SPECIAL GUEST BLOG By John Lennon, Export Strategy Mentor, Mentors.ie

How Most Manufacturers Start a Dealer Relationship

Manufactures spend time and money vetting potential dealers, looking  at who they represent, level of sales by product category, mix of revenues  new product, used product, service, spare parts, etc),  skill sets of their sales and engineering teams, financial stability, and the level of marketing and PR activity in their market.

Once this vetting is completed the contractual aspects are negotiated. These include; territory, duration, sales targets, initial stock or demonstration models, review mechanisms, payment terms, possible training required, reporting schedules and, finally the dealer agreement is signed.

 Then it’s over to the dealer to deliver the results.

Often forgotten in this new relationship is the time that a dealer needs to learn his new manufacturer’s business.  The dealer needs to time to develop the market, organise sales visits, demonstrations, trips to the factory in Ireland. He needs to get a few quotations into the system, to assess how his new manufacturer responds and reacts to the demands of his customers. He also needs to see what he has to invest versus what he will possibly earn and how long this process will take.

While all this is happening the dealer’s main suppliers of products and services are demanding the attention of his best people. Before anyone realises it, a year has passed and the targets so enthusiastically set at the contract signing stage are way off.

Common Mistakes Manufacturers Make With Their Dealers

In the scenario above, despite a very logical progression of events, the end result is that the dealer has missed targets, the manufacturer is disappointed, and likely both sides are questioning the future of their dealer relationship. What happened?

 To answer the question one must look at the assumptions that manufacturers commonly make when they begin working with dealer. These assumptions include:

• The dealer knows his market and our product.
• The dealer has / will dedicate all the resources necessary to meet the agreed targets.
• The dealer is interested in building new sectors within his geographical territory.
• Once we appoint the dealer that’s our part of the deal done.
• We will visit the market every 6 months for a full day long review and then leave it to him.
• The dealer we selected represents the Industry’s leading manufacturers therefore he must be the best available.
•  Our concerns over credit risk excluded a few of the smaller but more hungry dealers we met, we could not get sufficient credit insurance on their businesses. We liked their enthusiasm but we could not take a risk, we decided to appoint a recognized name.

Many other assumptions are at play in this honeymoon phase. If left unchecked they result in dissatisfaction and ultimately termination.