Welcome to WordPress. This is your first post. Edit or delete it, then start writing!
Why B2B distribution?
At some point, all manufacturing companies are faced with the same question: Do we sell our products ourselves or do we use a B2B distributor? Ultimately, the decision is always dependent on the individual requirements of the manufacturer. For the manufacturer of premium products with a small number of customers, establishing own sales is usually advantageous. For mass-marketable products and a high number of customers, external distributors can achieve efficiency advantages.
Prior to selecting a B2B distributor
The decision for or against a distributor is always based on performance, customer, company and competition criteria. In particular, the need for explanation and the price segment of the product play a major role. If the need for explanation is great, the involvement of a distributor usually does not make sense. The cost of training and the risk of communication problems are too high. At the same time, if products are located in a premium or luxury segment, customers more often expect a certain personal service and no anonymous advice through an intermediary. Next, the size of the company plays an important role in the decision making process according to a 2014 McKinsey study.
Both local manufacturers with own sales and larger exporters with distributors achieve on average 6 percent profitability. This is justified, among other things, in the custom-made sales models. Local manufacturers have direct access to their customers and can maintain contact and communication using their own sales department. Exporters would need offices in many countries and would need to build local knowledge. Since the costs for this would be significantly higher than the proceeds, it is based on distributors.
Furthermore, you should consider the following prior to selecting a B2B distributor:
– USP (unique selling point)
Selling directly to customers can be a unique selling point, which should not be underestimated. It can establish authenticity, personality and trust and strengthen the customer relationship.
– Financial situation
The financial strength of the company must be taken into account. For smaller companies, it is too expensive to build their own sales network for an entire country let alone Europe.
– Number of customers
The larger the number of customers, the more complex is the establishment of a separate sales organization. Complexity continues to increase as customers shop at short intervals. The use of distributors is cheaper in this case.
– Distribution channels already in use
The decision for or against distributors must always be made against the background of existing sales. The cost of restructuring can be very high. It may be worthwhile exploring a distribution model for the first time when expanding into new markets or smaller export markets. The empirical values ??are then evaluated and used to adjust the existing model.
Pros and cons of self-marketing
+ Full control
+ Lower transaction costs
+ Strengthens branding and improves customer loyalty
– Fixed costs are high
– Selling products in an export market requires a local office with ideally local employees
– Mass distribution is hardly possible
Pros and cons of using a distributor
+ Sales potential
+ No fixed costs
+ Distributors are specialized in selling products
+ Inherent incentive to create the highest possible sales
– Low control of distributors
Working with a B2B distributor
It is imperative for companies to see the distributor as part of their own company, even though it is de facto an external employee or business partner. But the distributor will only work efficiently if given the necessary tools and incentives. First and foremost, a reasonable margin for sales. If the distributor earns little or no money, his or her work does not pay for him. Consequently, he or she will look for other customers.
Of course, there is no universal remedy for working with a distributor. However, some important mechanisms have proven themselves and form the basis for success:
– Continious training and regular meetings strengthen the relationship between distributor and the manufacturer.
– Distribution only works if the producer offers assistance. The distributor must be provided with supporting information to be able to process newsletters, advertisements or the dispatch of mailings more efficiently.
– Although the distributor has some freedom, clear rules for corporate design must be communicated. This is even more important the bigger the distributor is.
– Good distributors are in demand. Accordingly, companies must ensure that distributors remain motivated. Annual conferences, competitions, newsletters and regular site visits form the basis for this.
Distribution and digitalisation
Traditional distributors have long had a reputation for good customer service. But to prevail in today’s digital market, you need more than that. Desktop and mobile devices have drastically changed the mindset of consumers. People no longer wait for a sales call or spend time flipping through a paper catalogue. Instead, they tend to conduct their own research, and purchase online at their own convenience. In order to become more attractive to existing and potential customers, products and their promotion require a localisation aspect to them, to be found on all channels potential customers are looking for them.
For us at Equestrian International this means: The utilisation of multi-channel on- and offline strategies including in-store retailers, fairs and events, carefully placed ads, useful content and influencers as well as a clean, well-designed online presentation including social media coverage creates transparency, usability, attractiveness and coverage. 4Hooves is an example of such a website, combining a shopping platform with infotainment across the equestrian industry – for B2B as well as B2C customers.
Distribution for mass products, self-sales with high need for explanation
Self-marketing is particularly suitable for consulting-intensive products and a small number of customers. This also strengthens customer loyalty and counteracts the anonymization in sales. However, the principle always applies: The decision for or against distributors must be made on the basis of the selection criteria presented and the individual evaluation of the advantages and disadvantages.
Distributors on the other hand, are a sensible sales channel for mass-produced products. Products can be presented in a cost-effective manner to a large number of customers in the B2B sector. However, distribution is not a one-way street: the manufacturer has to ensure attractive margins, regular training and the provision of advertising material. If expanding into a foreign market, keep in mind to utilise your distributors potential and its network.
Global context and cultural influence
Each country exhibits cultural differences that influence consumers’ demands, their mode of satisfaction and the communication they are likely to respond to. Around the globe, local preferences may vary resulting in the same communication receiving different responses depending on the diversity of consumers’ perception. Globalisation influences the development of markets, thus putting pressure on businesses to identify other opportunities in foreign markets to increase their economies of scale.
