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Tag: exporting

  • Differences Between Agents and Distributors

    Differences between Agents and Distributors

    OK, so you’re ready to have somebody else selling on your behalf “while you sleep”? Of course, there are various solutions to this, but two of the more common are the ’employment’ of commission (aka sales, aka trade) agents or distributors. But what are the differences between agents and distributors?

    Essentially, the difference is one of product ownership. While a commission/sales/trade agent sells product on your behalf that you continue to own and invoice the ultimate customer for, distributors take ownership of the product and sell on to their own customers. This can mean that while, on the one hand, your business builds a relationship with the customer, on the other you may not even know where your product ends up.

    Differences between agents and distributors

    The key point to remember when choosing between selling via agents or distributors is the following :

    In the case of distributors, a supplier / manufacturer sells his product to the distributor, who in turn sells the product on to his customers, adding a margin to cover his own costs. Distributorships are used as a low risk means of expanding business into new markets or territories. The distributor assumes liability, i.e. legal responsibility for one’s acts or omissions. Failure of the distributor’s business entity to meet that responsibility leaves him open to a lawsuit for any resulting damages or loss, which may occur to the other party. As the distributor has taken ownership of the products, he is incurring a greater degree of risk than an agent in the course of his business. The distributor has no authority to create a contract between the supplier and customer. The customer’s contract is, in this case, with the distributor.

    On the other hand, an agent is a self-employed intermediary who has continuing authority to negotiate the sale of goods on behalf of another entity – the supplier / manufacturer (aka the principal). The agent may negotiate and conclude the sale of goods on behalf of and in the name of that principal. As he does not take ownership of the goods, the agent does not take on responsibility. This remains with the supplier.

    Here are some main differences between agents and distributors.

    Distributor advantages :

    • A supplier is able to pass on risk associated with the products.
    • The distributor is motivated to sell the stock he has purchased from the supplier.
    • A supplier will not incur any liability (with exceptions e.g. defective products).
    • The appointment of a distributor will avoid the need for a supplier requiring an established place of business in the territory, reducing administrative costs.
    • The supplier has avoided the cost of employing a salesperson in the territory.
    • A supplier will only need to monitor accounts with a distributor.
    • No compensation is automatically payable to a distributor upon termination of the distributorship agreement.

    Distributor Disadvantages :

    • The supplier has limited control over activities of a distributor.
    • Under an exclusive distributorship arrangement, the supplier’s entire credit risk in respect of sales in that territory is concentrated on the distributor.
    • A distributorship arrangement is likely to be governed by domestic and European competition legislation.
    • The supplier lacks information on the ultimate customer – he who buys from his distributor.
    • Given the large degree of autonomy granted to a distributor, it is critical that the selected distributor is financially and commercially sound.

    Agent Advantages

    • The supplier has more control over the activities of an agent.
    • The financial and commercial background of the commission agent will not be as critically important to the principal.
    • The principal will want to ensure the integrity of the sales agent, since the principal will in the normal course be bound by the actions of the sales agent. This can be more easily done, when dealing with one person, rather than a company, as with a distributor.
    • The supplier keeps in direct contact with the customers.

    Agent Disadvantages

    • The principal is not able to pass on risk associated with the products to the agent.
    • The principal will incur liability as a result of the agent’s activities.
    • In most instances, the principal will be obliged to take on the expense of training the agent.
    • The principal will still be obliged to monitor the accounts of all customers.
    • An agent would normally carry several products from several manufacturers. If the supplier’s product is not selling well, the agent will typically divert more attention and energy to other products in his suite.
    • Under EU Commercial Agents Regulations, minimum notice provisions apply in the event of termination of the agency and the agent may also be entitled to compensation, over and above this notice requirement.

    While there is no right or wrong choice here (it depends on your industry and what choices you make for growth strategy), do take these differences between agents and distributors into consideration when plotting our next steps. Also, consider other factors in distribution agreements outlined in this blogpost.

  • 7 Trade Show Secrets

    7 Trade Show Secrets to a Better Event

    In lieu of Trade Show Secrets, you can substitute Consumer Show or Conference. The principles are essentially the same.

    Often, we get so excited about unearthing enough marketing budget to allow us to exhibit at a show, that we forget these 7 trade show secrets to a successful event.

    1. Preparation, preparation, preparation

    Never book your stand at a trade show, conference or other event, then fall asleep because you think the job’s done and turn up on the day expecting miracles. Before the event comes along, be sure you’ve invited all those you’d like to meet on the day. That might include current clients, past and lost accounts, colleagues in the industry, journalists, influencers, reviewers, prospects, etc. Allocate specific times to meet. People are less likely to let you down if there’s a slot penciled in for them. However, try not to simply invite these people onto your booth in isolation. Ensure you’ve already put in some PR mileage and relationship building beforehand.

