Because of all of the merger and acquisition activity on both the manufacturer and distributor ends of the market spectrum, it's tougher than ever for these two business partners to establish productive, long-term working relationships with each other. Many of the problems that develop between manufacturers and distributors have the same root cause: poor communication. A manufacturer's distributors can never know enough about the company, its background and distribution policies, as well as about the products, services and support it offers.
Most distributors have a pretty good handle on this type of information for their top product lines, such as wire and cable, lamps, lighting fixtures, switchgear, motor control, distribution equipment, gear and the dozen or so other product lines that produce most of the sales. But what about the other 100 to 200 manufacturers the typical distributor stocks in its warehouse? Electrical distributors probably don't know nearly as much about those companies.
Once distributors step outside their own warehouses, they're confronted with an estimated 3,000 or so more manufacturers that sell electrical supplies and related products. Many of these companies are in niche product areas for full-line electrical distributors such as security, voice/data/video, specialty wire and cable, energy-efficient lighting products or other construction supplies.
Other vendors are entrepreneurial start-up companies in mainstream product areas trying to build distribution networks. Some of these folks could be electrical contractors who designed products on the job site for their own companies to do electrical work more safely, faster or more profitably, and saw a marketing opportunity in the industry as a whole.
These 99 questions can help electrical distributors evaluate these different types of vendors, whether they are prospective vendors or companies they have been doing business with for years. Manufacturers will find these questions useful, too, because they offer a good idea of what distributors need to know about their companies and their distribution policies. Manufacturers should be prepared with clear answers to these 99 questions.
The Key Questions Distributors Must Ask Vendors
Basic Company Background
1. How large is the company (sales volume)?
How many employees does it have?
2. What is its sales history for the past five years?
3. Is it publicly or privately held?
4. How many manufacturing facilities does it have?
Where are they located?
5. How long has the company been in business?
6. How long has the current management team been in place?
7. How much experience do they have in the electrical industry?
8. Who are the key contacts at the company for electrical distributors?
9. How does the company headquarters communicate with distributors? Primarily through the local salesperson, or through direct contact with headquarters?
10. What other vehicles does the company use to communicate with distributors? Do they all get the company's newsletter or annual report?
11. Which industry meetings does the company attend?
12. What market share does the company have in each key product area?
13. How long has the company been selling through electrical distributors?
14. What percentage of the product line is sold through electrical distributors?
15. Which other distributors does the company sell through in this territory?
16. Does the company sell through field salespeople or independent manufacturers' reps in my market?
How long has it sold the line?
17. Does the company plan to merge with or acquire another company in the immediate future?
18. Is the company a member of any industry buying/marketing groups? If so, which one(s)?
19. What products does the company manufacture?
20. What are the applications for the product(s)?
21. What are the sizes, ranges, grades, models, etc.?
22. What special design advantages do these products have over competitive products?
23. What is the main appeal of the product to my customers? Ease of use? More economical?
Saving time or money?
24. Does the company back products with guarantees that distributors can use with customers?
25. How much inventory must a distributor carry to service customer demand?
26. What is the profit potential?
27. Is demand for the products seasonal in any way?
28. Do the products require demonstration?
29. Is there any potential to use these products as door openers to sell other products that a distributor stocks? Should it be sold with any other related electrical products?
30. Is the company developing any new products that will eventually replace or complement these products?
31.Are new markets being developed for these products?
32. What percentage of total sales does the company spend on research and development?
33.Are any products private labeled?
34. Does the company private label any product line for other manufacturers?
35. What advantages does the sales policy give this company over its competition?
36. Does the company have an open distribution policy, or is it selective or exclusive in any way?
37. What role did distributors play, if any, in developing this sales policy?
38. What qualifications must a distributor have to be selected as a distributor for the product line?
39. What are the responsibilities of appointed distributors? What are the manufacturer's responsibilities toward its distributors?
40. Do distributors have any territorial restrictions?
If so, how does the company arrive at them?
41. Does the written sales policy clearly define the following areas?
- Activities and functions of field representatives
- Distributors' stocking requirements
- Pricing and discount structure
- Terms, cash discounts and rebates
- Product guarantees and warranties
- Returned goods policy and inventory adjustments
- Sales aids, promotions and advertising support for distributors
- Protection against claims, damages and liability
- Termination of the relationship
42. What does the company do to keep its distributors in the market when competitive situations arrive?
43. How does the company keep distributors informed about price changes?
44. Who pays the freight? Does it depend on quantity?
Packaging & Labeling
45. What packaging options does the company offer electrical distributors? Bulk pack? Carded products?
Tear-open cartons that can be used as displays?
46. Can packaging withstand the abuse of rough handling in shipping, warehousing and on the job site, and is it sturdy and tight enough to protect the product against damage, leakage, breakage and corrosion?
47. Is the packaging compatible with the units of purchase that distributors and their customers are familiar with?
48. When necessary, does packaging carry measurements for the convenience of distributors and users?
49. Does the packaging have a secondary use, such as for a display or as a container for spare parts?
50. Can products be repackaged into smaller quantities for point-of-purchase display purposes?
51. Can the products be packaged in bulk quantities in reusable storage containers such as buckets with lids that are handy around the job site?
52. Does the package have a color scheme or theme that ties it to the rest of product line, and is it an attractive design that would attract attention from the shelf in the counter area?
53. Is the label in a position on the package so that it's easy to stock or pick in the warehouse? Does the carton have enough room for a pricing label if it's designed for the counter area?
