Tales from the Road 5: Beware the Automaton Traveller

It was 1995. We had been selling capital woodworking machinery through two distributors in the USA for years, one in Massachusetts, and another in North Carolina, but we didn’t seem to be getting much business from the East Coast. So I embarked on a three week trip taking in both existing and potential distributors. Many USA distributors will claim national coverage, but the reality is that most don’t have the infrastructure to support their claim.

My children were 10 and 8 years old, and this was to be my longest time away since they were born. So I did two things. I wrote short poems or stories, or notes giving clues on where to find small presents around the house and garden, and put them in envelopes for them to open each day. I traced a map of the USA and made a fridge magnet with a caricature of my head, so they could track my journey. And they did!

I arrived at an awful Holiday Inn near JFK for a stopover before an early morning flight to Vancouver where we had an excellent Canadian distributor. There was a notice on the door warning of the possible dire consequence of opening it to the pizza delivery man! That was based on a couple of recent gangland shootings where the pizza box had been used to conceal a handgun. The pizza was okay and I am still here.

I had been booked into Holiday Inns throughout my journey, and was relieved when Vancouver’s version was cleaner and less intimidating. I was there a few days and made time between meetings to take in the sights and sounds of the city. My abiding memory was seeing white lights in the distance moving up and down a night sky, and it took me ages to work out that they were ski lifts and not aliens landing.

The 7am flight to Seattle was spectacular, flying between mountain ranges on a clear frosty morning. I spent a long, incredibly hectic day there. It was February 14th, and the hippy cab driver who took me from the airport to my first meeting had a box of heart shaped chocolates in a heart shaped box that he was offering to all his passengers that day.

That was the fun bit. I was late for two out of the following four meetings because I hadn’t worked out my logistics properly. I felt constantly on the back foot. Some of the companies I’d identified as being potential distributors were more like local dealers, something that Google Earth might have signalled had it been around then. From Seattle I flew on to Portland Oregon, to arrive in their Holiday Inn just before 10pm when the restaurant was near to closing.

I left my bags at reception and had my evening meal straight away. Something light for my starter- a salmon terrine. When it arrived it wasn’t a terrine at all but a massive piece of salmon caught that day in the Columbia River. I began to dread what size my fillet steak main course might turn out to be. That was enormous too, a real ‘Tom & Jerry’ steak covering the plate. I managed half of it, partly because I was so tired and partly because it was so vast! I had a brandy nightcap, collected my bags, went to my room and fell on the bed.

There I woke up at 3am still fully clothed, got up to use the bathroom, and in my semi-comatose state I walked straight into the wall! The Holiday Inns I had stayed in until that night had been configured with the bathroom on the right as you walked in, a bed on the right, and desk on the left, and then a sitting room area in front of the window. In Portland, they did things differently. My room was the other way round. So ‘SMACK!’ and it really hurt. I woke up later to my 6am alarm to find an impressive bruise developing above my right eye. It looked like I’d been in a bar room brawl, and I was being collected at 6:30am by an important guy I had never met before!

When you travel extensively it’s very easy to slip into automatic. It’s a bit like that feeling you get after driving from London to Manchester, wondering whatever happened to Birmingham? That kind of thing mainly happens when you fail to pace yourself properly, when you put your mind and body under too much stress. And if you are not on top of your game you will reduce your chance of a successful outcome.

So what lessons can be learned?

1. It’s easy to cram too much into a business trip. It isn’t easy to stay fresh and alert if you do.
2. Plan your trips, and appreciate the size of the country, distances and journey times.
3. Research every company you plan to visit. Know their strengths and weaknesses.
4. Google Earth gives a useful impression of the premises you are about to visit.
5. Don’t arrive for a first meeting with a blackening eye. It can only get worse!
6. Children grow quickly in three weeks.


JOHN REED

Tips on Controlling Agents & Distributors

Good management practice prescribes that one needs to check ‘what was done is what one originally wanted to be done.’ Easy to say but particularly difficult when doing business with partners in remote locations. It is further complicated by the nature of overseas operations – arguably business being done through agents should be easier to control than that being transacted through distributors.

