How do I get the most from my sales agent or distributor?
Build the relationship. Build trust.
It is assumed that those reading this will already have in place a number of Agents. Distributors and other selling partners in their export markets. Some will be performing well, others have room for improvement, and a few may not be working out as hoped. Of those selected to represent your business in these markets, some will have formal contracts in place, others a letter of appointment, with some being tried out on the basis of a handshake. Multiple markets may be being managed simultaneously, or maybe just a few. Wherever you are in the development of your international business, you should have a long term plan for where you are going next, and you should be taking your best selling partners along for the ride!
Different markets will yield results at different speeds, and it follows that your focus in the current financial year should be mainly on those who are going to help you achieve or surpass your sales targets. Your best performing selling partners should be supported actively, with regular sales visits, sufficient marketing material, technical training etc. Call them your ‘A-List’. It is important to formalise your arrangement with them by issuing a Sales Agency or Distribution contract, or whatever is necessary to empower and encourage them to sell more of your products. Mr. Ozlan from Turkey achieved ‘A-List’ status for carpet tile distribution within 6 months, where his predecessors at the same company barely stepped out of the C-List. It was July 1998 and he had the conviction to promise £50,000 of orders before the end of that year, a target he easily surpassed.
Your ‘B-List’ should comprise those companies showing promise but who have not yet delivered much in terms of order quantity, quality, or prestige. Continue to encourage these companies within your allocated budget, only providing additional support where they offer a compelling business case. <strong>Mr. Weithofer was one of two machinery distributors in the USA: one for the north and one for the south. He turned over less than his southern counterpart but his orders were always more profitable. His business remained on the B List because it seemed not to have the focus or resource to be able to build on the business that it generated during our first few years together. Visits to his facility and to his customers tended to coincide with times when we were already in the market, thus always remaining within budget.
The ‘C-Listers’ are a mixed bunch: new enquiries from new and existing markets, and a range of opportunists, some of whom may offer serious propositions. Develop handling systems for your ‘C-List’, providing the information that they need, but using minimal resource. Don’t ever dismiss an export enquiry. Mr. Mehta visited a machinery stand in Dubai every day for six days. He had no experience of our products, but he was absolutely determined to have our agency. We barely had any visitors during the whole exhibition, so we gave Mr. Mehta a chance to prove himself. Within three years he was our most profitable overseas selling partner. Mr. Mehta went from the C to the A list very quickly, and that can happen.
This proves the need for some kind of enquiry handling system, linked to what you can afford and whether you can resource it. No system is necessarily right or wrong, but the simplicity of A, B, C gets most people hooked.
When we think of incentives it tends to conjure images of cash or gifts. There are limitless ways in which you can incentivise your selling partners to achieve more. Some are common to all business sectors whereas others will be sector specific. It can be important to adopt a ‘carrot and stick’ approach so the more they achieve the more they receive your support.
Remember Mr. Ozlan? He started his journey with us on payment terms of ‘Payment in Advance’ for orders below £10,000GBP or via Confirmed Irrevocable Letter of Credit for orders which exceeded that amount. The INCOTERMS we offered were Ex-Works UK, so he had the responsibility to arrange the transport to collect the goods from our warehouse. His first 6 months with us inspired sufficient confidence to improve these terms, and for the whole of his first full calendar year with us we agreed that he could pay on Open Account for orders below £10,000 with terms of 60 days from the date of shipment, unless there was payment default. The larger orders continued to be paid by Letter of Credit.
During his first six months there was a gentleman’s agreement that we would not sell to other Turkish companies. In January 1999, we granted his company a 12 month non-exclusive contract which detailed the responsibilities of both parties, and set sales targets for the year. In January 2000, his company became our Sole distributor in Turkey. This raised and formalised his status as our only representative in the market, while at the same time allowing us to sell direct to large international accounts with his involvement and support.
So if your selling partner asks for exclusivity, don’t be too ready to give it. Use it as a carrot at the end of a stick. Any kind of exclusivity must be earned. Please understand that the term ‘exclusive’ means that legally you are no longer allowed to sell direct into a market.
Some markets may initially be too large for smaller exporting companies to handle, so take bite sized chunks. For example, most design based business in Canada tends to come from Toronto, so it makes sense to focus on the city and its surrounds. Success in Toronto will generate interest from other parts of Canada. In 2012 following a Market Research exercise, Mr. Motley was appointed as a distributor for Ontario, Canada on the basis that if he was successful in Ontario he would be granted a wider territory. Today, he is the Exclusive Distributor of a range of British wall products for the whole of Canada. His successes have created demand from south of the border in the USA.
For many years, companies were encouraged to develop business with the BRICs (Brazil, Russia, India, China & South Africa) and while that yielded some great results these markets are probably too large for less experienced SME exporters. So look to their smaller, neighbouring markets or at those of a more manageable size. Colombia, Chile, and Peru are frequently cited as the more economically stable markets in South America. Business success in those smaller countries will attract business from elsewhere in Latin America, which is why a Chilean distributor Mr. Gerardo suggested he should be granted a 10% commission to develop business in adjacent markets. His suggestion was declined but this signalled the potential a regional sales centre for Latin America.
These are just a few examples of how selling through agents and distributors can work. Remember, your export markets will all run at different speeds so it is important to have in place a long term plan. For a whole variety of reasons some markets will yield results faster than others, and you can use profits from those to support activity in the slow burn markets. Don’t try and do too much at once. If you direct your effort at everything it’s affect will be minimal. If you focus your effort it’s affect can be magical.