Are you carrying out an annual distributor performance review for partners?

Year end is the time of planning, parties and performance reviews… Whilst most companies tick all of those boxes for their staff internally, I’m not so sure whether the same can be said for their channel sales partners. If you are treating your channel partners as your sales team (as you should) then you need to carry out an annual?distributor performance review.

It’s common practice to carry out an annual appraisal of your staff, so why not take a more systematic look at the work your channel partners are doing? It could be the springboard for growth that your sales need, not to mention being a great opportunity to strengthen brand loyalty and your relationships.

I’ll take a more in depth look at how you might choose to do that & which questions you can ask (or think about).

Why carry out this kind of distributor performance review?

There are several reasons that speak in favour of doing this exercise each year, although the timing may need to be adjusted to fit into your company’s individual planning cycle. If you have to give notice on an underperforming partner by the end of Q3, then of course you can argue the case for doing the appraisals during September. I’ve chosen to look at this topic now, as it’d be my preferred timing, assuming I basically have the right partners in place in each country.

So why go through this exercise at all?

• Analyse whether KPIs were achieved – the core sales metric for any partner (It does mean that you have to set the right ones in the first place though).
• Improve overall performance.
• One of the clearest benefits of regular reviews is the opportunity to improve the overall performance in any given market. Let’s face it, nobody’s perfect and the same applies to our channel partners. Even the superstars are able to make incremental improvements.
• Increase distributor engagement.
• Share of mind, time and energy is a key success factor when working with exclusive distribution partners
• Identify additional opportunities.
• Of course, this is something you should be looking at on a regular basis, but setting time aside to really discuss the direction with your importer, can be a valuable exercise.
• Identify training needs.
• As I mentioned above, getting the share of mind and time of the team of your distributor can mean the difference between success & failure so identifying training needs & then actually providing that training is one great way to show the partner that you care about them & their success.
• Strengthen relationships and loyalty.
• This is a key part of many cultures and when you are working with a distribution partner is your main building block for success.

Isn’t that the same as a quarterly meeting?

No.

Yes, I’m a big proponent of having quarterly meetings with all of your distributors where you do through the sales results in detail. Of course, these are key metrics and the outward sign of success.

However, a distributor performance review should also go more deeply into the sales process & the capabilities of your exclusive partner and their team. It’s your opportunity to really discuss how your vision is aligned and what additional budget measures might be needed to achieve the next level of sales. The KPIs around hard metrics are the output of all of these facts.

Carrying out this kind of evaluation process allows you to reexamine whether your partner is effectively representing your brand in their market as well as giving both sides the opportunity to appraise whether they are receiving adequate support from one another.

How to carry out this kind of assessment?

Each to their own of course, especially if you have any kind of company guidelines about how such processes are to be carried out and documented. Of course you can always do a simple SWOT analysis but this isn’t the best tool for the job.

My recommendation would be to ensure that there is an end result (be that a report, summary or whatever) that is agreed upon by both parties, which can then also provide a benchmark for follow up discussions. Additionally, if you are looking to use this internally to compare distributors (eg for best practice purposes or perhaps to award “distributor of the year”) then it really pays off to use an objective scorecard system.

If it’s at all possible, do any kind of performance appraisal in person, ideally combined with market visits to help you put the feedback into context.

What I will give you here is a kind of checklist that you can use for a distributor performance review with sample questions that you should be asking. You should always be discussing these with an eye to “what can we improve for the next 12 months?” Making a scorecard for distributors with the results will help you compare across the markets of your sales area, or between sales managers.

The Sales Metrics

Of course, this is entirely dependent on what targets and concrete KPIs you have agreed with your partners, but should include at least some of the following:

• Was the purchasing plan achieved? (maybe expressed in FCA or FOB value)
• was the turnover plan achieved? (net wholesale turnover – depending on how close your relationship is, it may require some discussions to reach a point where this is open on the table between you)
• are your internal profitability targets reached? (obviously not one to discuss with the importer in detail, but if it’s catastrophic then you have to talk about potential remedies. Same goes for the importer’s internal profits with your brand)
• did the sales teams make the agreed number of visits?
• did the sales teams achieve the targeted new listings?
• how are sampling activities carried out, and with what results?
• did the distributor achieve the required % growth in the agreed focus product groups?
• were the planned tenders submitted on time? % won?
• were there any stock/delivery issues? Were the agreed stock levels maintained throughout the year?

Ideally, you should agree measures to improve achievement for the future if goals are not 100% met.

Marketing & Branding

Here the question as to what are relevant metrics will of course vary according to the product category and chosen sales channels. The actual questions you need to ask, will depend on how much of the marketing you are doing yourself & which tasks your distributor is carrying out in your name.

• Did the exclusive distributor carry out all of the agreed marketing campaigns? Here I don’t just mean in a way to tick the box & have him say he did it, but in a way that optimised both side’s ROI.
• The small details in a marketing campaign are likely to make or break it, so you’ll need to dig into this topic more deeply
• does your partner track the relevant metrics?
• are the social media posts driving engagement, traffic & brand loyalty?
• does the distributor follow your guidance on branding, as well as knowing how to adapt to the needs of the local market?
• Are the agreed budgets transparently accounted for?
• Is your local website, state of the art & according to your corporate design guidelines?
• does your distributor track & analyse competitor activities and supply you with the data?

