.e. as a principal.
• The Distributor purchases goods from the Exporter and resells in
market, with a margin attached.
• The Distributor is generally liable for its actions.

The What P.14
The Distribution ‘POT’
• Products
• Price and Payment
• Performance
• Protection
•
• Objectives
• Obligations
• Type
• Territory
• Term and Termination

P.15 Products:
• De"ne Products subject to the agreement.
• Ensure #exibility to add / delete products from scope of agreement.
Price and Payment:
• When setting price, take into account nature of risk being assumed by each party.
• Avoid being locked into pricing for too long a period.
• Be clear on payment terms (and currency).
• Ensure there is an ability to charge interest in event of default.
Performance:
• Consider purchase targets.
• Consider rights if performance targets not met.
Protection:
• Limit warranties and conditions (both express and implied)
• Limit liability.
• Ensure title retention until paid.

Objectives: P.16
• Write these down!
• Consider consequences for failing to meet objectives.
Obligations:
• Best efforts to sell.
• After sales service.
• Compliance with applicable laws.
• Storage of products
• Reporting
• Etc….

Type: P.17
• Exclusive / non-exclusive
• Restrictions
• Supplier Direct sales, i.e. via website.
Territory:
• Clearly de"ne
• Jurisdiction / Governing Law.
Term and Termination:
• Fixed or inde"nite
• Exit Strategy
• Rights to terminate

CREATING LONG TERM RELATIONSHIPS P.18
• Be the squeaky wheel, you're competing at a SKU level
• Write the distributor into your plans
• Share and reward success
• Engage distributor resources i.e. sales team, marketing etc
• Continually educate and tool-up the distributor
• Measure and discuss performance at least quarterly

WHEN IT GOES AWRY P.19
• Transparency is key
• Come back to success criteria
• At #rst you don’t succeed, reengage
• Seek to understand, most distributors act as a window to the
market
• The opportunity cost of replacing distributors is signi#cant
• Don’t be afraid to exit

MANAGING PERFORMANCE P.20
Be clear on what performance requirements are, e.g:
• Purchase / Sales Targets
• Meeting obligations
Consider consequences of failure to meet performance criteria:
• Loss of exclusivity
• Termination
• Indemnity
Be clear of process to manage poor performance, i.e:
• Notice requirements / timeframes.
• Opportunity to remedy.

P.21
Consider what is to happen to surplus stock, i.e:
• Grace period where distributor can continue to
supply current orders
• Re-purchase of stock at cost
• Return of con"dential information
Be clear on process to deal with Disputes
• Negotiation
• Mediation
• International Arbitration

P.22 The best way to manage performance is to manage the
relationship!
• Regular contact
• In market visits
• Reporting

KEY TAKE-AWAYS P.23
• There is a paradigm shift in the business/distributor
relationship
• Successful distributorships have synergy with the business
and the customer
• The correct legal framework supports a good relationship
• Measure and manage the partnership’s performance
• Transparency is best
• Don’t be afraid to leave

QUESTIONS P.24
• Common questions
• What are the pro’s and con’s of exclusive
territories?
• How do we integrate our sales team with a
distributor?
• What type of tools could support our
distributor?
• How do we engage distributor sales people?

Maximising the effectiveness of distributors and agents

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