In addition, developments in telecommunication technologies and transportation have transformed societies from homogeneous groups into multicultural societies comprising multiple languages and races leading to the suggestion that consumers’ needs, desires and attitudes are merging across cultures. Marketers utilise this emergence of the ‘global consumer culture’ to standardise their marketing strategies across the globe. However, the questions as to whether a ‘global consumer culture’, focussing standardised attributes such as lifestyle and identity creation associated with ‘social consumption’, exists, or whether some facets of consumer behaviour are culture-bound, remain crucial.
Standardisation vs. Localisation
In global branding and advertising standardisation and localisation are two conflicting forces in relation to consumer behaviour. Back in the 80’s Levitt’s standardisation strategy maintained that global advertisers can use identical advertisements around the globe to attract international customers. In contrast, Wind & Douglas maintain an adaptation strategy to local preferences. This discussion has not ended, yet
Advertising is one of the most important marketing strategy in an international context of a brand and requires market research with a cross-cultural and global research focus to reply to increasing globalisation. However, many brands are relying on a standardisation strategy in order to utilise better economies of scale. Moreoften, these strategies are based on common beliefs like for example; Germany and the UK are regarded as similar markets due to their close geographical proximity.
The implication of culture between Germans and the British
A cultural comparison of Germany and the UK should provide insights in the differences or similarities in the consumers’ response towards advertising. In this context, national culture forms a very important aspect in consumer behaviour and advertising.The Dutch social psychologist Geert Hofstede established one of the most predominant concepts about cultural differences, the cultural dimensions model. When exploring the German and British culture through the lens model, two significant differences between both cultures become apparent in what Hofstede refers to as Individualism and Uncertainty Avoidance.
Individualism is the degree of interdependence a society maintains among its members. Whilst both cultures are individualistic ones, the British score is one of the highest scores in the world. In Germany families with a close relationship between parents and their children are common. The loyalty is based on personal preferences as well as a strong sense for duty and responsibility. A prominent example for this can be found in long-term employment contracts. Germans follow a strong focus on a direct conversation, giving his or her counter part the chance to learn from mistakes.
Individualism and privacy dominate the British culture, which is already taught in early ages. By this lesson children should find their unique purpose in life is and how they can contribute to society as an individual. A recent phenomenon is the rise of rampant consumerism and the rise of the „Me-culture“.
By comparing the individuality of both cultures, even though both culture are individualistic ones, it becomes apparent, that Germans react more on a basis of personal/social preference, the British appreciate innovation, uniqueness and creativeness.
The uncertainty avoidance index is strongly related to anxiety and deals with the way the society deals with its future – either trying to take control or letting it happen. This index shows a great difference between both countries. The UK is amongst those countries with a low uncertainty avoidance index, which means that they are happy to wake up and ‘muddle through’ the day without knowing what is happening next. Planning is not as detailed as it is in countries with a higher score. How to reach a goal is only roughly planned, so that the process can be adjusted anytime in relation to the emerging and flexible environment. In combination with their individualism, the British are highly curious, creative and long for innovation. This is being reflected by the nations humour, heavy consumerism for new and innovative products as well as fast, creative industries like advertising, fashion and marketing.
Whilst the UK presents low uncertainty avoidance, Germany belongs to the uncertainty avoidant countries. Germans prefer a deductive rather than an inductive approach in their thinking, planning or presenting, which means that a systematic overview has to be given in order to proceed. Details are important to create certainty by strongly relying on expertise.
And now what?
Studying Hofstede created a feeling somewhere in-between laughter and shame, due to the fact, that I always research potentially interesting products. And by research I mean at least 3 independent sources – long term studies at best. If there’s not enough evidence to support the greatness of a product, it’s simply not a great product! How very German of me…
The key fact to take away is simpel: You may have a great product, but there is a huge difference in whether you are aware of that, or your customer. Have you ever wondered about the right strategy to market your product internationally? Get in touch and we are happy to analyse your target market and create a strategy on how to enter and succeed in it.
4Hooves as business channel
We are happy to announce that we have partnered up with 4Hooves. 4Hooves is an up and coming online search engine for the equestrian industry, bringing together brands and customers. There is also a marketplace available, offering a „shop-in-shop“ – system with an optional iframe coming soon. This way brands without an own online shop can profit from the technical setup and do not need specific knowledge.
But also brands with an own eCommerce setup can profit from 4Hooves and use the platform as a sales and marketing channel. The platform operates mainly in Germany, but is also translated into English to cover most of the countries. More languages are also planned in the upcoming years.
Not „just another Online Shop“
4Hooves isn’t just another online Shop but rather a combination of online shops, search engine, infotainment and research engine. Shoppers, businesses, freelancers, service providers and those who seek them alike can find each other via 4Hooves. Promote yourself and get contacted by interested consumers. It’s never been this easy!
Benefits of working with 4Hooves:
- riskless market entry in Germany and other European markets without huge spendings and investments necessary
- positioning on a platform amongst established brands
- giving smaller brands a chance to get noticed and discovered
- regular PR coverage and trade shows that bring attention to 4Hooves and it’s partnering brands
- unique content opportunities at fair prices
- over 450 product categories across 5 levels to provide users the best search – find-experience possible
- different payment and commission models available to find the best option for each merchant and business
- affordable, but yet creative marketing option available at special rates for Equestrian International clients
We at Equestrian International will recommend to work with 4Hooves as a state-of-art-partner and to reach a younger and online-driven target group, wherever we see fit.
Have a successful week.