Why a Formal Distribution Program Is Essential for Vendor Success

By Larry Walsh

Channel professionals and leaders have varying opinions about distribution. Many see it as a necessity to work with partners and get products to market. Others understand distribution’s role in the go-to-market process but harbor doubts about distributors’ contributions to their channel success. Some don’t see the value of distribution but work with two-tier partners out of pure necessity.

Regardless of how a vendor or channel professional views distribution, the industry is clear in its value sentiment: Distribution is here to stay. According to a survey by Channelnomics and the Global Technology Distribution Council (GTDC), 75% of channel professionals believe distribution’s value and contributions to vendors’ success will increase or remain the same over the next five years.

Despite the recognized importance of distributors, however, the lack of a formal distribution program can hinder the effectiveness of relationships with two-tier partners. Many vendors treat these relationships as bespoke agreements that lack standard structures and consistency. This ad hoc approach can lead to systemic challenges, as the Channelnomics - Global Technology Distribution Council (GTDC) survey highlights. Vendors often face difficulties with distributors not recruiting and developing new partners, lacking the ability to adapt to changing market demands, providing lackluster marketing support, and causing general channel conflict.

These challenges often arise from the absence of formal structures in vendor-distributor relationships. While many vendors consider distributors as go-to-market partners, the lack of formal distribution programs results in each distributor having different contract provisions, expectations, and compensation. This inconsistency is further complicated by regional variations — how a vendor works with a distributor in North America, for example, may differ significantly from their operations in Europe or Asia.

The absence of a formalized distribution structure creates inefficiencies and inconsistencies in channel operations, leading to wasted budgets and efforts. Vendors must implement formal programs with well-defined requirements, clear performance expectations, and measurable metrics to address this. This structured approach can provide the necessary direction and control to maximize the value derived from distribution partnerships.

A formal distribution program is essential for vendors to manage their channel strategy effectively. It ensures that all parties involved — vendors, distributors, and partners — are aligned in their market focus and goals. This alignment is critical for driving outcomes that benefit everyone. Here’s why vendors should implement a structured approach:

• Market Focus: A formal program aligns the efforts of vendors and distributors toward common market objectives. With their on-the-ground insights, distributors help vendors tailor their offerings to specific market needs. This alignment ensures that both parties work toward the same goals, enhancing market penetration and customer satisfaction.
• Measurable Activities and Results: A structured distribution program enables vendors to establish clear metrics for sales, marketing, and enablement activities. By defining specific goals and tracking outcomes, vendors can accurately measure the effectiveness of their distribution strategies. This data-driven approach allows for informed decision-making and efficient resource allocation.
• Operational Consistency: Standardization is a key benefit of a formal distribution program. It ensures consistent communication, operations, and processes across the distribution network. This consistency helps maintain brand integrity and ensures that all distributors represent the vendor’s products uniformly, avoiding confusion and misrepresentation.
• A Level Playing Field: A structured program ensures that all distributors operate under the same conditions. This fairness prevents favoritism and sets clear expectations for performance. By creating a level playing field, vendors can foster a competitive environment where success is based on merit.
• Manageability and Performance: A formal program allows vendors to manage their resources more effectively. Standardized training and support enable distributors to perform at higher levels. This manageability allows vendors to extend their market reach without overburdening their internal teams.
• Cost Management: A formal distribution program provides transparency in financial dealings with distributors. Clear terms and conditions help vendors control costs and prevent unexpected expenses. By defining compensation structures, vendors can ensure that payments are aligned with distributors’ value and performance.

A formal distribution program is crucial to a vendor’s channel strategy. It emphasizes alignment, measurable outcomes, consistency, and regulatory compliance. The program also ensures fairness and manageability while keeping costs under control. Implementing a structured program helps vendors strengthen their channel relationships, streamline operations, and achieve sustainable growth.

This article was first published on Channelnomics.com.

Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide.