This my friends is one tough question to answer. Is there a benchmark for when to hire direct reps or go with distributors? I do not know the answer; no doubt there are consultants out there who claim to know. Here is some down home feedback.
If you decide to go with distributors then you wii have only one or several products in a distributor rep’s bag that could contain dozens or hundreds. When I did work through distributors I always wondered how often they talked about my product. If my product happened to be one that worked hand in glove with one of their other products then I felt better. If the product was a stand alone then I had my doubts about how often the rep would take my product out of the bag.
In one company where I worked they started out with distributors but moved to direct reps when the distributors failed to sell enough product. The reason was that the distributors could not effectively communicate with the buyer because they did not have sufficient knowledge of the heart. It’s kind of tough to talk with a Cardiologist when you don’t know the difference between the circumflex artery and the main artery into town.
These are my rules of the road for when to sell through distributors:
- The product is generic and you are looking for mass distribution
- The product does not require sophisticated knowledge to discuss it with a buyer
- Your company is a start up and you can’t afford direct reps
- Your company has dozens of products that are generic or me-too
- The margins on the product are low
- Your customer base is large and cuts across market segments
A true marketing guru could no doubt add to the list. Whenever I faced a decision like this I always looked at the sophistication of the product and of the buyer. If a buyer looked at the product and said ho-hum, this is nothing new, I tended to choose distributors. If the marketplace was savvy and the product required specific knowledge then I went with direct reps.
The other question to consider is the current revenue of the company making the product. If you are a million dollars in revenue or less and you’re just getting up a head of steam then go with what makes sense at the time, even if the product is sophisticated. If you do a really good job of training the distributor reps and they get it and the commissions on the product make it worth their while then they will pull it out of the bag. If the reps are not encouraged to sell the product and they know little or nothing about it then you’re dead in the water.
If you, as the business owner, have done all that you can do and the sales are not coming via distributors then cut them off and hire a direct rep or reps. How much should you pay these reps? Tune in Wednesday.
The final Thought: “For what is the best choice for each individual is the highest it is possible for him to achieve.” Aristotle.