54. Does the package or label highlight key product information, such as a part number, Underwriters' Laboratories listing, National Electrical Code compatibility or application information?
55. How user friendly is the package? Is the catalog number easy to read to assist distributors in reordering?
Merchandising and Promotions
56. What type of displays does the company have available? Display materials for in-line shelving?
Stand-alone, point-of-purchase displays? Product demonstrators or wall boards?
57. How much do displays cost? Are they free with a certain size order?
58. What other types of merchandising tools does the company offer (counter mats, stools, signage, clocks, etc.)?
59. Who is responsible for restocking displays — the distributor or the manufacturer's local salesperson?
60. What's included in the company's co-op advertising program?
61. How does the company tie in new product rollouts with merchandising and promotions?
62. What promotional campaigns does the company have running?
Distributor Advisory Councils
63. If the company has a distributor advisory council, how does the company select who is on that council, and how long is the term for each member?
64. How many distributors are on each council?
65. Which of the manufacturer's senior executives attend the council?
66. How often does the council meet?
67. How much advance preparation is required for distributors? Does the company send an agenda to all participants before the council so they can come prepared to discuss certain issues?
68. Does the company compensate distributors for transportation and lodging?
69. What does the company do to promote its products to end users?
70. If the company does advertise, in which publications?
Are copies of these ads available?
71. How many people read these publications? Who are they and what are their job functions?
72. How big is the current advertising campaign? What is its theme?
73. How can distributors most effectively tie into this campaign? Can they coordinate their own promotion and sales efforts at a local level?
74. How does the company handle inquiries from advertising?
75. How does the company promote bread-and-butter products that aren't new or part of a major campaign?
76. What type of factory-sponsored training schools are offered for distributors?
77. How frequently are these schools held? How long is each session? What is the average class size?
78. Who pays for it?
79. What type of online training opportunities are available (Webcasts, courses on Web sites, etc.)?
80. How technical is the subject matter? Is there any assumed knowledge base for students?
81. Do students get any hands-on experience with the products — taking them apart to see how they work, cleaning or servicing (if applicable)?
82. How many people have graduated from the school, and how have these graduates been more effective in selling and promoting the product line since attending the class?
83. How often are catalogs updated?
84. Do the descriptions for each product include all of the necessary information to specify and sell the products?
85. Does the company provide space on the cover in a prominent position for a distributor imprint?
86. Are catalogs styled in size and format for the convenience of end users, counter workers, inside salespeople and field personnel?
87. Is the catalog available in any electronic formats, such as on CD-ROM, or a Web site? If not, does the company plan to have it available electronically in the near future?
Other Selling Aids
88. What types of promotional material for direct-mail campaigns and other promotional sales efforts does the company provide distributors?
89. Does the company offer distributors a packaged promotion program with regular mailings to their customers or prospects? If so, what does it include?
Who handles the customer and prospect lists at the company?
90. Does it provide distributors with any promotional literature such as company newsletters, or reprints from trade magazines with information on the company and/or its products?
91. Do the company's sales aids dramatize how users can cut costs and/or increase their productivity through the application of products?
92. At which national electrical industry trade shows does the company exhibit? How about regional or local shows?
93. Who is in charge of setting up and working in the company's booth — someone from the home office, independent reps or regional field salespeople?
94. How does the company get the sales leads from trade shows to distributors? How quickly does the company distribute these leads?
95. What is the primary function of the company's Web site? (Basic contact information, online transactions, tracking orders, product information, etc.)
96. Does the company take orders over its Web site?
If not, will it do so in the near future?
97. Which resources of the Industry Data Exchange Association (IDEA) does the company utilize (IDW, IDX2, etc.)?
98. If the company does not use any IDEA e-business tools, why not? How soon does it plan to do so?
99. Does the company have a technically competent point person designated to help distributors with all IDW and IDX2 issues?
Finding Information on Prospective Vendors
You are scheduled to meet with a new vendor first thing in the morning. The product sounds interesting, but you don't know very much about the company. Don't despair. You can get some basic information about prospective vendors from the following sources.
“About Us” sections of corporate Web sites
This may sound like a no-brainer, but it's surprising how many people don't make the “About Us” section of companies' Web sites their first stop when gathering basic corporate information.
Your next stop should be www.hoovers.com, the Web's best free resource for corporate data. Owned by Dun & Bradstreet, Hoovers offers a surprising amount of sales data and company information for free. Hoovers does charge for more in-depth information.
If you belong to one of these groups, see if the prospective vendor is a member, too. You can also check with noncompeting distributor members to see if they carry the product line.
If the vendor uses independent manufacturers' reps as part of their sales efforts, there's a good chance they are a member of the National Electrical Manufacturers Representatives Association (NEMRA), Tarrytown, N.Y. The NEMRA Locator is a quick-and-easy online resource for contact data.
The National Association of Electrical Distributors (NAED), St. Louis, also has a search tool you can use to find basic contact information for manufacturer members.
Local business library
If you have the time to stop by for a quick visit over lunch or on the way home, local business libraries usually have plenty of print and online resources with company information. If the library subscribes to a news service such as LexisNexis, you will have hit the jackpot because these services offer quick access to hundreds of newspapers, PR NewsWire and other sources of company data.
When all else fails, you can always “Google” a company on the Web. Although the information you get is often a hodge-podge that you will have to cull through, it's worth a try.
This article is an excerpt from the upcoming second edition of “The Electrical Marketer's Survival Guide,” which will be published later this year. Look for more excerpts from this popular industry resource in the months to come.