The Biggest Is Not Always The Best
Selecting an international Distributor or Agent should not be taken lightly. Adopting a structured approach will ensure success and save money.
Manufacturers opt to work with the biggest Distributor (s) in the region assuming that this is the best choice for their innovative products although they still have to invest in market research and preparation.
We have recently been approached by a European medical device manufacturer. It is a start-up with an innovative product in Dermatology. The company has signed an exclusive agreement with one of the biggest Distributors in the Arabian Gulf. The Distributor enjoys a multimillion dollar business and represents US and EU blue chip organizations.
The manufacturer is convinced that he provided his distributor with necessary support of marketing, clinical, field visits and training. The relationship between the two parties has suffered major setbacks because sales are not progressing as the principal has anticipated. The results are false promises from the distributor, communication issues and slipping forecasts from quarter to quarter.
It is evident that there is a power imbalance between the two parties. The distributor is mainly focusing on principals with products that generates significant sales turnover. The choice of the Distributor was not appropriate from the start. In our case, our client should be realistic about the attention he will get from his distributor. He cannot leave the total responsibility for growth to his partner. In fact, our principal should make extra efforts to further develop the market and actively manage the relationship to make the distributor more passionate about the product.
The principal’s share of business is one of the criteria of distributor’s choice. It could strongly impact on the success of the product in new markets. If the company represents 1 million dollar in hundreds of million dollar business of the distributor, the leverage will be negligible.