Competitors are upgrading their channels of distribution

Symptom: As manufacturers have suffered through the last several years of hostility, the dealerships have also been severely squeezed. Many of them need the attention of the manufacturers to help them restore their profitability — and their effectiveness with their own customers. Several competitors are now working to upgrade their channels of distribution.

Implications for the market:

  • A manufacturer should consider the merits of two different approaches to helping its channels of distribution.

    • Reduce the costs that the dealers incur in ordering, accepting, and selling goods from the manufacturer.

    • Improve dealers' revenues by clarifying territory protection and by instituting programs to help their distributors market more effectively.

  • Either approach to helping the distributors will produce a stronger and more effective dealer group in the future. The better manufacturers will follow one or the other. As a consequence, the performance bar will rise for all suppliers in the market. Within two to three years, the market will be much more competitive.

Recommended Reading
For a greater overall perspective on this subject, we recommend the following related items:


Perspectives: Conclusions we have reached as a result of our long-term study and observations.

  • "Finding the Open Door"
    Volatility is the movement of volume from one supplier to another. A company can not gain volume unless customers are willing to make a change in suppliers. Volatility has special rules in hostile markets.

  • "The Big Slice of the Pie"
    The head of one industry leader explains his company's insistence on being a key supplier to each of his customers: "The guy with the big slice of the pie doesn't go hungry." The workings of the typical hostile market provide solid support for this philosophy.

  • "Use Subtle Strategy in Tough Markets"
    A hostile market operates differently than a market with "normal" competitive conditions. But as difficult as a tough market can be, it can also present an astute management team with an unusual opportunity.

  • "Which Customers Matter Most?"
    Average customer profitability differs dramatically in non-hostile and hostile markets. Does the relative importance of one customer versus another change as well? The answer is less evident than many business leaders believe.