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Agent, distributors and channel partner management
1. August 2015
PARTNERING WITH
AGENTS &
DISTRIBUTORS FOR
INTERNATIONAL
SUCCESS
Presentation to the Food and
Grocery Council
Shaun Conroy
New Zealand Trade & Enterprise
5. 5
A FEW CONCEPTS
1. The Channel Partner Lifecycle
2. Active Management
3. The Transparent Relationship
4. Supporting your Channel Partner
5. Performance Management – The Dashboard
6. What Does Success Look Like? Cash flow Positive
7. 7
ACTIVE MANAGEMENT
• Is an engaged and active process
• Is about maximising performance
“You would never recruit an employee
and give them no guidance, training or
support, but then solely rely on their
networks and hold them accountable
for results.”
8. 8
TRANSPARENT RELATIONSHIP
• Know your end buyers very well
• Remember the ‘quid pro quo’
“If your channel partner owns the
customer they own you.”
9. 9
SUPPORTING YOUR CHANNEL PARTNER
• Be valued by your channel partner
• This is not just $$$
“Many family businesses in Asia for
example have been built on the
personal relationship of the
founder/CEO with his key customers.
These businesses may lack the HR,
computing, logistics, inventory
management and governance
processes your business takes for
granted.”
10. 10
PERFORMANCE MANAGEMENT
• Active process
• Based on a strong relationship
• Co-development of
performance measures
• Balanced Scorecard
• Dashboard
• But, it’s not just about KPI’s
11. 11
WHAT DOES SUCCESS LOOK LIKE
• Follows a structured process
• Has an Active Management
relationship
• Is a 100% transparent
relationship
• Is built on a strong relationship
• Provides support
• Manages the lifecycle
• Is performance managed
• Has a visible dashboard
• Is cash flow positive
13. 13
NZTE MAP – THE WORLD
Riyadh
Abu Dhabi
San FranciscoIstanbul
New Zealand
Offices
Port Moresby
Bogota
INDIA, MIDDLE EAST
AND AFRICA
EUROPE
GREATER CHINA
EAST ASIA
AUSTRALIA AND THE PACIFIC
SOUTH AMERICA
NORTH AMERICA
New York
Washington DC
Mexico City
Los Angeles
Auckland
Vancouver
Tauranga
Napier
Wellington
Christchurch
Dunedin
Nelson
Palmerston North
New Plymouth
Santiago
Sao Paulo
Hamilton
Sydney
Melbourne
Jakarta
Mumbai
Singapore
Kuala Lumpur
Bangkok
Ho Chi
Minh City
Manila
Hongkong
Taipei
Shanghai
Guangzhou
Shenzhen
Beijing
Seoul Tokyo
New Delhi
Dubai
London
Paris
Madrid
Moscow
Milan
Hamburg
Notes de l'éditeur
Acknowledging the different stages of the relationship is important to correctly manage the relationship…
The Agent that got you into a market may not be best placed to grow your business 3-5 years later…
Some companies build a relationship with the first importer that places an order, locking in a sale now at the possible expense of future growth.
Understanding that the Channel Partner you start with may not be the most suitable partner at all stages of your sales growth cycle…
As sales grow your agent may not have the sales force, logistics or finance to grow with you.
This is the opportunity cost of staying with the wrong partner.
One problem often reported by exporters is their growth in a market has plateaued and stalled. They report an excellent relationship with…
In many cases your growth aspirations have exceeded the Channel Partner capacity. They have good relationships with a series of good customers, however not many of them, and are incapable of growing the market further.
The Channel Partner you have started with no longer has the capacity to keep up with your growth needs.
Active management is about driving performance through your channel partner
Many companies put the majority of their efforts into finding an Agent and very little effort into managing the performance of the Agent. They mistakenly believe that if they sign up a good name distributor, results will magically just happen.
Bain & Co. looked at 2,000 successful sales organisations and tracked their sales growth over 10 years. Their research found that only 25% of companies were able to achieve growth rates of over 5.5% per annum. That is not great growth!
Bain & Co. found that conventional companies:
Spread their targets across territories
Are dependent on rainmakers (Channel Partners)
Focus on trends (or hot markets)
In order to achieve sales growth these companies have to increase sales resources and/or add new markets thus adding cost. These companies grow the market by adding cost, with average low growth rates and that is not a great business model.
Bain & Co. found companies with superior sales performance take a more structured approach. They identify the most promising customers:
Customise products to sell to them
Prioritise resources into these key segments
They have a systematic sales and marketing process
Structured performance management process
Align sales metrics to maximise sales
Active Management is simply the concept of being actively involved in your business with the Channel Partner. You would never recruit an employee and give them no guidance, training or support, but then solely rely on their networks and hold them accountable for results so why would you do this with a Channel Partner?
Too many exporters believe that Channel Partners are automatically motivated to take on and sell your products simply because they stand to make a profit on the sale. Companies are motivated by profit but there is a dollar cost and an opportunity cost to taking on your products. Channel Partners are exposed to new products every day. Taking on new suppliers requires investment, training and takes resources away from other parts of the business.
If you want your product to be successful; look at your relationship with the Channel Partner as a partnership and your contribution to that partnership is your Active Management.
You need: A mutually agreed understanding with your Channel Partner that your active engagement in their business is the best way to achieve prolonged sales growth and performance.
