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Is It Time for a Wake Up Call?

Is It Time for a Wake Up Call?. Distribution Conference Reno 2005. Ed Runner E. C. Runner & Associates, Inc. 1 630 365 1898. Is It Time for a Wake Up Call?. A. History & Trends B. Important Issues Today C. Critical Decision Time. A. History & Trends. History- General Business 1955.

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Is It Time for a Wake Up Call?

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  1. Is It Time for a Wake Up Call? Distribution Conference Reno 2005

  2. Ed RunnerE. C. Runner & Associates, Inc. 1 630 365 1898

  3. Is It Time for a Wake Up Call? A. History & Trends B. Important Issues Today C. Critical Decision Time

  4. A. History & Trends

  5. History- General Business 1955 • Pent up demand. • Unlimited resources. • Little world wide competition. • Few government limitations. • No world class competition. • End users lacked knowledge.

  6. Historical Distribution 1955 • Distribution was transactional. • Distributors were small. • Distributors handled commodities. • Barriers to entry were low. • Distributors could be easily replaced. • Distributors lacked funding. • Channels often under-managed.

  7. Today • Distributor/manufacturer relations today have legacy issues in all industries. • In the lubricant industry, we have more legacy issues than most industries.

  8. Generic Sales Channels Mfr EFS SIR CIR DMS EU

  9. Sales Channel • Each sales channel has advantages and disadvantages. • We need to be more objective to understand these. • It takes real effort by all parties for a channel to stay healthy for your brand.

  10. Comfortable Business Change in the Channel Concern for Survival

  11. Joint Success Issues • High Trust • Good product or service to sell. • Acceptable profit for dist & major. • Reasonably easy to deal with. • A strategy for joint survival & success. • Dependable primary contacts • Commitment to make it work.

  12. A.History & Trends

  13. B. Important Issues Today

  14. “Manufacturer-distributor relationships are no longer working.” NAW Study

  15. Conflicts There are a number of conflicts in place that threaten our profits and the survival of our brands.

  16. 1. Sales vs Profit

  17. 2. Long term vs short term

  18. 3. Efficient vs effective

  19. 4. Way we do things vs the need for real change

  20. 5. My needs vs your needs

  21. 6. Internal company politics distractions

  22. 7. Being too passive

  23. 8. Structure and organization vs strategy.

  24. Result: Need for clearer strategy focused on long term needs and on joint success.

  25. “Sales channels are experiencing some critically important trends.” “But wholesaler-distributor and manufacturer partners don’t agree on the implications of those trends.” NAW Study

  26. Market Forces-Today • Buying groups. • Distributor mergers or roll-ups. • Integrated marketing. • Hybrid channel efforts. • Traditional alternate channels. • New alternative sales channels. • Web exchanges.

  27. Getting More Profit • Getting higher prices • Getting paid for extra value • Getting paid for services • Getting reasonable compensation • Running a lower cost model

  28. High Profit Effort The company that does not create a plan that successfully motivates customers, employees, and channel partners to enthusiastically work together, runs the risk of having someone else create the plan for the market.

  29. Total Market Offering Needs to be superior Product Information Company support Tech support Quality sales force Advantage Differentiation Better marketing Easy to deal with Rapid response Training Total Market Offering

  30. B. Important Issues Today

  31. C. Critical Decision Time

  32. Trends in Distribution • Increased use of distribution. • End users reducing supplier numbers. • End users smarter. • Often old models don’t seem to work. • Manufacturers using alternatives. • Distributors have more choices.

  33. Where We Fit in the Market Integrators • AHTD • MARGIN • TraditionalSupply • Catalog or web houses VALUE ADD

  34. A B Price D C Performance A Look At Competition What will you do to move company performance value to the right?

  35. Reviewing Your Business • It’s not in the product. • You survive because you’re different. • You will prosper being compelling. • How are you really different? • What do you bring that is compelling?

  36. Providing & Selling Value

  37. Manage • This is a crossroads for many companies in the US. • Be sure we know what business we want to be in. • Connect with customers better. • Bring real value.

  38. # Distributors/ Manufacturer Profit Maximum Profits $ Cost Revenue Number of Distributors

  39. 5 4 3 2 1 1 2 3 4 5 Voice of Customer Customer Satisfaction, Loyalty, and Purchases Relate to Performance. Ratings Importance II

  40. You WantProof High Bring Valuable Information Literature Reliable Performance Products Meet Specs Accurate Invoicing Applications Knowledge Advertising Special Pricing Current Performance Contact Frequency AcceptableLead Times Resolution of Complaints Easy to Deal With Low Low Importance to Customer High

  41. We need a better balance between the long term vs the short term needs of all parties: • the major, • the channel, • channel partners, and • the market.

  42. High Profit Efforts • Efforts to reduce duplication. • Cost being taken out of channel. • Differentiation. • Manufacturer and distributor can improve profit better working together.

  43. Saturation • Saturation of distribution hurts all but a monopoly. Saturation: -- distributors compete on price. -- customers value product less. -- hurts everyone’s profit. -- limits funds for staff and value add. -- customer support suffers. -- the brand suffers. -- everybody loses.

  44. A Modest Proposal • It’s time. • The alternatives offer some real negatives. • Taking the best from other industries, the lubricant industry can improve significantly. • It’s reasonable.

  45. Becoming More Valuable How Do We Increase Our Value? What Is Our Potential? Current Current Value to Customer Current We can’t get improved prices or profits unless the customer sees value.

  46. C. Critical Decision Time

  47. Managing Partner Connections Attitude • Remember, in addition to the message, we are also communicating attitude. • We represent our attitude and the attitude of the company. • We can build the relationship, even in the midst of trouble.

  48. Bullseye Unimportant Important Critical Issues Growth

  49. Critical Success Issues • High Trust • Good product or service to sell. • Acceptable profit for dist & major. • Reasonably easy to deal with. • A strategy for joint survival & success. • Dependable primary contacts • Commitment to make it work.

  50. Time for a Wake Up Call? A. History & Trends B. Important Issues Today C. Critical Decision Time

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