Safari an OReilly Media Company. - Distribution Channels, 2nd Edition

T his book is for anyone whose role touches the marketing, sales, distribution and service channels of their industry. It is for anyone whose responsibilities include generating demand and fulfilling customer needs through the provision of products and services. If any of the following terminology forms part of your job description, this book is for you:

• routes to market;
• go-to-market;
• distribution channels;
• channels to market;
• sales channels or marketing channels;
• account, relationship or partnership management;
• business to business;
• business to consumer;
• partners (sales, marketing or distribution)

This book is for the managers of the businesses that market, distribute, sell and service the products and services of other suppliers and it is for anyone who is involved in the frontline of these relationships.

If your role has any commercial element, then this book has you in mind. It is written for people who dont consider themselves to be financial experts but recognize that they need to be masters of the economics of their business and the businesses with which they work. It aims to provide pragmatic insight into the challenges faced by each of the parties involved in the marketing and distribution of products and services (the players) and the opportunities that this insight unlocks.

Equally, if you are financially literate but are relatively new to the special dynamics of distribution, then this book should give you a fast track through many years of experience to the unique issues, measures, relationships and success factors that apply, whether you are working for a player in the midst of the value chain, a supplier at one end or a customer at the other.

It is for anyone who manages the relationship between two or more players in the distribution system, be they partner account managers, partner business managers, channel managers, sales managers, buyers, programme managers, etc. And of course it is for the managers and ultimate directors of these critical roles. Everyone involved in these roles needs to know how to demonstrate the commercial value of their relationship with another player to win and retain business. They also need to understand the way their own business works to build relationships that work for both parties, be they the buyer or seller in the relationship.

There are many books and courses about finance. Some are for financial people; many are for the non-financial manager. Most of these books talk about product companies; some even include a chapter or two about service companies. There are also books about distribution channels and systems, often from a sales or marketing perspective, dealing for example with how to minimize channel conflict or increase your power in the relationship with the channel. However, we have yet to find a book that deals with the business models of companies whose role is primarily to distribute products and services, written for people whose job specification does not require a qualification in accountancy so here it is!

This book does not aim to teach you how to read balance sheets and profit and loss accounts or how to explain depreciation though we expect you will probably be able to do these things by the time you have finished it. It will help you to understand:

• why working capital management is critical to distributors;
• how to address the demands for more margin from your retailers or distributors if you are a brand leader;
• how to secure the resources you really need from a supplier to achieve your growth targets;
• how to increase your share of your partners business even if they claim that you are not as profitable to them as your competitors;
• how to punch above your weight in the distribution system if you have a tiny market share;
• how to ensure you are allocating scarce resources to the channels that will generate the highest returns;
• how to increase your leverage over partners who may not even sell or distribute your products, but whose recommendation is critical to customer preference.

Throughout this book we refer frequently to business models, so we had better explain what we mean by the term business model. A business model is how a business makes money from its activities. It is the financial expression of the role, positioning, strategy and execution of a business plan of a specific player in a specific industry. It is the logical financial result of the economics of the structure of the industry and its distribution infrastructure. It is both static in the form of certain cost structures, margins, capital turns and the like, and dynamic in the way that costs behave, key ratios change with growth or margins behave under increased competition. So the business model of, say, a distributor of plumbing supplies will have some predictable similarities and some predictable differences with that of a computer products distributor, and further predictable similarities and differences with a sheet music or a cream cake distributor. The same can be said of different players in the same channel eco-system, with their role, balance of power and strategy determining where and how they will make profits, where they have to deploy capital and the scale of both these factors relative to the size of business being done.