12 July 2023
Technical distributors in the distribution of technical products and services
Introduction:
In today's complex and rapidly evolving technological landscape, the distribution of technical products and services requires specialized expertise. This is where technical distributors play a crucial role. They serve as the link between manufacturers and end-users, ensuring efficient and effective distribution of technical goods. In this article, we will explore the definition of a technical distributor, their distinguishing features, advantages over direct distribution models, the split distribution strategy, and how manufacturers can optimize the value of technical distributors.
Defining "What is a Technical Distributor?":
Distributors in general are distinguished from other channel partners by the fact that they BUY the product from the manufacturer and hold it in stock. Thus the distributor is the manufacturer's true customer and the distributor owns the relationship with the end-user.
A technical distributor is a specialized entity that focuses on distributing technical products and services to end-users. These distributors have in-depth knowledge of the technical aspects of the products they handle and possess expertise in various industries, such as electronics, engineering, and information technology. They serve as a reliable channel for manufacturers to reach their target market, providing value-added services, technical support, and expertise throughout the distribution process.
Distinguishing technical distributors from other distributors:
What sets technical distributors apart from general distributors is their technical expertise and knowledge. Unlike traditional distributors that handle a wide range of products, technical distributors specialize in specific industries or technical niches. They possess a deep understanding of the products they distribute, including their specifications, applications, and compatibility with other systems. This expertise enables technical distributors to provide targeted solutions, guidance, and support to end-users, ensuring they make informed purchasing decisions.
Typical examples of technical product distributors are:
Remtron Automation who distribute automation industry components and represent global brands such as ABB, SICK, FESTO, JUMO, Parker, Phoenix Contact, Autonics, BRADY, and others.
Integrated Sciences who distribute scientific instrument and test & measurement equipment representing brands like Agilent Technologies, DYNEX Technologies, Permagen Labware, and others.
Conbear/CBC Bearings who distribute power train equipment and products like bearings, industrial clutches, drive couplings, industrial brakes representing brands like Altra Motion, TIMKEN, REXNORD, Bonfiglioli, Loctite, Fanmaster and others.
Advantages of technical distributors over direct distribution models:
Opting for a technical distributor over a direct distribution model offers several advantages for manufacturers. Firstly, technical distributors have an extensive network of established relationships with end-users and industry professionals. This network facilitates market penetration, enabling manufacturers to reach a wider customer base and expand their market share quickly. Technical distributors also provide valuable market insights, helping manufacturers adapt their products to meet specific customer needs and preferences.
Secondly, technical distributors offer localized support and expertise. They understand regional nuances, regulations, and market demands, allowing them to address customer requirements effectively. This localized knowledge reduces logistical complexities and ensures faster delivery of products and services to end-users.
Split distribution strategy in the context of technical distributors:
Typically, technical product manufacturers (particularly the global brands) set-up split distribution. The manufacturer directly manages larger sales opportunities, such as major accounts, while utilizing technical distributors to more efficiently handle the smaller end of the market. This approach ensures that each channel focuses on its strengths, resulting in a more streamlined and effective distribution process.
However, the truth is, larger accounts (typically other large global giants) eschew being supplied through distributors and are adept at cutting deals direct with the manufacturer leveraging their market clout to negotiate favorable pricing. The manufacturer cannot accommodate the distributor's margin and needs to sell direct.
By directly managing major accounts, manufacturers can establish closer relationships, understand their specific needs, and provide tailored solutions. This direct interaction allows for greater control over the sales process and fosters deeper customer loyalty.
On the other hand, technical distributors excel in managing the smaller end of the market. They have the expertise and resources to efficiently handle a large number of smaller customers, providing personalized attention, technical support, and quick order fulfillment. By leveraging the capabilities of technical distributors, manufacturers can reach a broader customer base and maximize their market coverage without compromising efficiency.
Problems with the split distribution model
While the split distribution model offers advantages, there can be potential challenges and problems that may arise. It is important for manufacturers to be aware of these issues and address them proactively. Here are some possible problems that can emerge from the split distribution model:
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Channel Conflict: The split distribution model can lead to channel conflict between the manufacturer and the technical distributors. This conflict may arise due to overlapping territories, customer accounts, or disagreements on pricing and promotions. If not managed effectively, channel conflict can strain relationships and result in inefficiencies and lost sales opportunities.
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Inconsistent Messaging: With multiple channels involved, there is a risk of inconsistent messaging reaching the end-users. Different distributors may have varying approaches and ways of communicating the value of the products, which can create confusion and undermine the manufacturer's brand image and positioning. Ensuring consistent messaging and brand representation across all channels becomes crucial to maintain a cohesive customer experience.
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Lack of Control: Manufacturers may feel a loss of control over the distribution process, especially when it comes to the smaller end of the market handled by technical distributors. They may have limited visibility into sales activities, customer interactions, and overall market dynamics. This lack of control can make it challenging to align distribution efforts with broader strategic goals and monitor the performance of the distribution channels effectively.
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Diluted Focus: Technical distributors often handle a wide range of products from different manufacturers, leading to divided attention and diluted focus. Manufacturers may find it challenging to ensure that their products receive sufficient attention and priority from the technical distributors. This can impact the level of support, marketing efforts, and overall commitment to promoting the manufacturer's products.
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Channel Cannibalization: In certain cases, the split distribution model can lead to channel cannibalization, where the manufacturer's direct sales efforts compete with those of the technical distributors. This can create pricing conflicts, customer confusion, and undermine the effectiveness of the distribution channels. Manufacturers need to carefully manage pricing and define clear roles and responsibilities for each channel to mitigate this problem.
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Logistics and Coordination Challenges: Coordinating and managing the logistics of multiple distribution channels can be complex. Ensuring timely delivery, order fulfillment, and inventory management across different channels require efficient coordination and communication. Manufacturers must establish robust systems and processes to streamline logistics and avoid delays or inventory discrepancies.
Supporting and optimizing the value of technical distributors:
To maximize the value of technical distributors, manufacturers of technical products and services must provide adequate support and resources. Firstly, manufacturers should establish strong communication channels with their distributors, fostering open and transparent dialogue. This enables manufacturers to understand market dynamics, emerging trends, and customer needs more effectively.
Secondly, manufacturers should invest in continuous training and education programs for technical distributors. This ensures that distributors stay updated with the latest product developments, technological advancements, and industry standards. Regular training sessions and workshops also enable distributors to effectively demonstrate and communicate the value and benefits of the products they distribute.
Moreover, manufacturers can support technical distributors by providing comprehensive marketing materials, including product specifications, brochures, and technical documentation. Clear and concise product information enhances the distributor's ability to market and sell the products to end-users successfully.
Conclusion:
Technical distributors play a vital role in the distribution of technical products and services. Their specialized knowledge, industry expertise, and established networks enable manufacturers to reach their target markets efficiently. By understanding the unique advantages of technical distributors and leveraging the split distribution strategy, manufacturers can optimize the value and performance of their distribution channels, ultimately benefiting both themselves and end-users.