Agreement that you are engaged in a totally transparent relationship with the Channel Partner’s end customers – the ultimate buyer.
Agreement on exclusivity or segmentation of you market.
Support to your Channel Partner to help them grow and sell. This is vital as Active Management is a two-way street and your contribution is required to make the Active Management relationship work. For example;
Regular communication and market visits, co-developed launch program, 3-5 year growth plan, jointly developed marketing program with co-investment, joint product development, innovation & localisation, marketing support kit, customer claims processing
A Performance Management Framework. This entails how to develop and agree performance KPI’s and the development of a visible dashboard for both sides to view and update.
The Transparent Relationship is simply you knowing your Channel Partner’s customers – the end buyer - very well. These are the people that actually buy and or use your products, so knowing them and understanding their needs is essential to your success in the market.
Many Channel Partners will initially be suspicious of your motivations to want to meet and know their customers. They will rightly be concerned that once you have this information you can leave at any time for a better deal taking the customers with you - they have been burnt before.
You need to build a strong bond of trust with your Channel Partner for this to happen and you need to explain to them that this is how you run your business, work with Channel Partners and how it generates the best results for both sides. But it does come with the quid pro quo that you are actively managing the relations and financially investing in theirs and your success. You can’t have the ‘take’ without the ‘give’ and the best way to generate this trust is to demonstrate your commitment to the Channel Partner through the very visible actions such as;
Active Management is a big commitment on your behalf and costs you a lot of time and money, so you are unlikely to enter in Channel Partner agreement lightly, nor would you change them without reason. Your commitment to this process is significant and undertaken because you know it will reward both parties with the highest return on investment. Once your Channel Partner understands this and buys into the process your interests are aligned and your chances for success are improved.
If you want to be important to your Channel Partner your support is essential. By becoming valued and important to your Channel Partner they are much more likely to prioritise your products and sales growth.
Support can be provided in many ways and means and does not only mean financial support. Don’t assume your Channel Partner has access to all of the modern tools and processes your business relies on. Many family businesses in Asia for example have been built on the personal relationship of the founder/CEO with his key customers. These businesses may lack the HR, computing, logistics management and governance processes etc. your business takes for granted.
If you can identify their needs and appropriately suggest how you can help them you may add much more value to your Channel Partner’s business than just through the P&L your products represent. Consider how you can support your Channel Partner through;
Sales training
IP development and protection
Developing operational expertise; logistics, inventory management
Development of policies and procedures for example health and safety
Developing modern HR frameworks for people development
Supporting your Agent in the sale process by embedding your staff in Channel Partner’s company
Investing cash in the sales development process through trade shows
Running customer information seminars
Consider having a full Board meeting in the Channel Partner’s country to expose the Board to the market and opportunities and get their full support for the strategy.
Managing performance is not just about focusing on the KPIs; it is about the whole Active Management process. Although it involves a large time commitment by you and it absorbs your resources, but it does give you the highest probability not just of success but also over performance.
Holding your Channel Partner accountable to the performance standards you jointly agreed is essential. Accountability is not necessarily about penalties or changing Channel Partners when they do not meet targets, it is about a commitment to jointly look at what went wrong and to work out a plan to turn it around.
Setting KPI’s is generally not that hard, having them agreed to by the Channel Partner can be. A mistake new exporters often make is to set KPI’s at the beginning of the Channel Partner relationship with no regard to other factors affecting the relationship like Active Management, Transparency and Channel Partner Support. If your product is new or you are unknown or a small player in the market, asking your Channel Partner to set KPI targets is very difficult as there is simply no sales data to go on. Most Channel Partners will be reluctant to agree sales levels targets in year one.
Set them jointly and term them ‘Channel Partner Commitments’
Make them achievable, no matter how small the number in the first year
Support your Channel Partner with marketing and other resources including cash to help them make the target. This approach can be very helpful when setting strength goals. Ask them, “What support do you require from me to meet these sales targets?”
Incentivise your Channel Partner to achieve KPIs with a bonus payment for reaching targets.
Spell out clearly what actions will be taken if the KPI’s are not met. Nobody wants a smack on the hand, but sometimes a thorough customer review session followed by an action plan and supported by you can be hugely empowering and motivational for a Channel Partner.
The Dashboard:
Setting up a visible and easily accessible KPI dashboard is a really easy and effective way of making performance visible and accountable.
It is a form of continuous passive management that seeks to make Channel Partner performance transparent.
Setting up an online dashboard allows the Channel Partner to see the relationship from your perspective and align their behaviour accordingly. The dashboard should capture the main KPI’s you are managing to and importantly should be live and continuously updated.
The dashboard is effectively a management accounting tool that provides you with more performance data. It will allow you to link incentives, support and bonuses more easily and relevantly in a time bound manner.
An advanced form of the dashboard is the use of the Balanced Scorecard approach as developed by Kaplan and Norton (http://balancedscorecard.org/Resources/About-the-Balanced-Scorecard). This requires customisation but may give you the most flexible and holistic management approach.
Cash flow positive is the ultimate expression of a best practice Channel Partner relationship.
It shows that you are so valued by a Channel Partner that they are prepared to fund your business by paying for the goods or services in advance.
You are now an integral part of their business and their success is based on your success, therefore their desire and need to invest in the success of your business is assured.