Team & Training

• does your distributor provide enough team members to really drive sales of your brand?
• This includes dedicated team members such as a brand manager or sales reps, as well as shared team members such as e-commerce or social media specialists
• how is the fluctuation of the team members? If you have a new brand manager every 6 months, it doesn’t speak well for the culture of your partner company. This can be exhausting for all concerned if you never get out of the loop of onboarding new team members who then leave before they were able to make a productive contribution to your brand
• are the team members in the quality that you need? eg. do the sales reps have great sales skills and is the brand manager characterised by their creativity and marketing excellence?
• Do the relevant people who are in contact with your team have suitable language skills?
• does your distributor send the relevant team members to trainings that you offer?
• does your distributor invest in training for all their staff in addition to the ones that you regard as compulsory for product knowledge?

Relevance

There are a couple of aspects to this topic. On the one hand how important is your product to the distributor and on the other hand, how is the reputation of your partner in the market in which they are working?

• what % does your product represent in the portfolio of your distributor?
• Often for consumer goods, 10% is a kind of “magic figure” and if you can reach that, then you are guaranteed a certain amount of focus for your products
• how important is your distributor in the market? Are they a respected and relevant partner for the major retailers you are targeting? (If not, why did you start working with them in the first place??)
• how does the CEO of your distributor view your brand? Even if you don’t reach that magic 10% number, if she feels a special affinity for your product and you show growth potential, then this may support you to obtain the focus of the sales team

Cooperation Quality & Culture

This point is up to you to decide how you are going to score it & measure. You will know for sure whether your cooperation is working well or not on the relationship level, but a couple of additional ideas to consider

• does your exclusive distributor embrace change when necessary, & support you fully on new projects?
• does your partner closely align with your brand vision and values, including on DEI?
• does your distributor work in your best interest, including telling you clearly if sometimes your ideas are not suitable for their market? (Of course, in the end, each company has their own goals, especially when it comes to profit, but it’s important that you can align as far as possible).

IT Investments

Is your partner prepared to make the necessary investments to keep both of you at the forefront of your industry in the target market? Once a partner of mine took the decision to cut the contracts with a number of their provincial distributors who were simply unwilling to introduce electronic stockkeeping & this repeatedly led to problems with expired products…

• e-commerce & the necessary interfaces
• CRM systems & the associated hardware for your teams (not to mention the necessary training in order to use it effectively)
• retail reporting – be it in the form of Nielsen data or information directly sourced from retail partners
• for China, & increasingly for other countries, equipment & facilities for livestreaming
• product traceability systems

Communication & Reporting

Communication plays into most of the points above, but is also a question of individual style. I’m not going to make any recommendations about HOW to communicate with your partners as that depends on the market, the time of day, their language skills etc, but you should review whether your communication is effective (this works of course both ways).

• is there enough communication?
• what about the speed of answers?
• how is the verbal communication?
• is written communication clear & concise?
• do reports arrive complete and on time?

Marketplace

The trends on the marketplace in terms of new products, economic factors, pricing trends, competitor developments etc are not strictly speaking part of the distributor performance review (for me, these are the points that should be discussed in quarterly meetings) but if your partner can’t discuss this authoritatively then you need to be talking about their weaknesses.

General

Of course, in addition to aaaaallll the questions I’ve suggested above, you probably are going to want to also assess:

• Market Knowledge
• Commitment to your brand
• Financial Strength combined also with their payment record with you
• Storage Facilities & stock management skills
• Customer Service & crisis management

No review without KPIs

It should be obvious by now that if you want to do a meaningful distributor performance review at the end of the year, then you need to have first set the expectations both quantitive and qualitative at the beginning of the year. Suddenly pulling standards out of the hat at the end of the year & criticising a partner for not having guessed what he needed to meet is a fast route to needing a new partner. Nobody appreciates having the goal posts moved so being clear right from the start means that your partners can work towards achieving your standards.

Setting KPIs so that they are challenging but realistic is a whole other topic for another day, but is a skill that you need to master if you want to be successful in managing international sales.

Pulling it all together

The aim of this assessment exercise is to analyse together with your distributor how you can improve the results together in the coming year. If you are in continuous contact throughout the year, it shouldn’t be a stick to beat him about poor performance (that should be discussed before it reaches this point – don’t wait) but rather to agree on measures to be even more successful together in future.

Remember that companies change! A partner who delivers stellar results for years but who is not able to manage to evolve at the same speed of the market can end up being a poor partner. Likewise, a partner who focuses on your products and makes every effort to support your brand can evolve into a highly successful distributor. This is especially true in rapidly developing and evolving markets, but can also happen when companies go through major changes of ownership such as mergers or acquisitions, or a generational change. That doesn’t only count for distributors, but also for your own company, & like with marriages not every cooperation is destined to last forever.

Finally I’d like to remind you that in all the stress of planning & performance reviews, you shouldn’t forget the 3rd of the year end trifecta of Ps: celebrate your wins together with your business partners be it with a Christmas party, or a year end party.

#KExplains #InternationalBusiness #Distributors

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