Using Agents

If using an agent, you retain direct contact with end-customers as the agent is selling on your behalf and selling at your price. The task is to control salesmen who act like any other salesmen throughout the world. The core requirements are to ensure the agent is:

•calling on all suitable customers
•spending the right amount of time with each customer
•selling the appropriate range of products
•gaining the correct size of order
•seeking new business
•feeding back competitor and market information
In other words, each order you receive from the agent is a direct measurement of his performance and can be evaluated by traditional sales productivity criteria i.e. in a given sales period:

•Number of orders, by customer
•Number of products sold, by customer
•Average order size and value, by customer
•Orders received this year to date, versus last year to date, versus this year’s planned forecast
•Customer retention
•New customers
•Spread of customers across assigned territory
Using distributors

Dealing through distributors is more difficult. They sell stock purchased from you to their own customers in their own way at their price. Legally you cannot control their margin or their sales-out price. The problem is you may not know to whom and how well they sell.

If you subscribe to the view that ‘I give my distributor the best price and expect him to get on with it’ then this article is of no value to your business. If, however, you believe overseas business is best developed by nurturing partnerships please read on.

There are three main elements:

1.Key result areas
2.Reporting methods
3.Making market visits
Key result areas

The main issue is the reporting of in-market sales. At the outset the exporter only knows what is shipped to a distributor, but has no idea where these products are sold in the market. In-market sales provide the actual measurements of performance and the basis on which future marketing and sales decisions can be made. Additionally, information on distributor stock inventory is of particular value in assessing the distributor’s ability to order the right quantities at the right time to satisfy future demand.

Examples of basic reporting will include:

•In-market sales by product & variant/packing
•Key trade sector in-market sales
Then dependent upon the level of distributor sophistication and cooperation:

•Stock inventory by product & variant/packing
It may be of commercial benefit to understand more about how this business was achieved, similar to assessments made on an agents’ performance:

•Distribution of product, by outlet and/or trade channel
•Salesmen coverage and number of visits.
•Number of salesmen employed full or part-time on sale of exporter’s products
Reporting methods

It is critical that the distributor provides a series of regular reports. This level of formal reporting will be supported by informal and regular contact on current issues. The two basic requirements should be, at least, the provision of a regular report, say monthly and an ad-hoc market research questionnaire. It is recognised that this requirement can often be a contentious issue between both parties with the distributor either not able or not wishing to provide information. This article cannot address the management skills required to handle this but a number of rules must be agreed at the appointment stage of a new distributor.

Recognising that many distributors sincerely believe it is an intrusion into their own business, the exporter must be clear on what and why he requires regular reporting and find an early amicable solution to the issue. If not, he will operate remotely and in the dark. The basic requirements of a regular report would be to:

•Measure performance against standards, targets and objectives
•Obtain feedback
•Prompt corrective action as required
As a minimum, the distributor should possess the necessary internal systems to report on:

•Actual in-market sales this year
•Cumulative sales this year to date
•Actual sales for same month last year
•Cumulative sales for last year to date
•Sales performance versus budget
Ideally he could also provide:

• Sales by customer & trade sector
•Stock and sales
◦Opening stocks
◦Shipments received during reporting period
◦Market sales
◦Closing stocks
◦Forward orders
Again the matter of inventory management is potentially a complex issue in that the exporter cannot dictate what a distributor should purchase to his own account, yet must ensure he is ahead of the business in terms of production and shipping planning. The less reactive the exporter is in the supply of product, the more proactive he can be promoting in-market sales effort.


Market visits
Whilst there are no set rules with regard to frequency, the exporter must ensure regular market visits are undertaken. Nothing can replace ‘seeing is believing’ and benefits both agent and distributor arrangements. Recognising that making visits are costly both in time and expense, the exporter must be clear on setting specific market visit objectives which could include a number from the following list: The bottom line must be that the visit must generate future business.

• To present new products, advertising plans and promotions
•To review sales performance - achievement against current plans and programmes
•To provide feedback on company and general distributor performances i.e. comparisons with other markets
•To resolve administrative problems arising from communication restraints
•To concentrate the distributor’s focus onto the exporter’s products
•To motivate by resolving any distributor problems in generating business and ensure the visit is not perceived as wasting the distributor’s time
•To review status of distributor’s overall business
•To review skills and training needs of distributor team and provides solutions
•To generate business and goodwill.
•To plan annual (or other periods) sales and marketing programmes
•To set action plans to counter deviations from plan and to handle new objectives
In summary, the main dilemma for any exporter is how much does he need to know about the sale of his products in each market and how can he find out? This requires the setting of practicable performance measurements, agreeing formal methods for regular reporting and the actual checking in-market to see what is being done.

Written 4th April 2011 by Dick Brentnall - S&H LLP Associate/ Trainer

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Managing Agents & Distributors

Introduction to Export Marketing and Sales

Improving Export Sales Performance

Incoterms 2010