    Trade Show Secrets

    2. Remind

    One of my favourite marketing adages is that “nobody gives a damn about your business but yourself”. Slightly crude and exaggerated this may be, but it serves to remind us that we must be communicating with our targets, because they’ve got a load of other stuff going on. 72 hours before the show’s opening, remind your prospects to come by and visit your stand. Do the same again on the day.

    3. Show; don’t just tell

    There is little worse for a busy buyer*, who has made the decision to spend some of his or her tight schedule on your stand, than to discover you have nothing to offer. Discuss some new product or service concept you’re working on and ask for their opinion. Show them something. Demonstrate, sample, taste, touch. Involve them. Inspire them.

    4. Feed and water

    Yes, they do want some snacks to eat and some liquid to drink. Not just coffee. And yes, they do want to sit down.

    5. Follow up

    The amount of what-turns-out-to-be-rubbish-or-forgettable that buyers collect at trade shows is extraordinary. Be the one who follows up. Stand out. Let this slip and you will slip their memory.

    6. For yourself

    Wear comfortable footwear. Bring with you a square metre of really good quality, thick carpet. Place it under the regular carpet of your stand floor towards the back of your space and retreat there when there are no visitors. This will save you aches and pains in your legs over the duration of the show and keep your energy levels up – one of my favourite trade show secrets! Drink lots of water and no alcohol. Eat plenty. Sleep plenty. Keep very good notes of who you’ve met, including basic physical features so you can picture them in your mind’s eye for the next time you meet. Even better, take their photo. Have a prioritised “to do” list for after the show. Smile.

    7. Can’t afford to exhibit?

    Many small and micro-enterprises simply don’t have the budget to book a stand at a major national or international trade show. What can be done? Here’s what. Nowadays, flights are cheap with the likes of Ryanair. Fly over and visit the stands of people you’d like to talk to. Visit others for research purposes. But here’s the secret : In this scenario, you are visiting their stand. And they are at the show to sell, not to buy. So do this work early in the day, right at the start of the opening hours. Because this is their dead time, when their prospects haven’t yet arrived at the show, so you’re not infringing on their selling time.

    Trade Show Secrets

    Exhibiting can be a big drain on any company’s marketing budget. Be sure to put in the ground work beforehand, use these trade show secrets and then follow up leads afterwards. The show is not a stand-alone gig, but rather should form an integral part of an ongoing pro-active marketing programme. Get comfortable with these trade show secrets and see your ROI, as well as your customer relationships, improve.

    And remember that you can still gain value from a show, even if you’re not in a position to exhibit.

    * For “buyer”, read buyer, specifier, influencer, financial controller, journalist, etc.

  • Distribution Agreements – What Are You Looking For?

    You may have found a product you’d like to distribute into your market on behalf of its principal (manufacturer or developer). Indeed, you may have developed your own product for which you now need a distributor in new markets. Consider these points when setting out to secure distribution agreements.

    1. Density of end-users

    The higher the density of end-users, the more distributors you may need (or a small number of distributors, each with a significant sales team). The lower the density, the greater the area your partner may need to have “allocated” to him. But be very careful : geographic exclusivity is not permitted within the EU.

    2. Length of purchase decision-making process

    The longer the decision-making process, the more time consuming this may be for your distribution partners. If final purchasing is done online or via retail, then your partner can cover a larger area.

    Distribution agreements
    Distribution partnerships

    3. B2B v B2C

    Distribution of products direct to consumers is clearly much more time and energy consuming than through a channel. Selling B2B requires fewer accounts, with larger volumes per account.

    4. Volume v margin

    Too often, principals try to get away without rewarding their distributors sufficiently well. If your product is high-volume, then partner margins can be lower. Margins for lower volume sales, however, need to be higher.

    5. Intra-distribution partner competition

    If a principal is serious about supporting his distribution partners, then he will not undersell them. Nor will he try to bypass his “geographic” partner in order to sell direct to a large account in that partner’s area. It’s about respect.

    6. Promotional support

    I like to see principals who are dedicated to supporting their distribution partners, through pro-active marketing (often co-branded). On the flip side, I also like to see a distributor who does not demand that all marketing costs be borne by the principal. Willingness to spend + Willingness to share = Potential to succeed.

    Here are some critical subjects about which a potential distribution partner needs to convince a principal :

    • product and market knowledge
    • visibility and being known in the marketplace
    • commitment
    • finances, ability to pay and handle cash flow
    • customer list
    • that he will not “bury” the product *
    • ability to promote
    • ambitious (but realistic) targets
    • branding
    • team – especially sales!
    • most importantly, trust

    * Sometimes, a distributor will seek to take on a product from a principal, simply in order to bury it, i.e. stop or stall its entry onto and impact upon the market. Trust me, this happens.

    Among micro- and small enterprise in Ireland, distribution is one of the Four Ps of the Marketing Mix that often gets ignored. As the old adage goes, you should seek to have others “selling your product while you sleep”.

    Distribution Agreements – Resources

    Read this Enterprise Ireland article on market entry and distribution.

    Read this NI Business Info article on agents and distributors.