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Improve Your Profitability

May 4, 2000
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A recent newsletter published by the Industrial Performance Group gives some helpful hints on how manufacturers and distributors can increase sales performance and improve profitability at the same time.

A recent newsletter published by the Industrial Performance Group, Inc., Northfield, Ill., gives some helpful hints on how manufacturers and distributors can increase sales performance and improve profitability at the same time.

Sales-performance problems usually occur as a result of a poorly defined sales and marketing strategy combined with an overall lack of formality in manufacturer/distributor working relationships.

Most manufacturers have an implied sales and marketing strategy that is mired somewhere between pushing products into the marketplace and pulling products through the channel. This creates confusion on the part of everyone involved, including customers, as to who is responsible for doing what.

By pushing products into the marketplace, the manufacturer relies on distributors to create demand for its products and to satisfy that demand in local markets. Distributors are responsible for maintaining an ongoing relationship with customers/end users and sharing customer information with the manufacturer.

By pulling product through the channel, the manufacturer assumes primary responsibility for creating demand for its products and maintaining an ongoing relationship with customers/end users. Distributors function as logistical outlets for the manufacturer's products in local markets.

The second factor that greatly hinders sales performance is the lack of formality and accountability in most manufacturer/distributor working relationships. Formality does not mean getting distributors to sign legal agreements. It simply means that the roles and responsibilities for both the manufacturer and distributor are clearly defined, and both parties are accountable for their performance. So if you are struggling with sales-performance problems, the questions you need to ask yourself are:

  • How well-defined is my sales and marketing strategy; and
  • What is the level of formality in my current manufacturer/distributor working relationships?

Most manufacturers know exactly how much it costs them to make their products. However, very few manufacturers have any idea what type of return they are getting on their sales and marketing dollars. If you are like most manufacturers and distributors, you probably know how much you spend on advertising, trade shows, maintaining a sales force, etc. But can you define the measurable return on that investment in terms of the numbers of new customers you have acquired as a result of these activities?

Profitability is also diminished when a manufacturer and its distributors are in competition with each other. In competition-based relationships, the manufacturer and its distributors act independently in an effort to accomplish their separate goals rather that focusing their combined resources on better serving their mutual customers. Eventually, these relationships drive profitability to a point where suppliers can no longer invest in their people and operations, which ultimately leads to quality and delivery problems.

To learn more about what you can do to improve sales performance and profitability, call the Industrial Performance Group at 800-867-2778, or visit www.indusperfgrp.com.

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