Allowing distributors to take over some of your marketing functions lets you focus on manufacturing the products that most completely meet the needs of your customers. Within the distributor relationship, the distributor can carry out specific tasks that help with overall business performance. The key is to evaluate which of your functions the distributor can fulfill more effectively and at lower cost.
The principle function of the distributor is to make your products available in more markets. Making it convenient for potential customers to purchase your products is an important marketing function. Companies that specialize in distribution have contacts and business relationships with a wide variety of sellers and can ensure your products are present in outlets visited by your targeted consumers. Increased market coverage ensures customers can purchase your products whenever they need them.
While manufacturers often arrange for general publicity via press releases or articles about their products in trade magazines, distributors can take over targeted promotion. Advertising that promotes a specific product at particular retailers is often handled more effectively at the distributor level. Distributors can arrange for discount coupons and in-store promotions more easily because they have the contacts and contractual relationships at the retail level. You can compensate distributors directly for such initiatives, or increase their margin with the understanding that they will carry out local promotions.
Distributors seldom have the expertise or training to handle in-depth technical support, but they can be a good first contact for customer service. Some distributors have the personnel and communication facilities to allow them to handle customer service calls more effectively than a manufacturer. Others are focused on distribution and don't have such capabilities. As a manufacturer, you have to decide whether you want to handle general customer service calls yourself, have a distributor handle them, or outsource them to third parties. Your preferred customer service configuration can influence your choice of distributor.
Since the distributor is closer to the market than the manufacturer, distribution companies collect more market information in the course of their business. Feedback on trends, customer satisfaction and competitors' positioning is vital in markets that change rapidly and that require responses to market events on the manufacturing side. Because collecting and sharing data is costly, your distributor agreement has to specify what data you need. You can use market information from your distributors to develop new product features that your customers want and phase out obsolete products.
For large purchases, financially strong distributors often handle financing for customers. Offering advantageous rates and favorable re-payment terms can increase sales. Even distributors who can't offer financing themselves, may arrange it through third-party financial companies. Manufacturers with substantial capital expenses are insulated from the risk of consumer financing while benefiting from improved sales performance for their products.