Distributor Management - Art or Science?

Our research has shown that on average European medical device SMEs export to 32 different countries. And managing a complex network that covers such a large geographical area and that brings differences in culture, language, healthcare systems, regulatory requirements etc. is certainly not an easy task. So, how do you manage such a large group of distributors? 

I personally do not believe in stringent control systems, after all distributors really do not like to be micromanaged. It is important to view distributors as an extension of your organisation, rather than a ''service provider'', and the focus must be on education. A distribution company can only succeed if their team is confident in your product, its application/functionality, its USPs etc. and they fully understand your market strategy. I have seen successful distributors fail because their sales team did not introduce the product to the right target market (end-users) or they were unable to deliver a convincing sales pitch. Therefore, ongoing education, particularly for more challenging devices, is vital to ensure continued market success. 

Good distributors also prefer to be left to their own devices and focus on delivering results, rather than wasting time by overanalysing monthly figures. Of course, it is important to meet regularly, both virtually and in person, to provide training, review sales, align objectives as well as to discuss any market challenges that need to be addressed. Surprisingly though, many of my best performing markets are also the ones that require the least amount of 'management' and input. So, does this come down to distributor selection? 

Obviously, selecting a high-performing partner from the start will have a positive impact on efficiencies in the long run and is likely to yield quicker and better results. But manufacturers must also be considerate of external factors such as market fit, market readiness and general market dynamics that can impact the distributor's performance.

 

Distributor selection

There are thousands of different distributors out there and finding the right distributor for a device in a specific market can be like looking for a needle in a haystack. So, how do I know which distributor is right for my business? Well, generally, you tend to find three types of distribution companies:

 

• Small distributors

 

The set-up for smaller businesses tends to vary. Sometimes, these are start-ups that have been founded by former employees of multinationals who are highly skilled and knowledgeable in a certain clinical field. The advantage of collaborating with such a distributor is that they are likely to be very ambitious and driven to succeed. After all, their company's success is fully reliant on the successful market introduction of your device. Also, if your product was to fall into their area of expertise, they would already have well-established local relationships with the right key opinion leaders. However, some of the drawbacks of working with a smaller company may include a lack of financial resources and financial instability, limited market reach particularly in geographically larger countries, and their logistics and general operations may not be running smoothly (yet).

In some markets, you will also find numerous distributors that may present themselves as major organisations and they often promise manufacturers substantial success, particularly at exhibitions. However, after conducting your own research, you may find that the company may not be as well-established as they led you to believe. These distributors are often active in low-cost consumables, so it is important to perform due diligence before entering into any agreements.

 

• Medium-sized distributors

 

These distribution businesses tend to be specialised in serving a particular clinical field. For example, they may be specialised in supplying the sterilisation department or devices for laparoscopic surgery. Provided they are handling high-quality devices, they will have an excellent relationship with a particular group of end-users, and they would also be an ideal partner for the introduction of innovation. 

As for the disadvantages, if your product is not an innovation and your company is late to market, it is likely that those companies may already handle a competitor's product if it falls within their key activities. Also, those companies tend to be very cautious and selective when considering new additions to their portfolio, so it is important to deliver a strong value proposition. 

 

• Large distribution companies

 

Larger distributors tend to be active in various clinical areas and they usually operate a dedicated team for each division. Those companies are well known within the market, and they often represent several multinational organisations. Thanks to their existing reputation, they tend to be very effective at ''opening doors'' which is particularly important for brands that are new to market. They are also likely to have significant financial resources, they may designate a larger sales force to your product for maximum market reach, and they have a strong logistical set-up. 

However, due to their large portfolio product focus is often an issue. Particularly, if your product is proving to be more difficult to market than expected. In addition, those companies also tend to work with multinationals, and it is important to understand that they must dedicate a significant amount of time and effort to looking after those major brands to maintain those all-important contracts. 

Staff changes are also very common in larger organisations. Therefore, it can be difficult to establish longer-term relationships for example with the sales team. Consequently, more product training sessions will also be required to ensure the necessary level of knowledge is maintained across the team. Although not exclusive to the larger distributor category, my experience has also shown that a small change within a sales team can dramatically decrease or increase existing sales. So, it is also important for manufacturers to gauge whether sales are driven by one person or if efforts are evenly spread across the team.

 

Conclusion

So, is it art or science?

I have been active in international distribution for various brands for the past 14 years and worked with distributors of all sizes and in all corners of the world. Over the years, I have learned that (unsurprisingly!) you need to apply a little bit of both to create, develop and maintain a successful distributor network. 

Science. It is of course important to make use of some textbook material and to implement feedback loops involving performance management, market research, market feedback etc. Distributor selection, in particular, requires a more rigid and scientific approach. Therefore, having an existing framework in place that can be readily applied at the first point of contact helps to streamline the process. As an example, one of my prerequisites for successful distributor selection has always been a distributor's existing reputation for quality and innovation. I have always avoided partnering with distributors that are active in the low-cost, low-quality spectrum of the market.

However, when it comes to ongoing management and development of the network, I believe art plays a much bigger part in this. When you work internationally there is simply no uniform framework, no ‘one size fits all’ model.  Distributor management is an artform, it’s a dance. I have met many successful international sales managers over the years, and they all have one thing in common: They master various dances and feel perfectly comfortable and confident performing them all. 

Flexibility and an open mindset are really the basics to successfully navigate the world of international sales. One strategy that works well in one market may be completely inapt in another. In the end, it is all about understanding and embracing different cultures and different ways of doing things without changing who you are or losing track of your company's mission. 

 

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