Managing Distribution Channels and Relationships
Challenge: A supplier of packaging products sought to increase its market share, while deepening its relationship with a key distributor. The supplier sought to evaluate the opportunities and challenges of implementing two alternative distribution models to achieve its growth targets. The key distributor would be the exclusive provider of the client’s packaging products in designated sales territories in one model. In the other model, the key distributor would act as a regional distributor to the client’s smaller distributors in rural locations. Each model challenged the status quo of the client’s current distributor network. As such, our client wanted to ensure that these models be thoroughly assessed to avoid triggering channel conflict, which could result in disgruntled channel partners, deteriorating customer loyalty, and ultimately potential revenue loss.
Assessment: The Blue Canyon team developed frameworks and performed in-depth analyses to help the client and key distributor understand and discuss the opportunities, necessary investments, and challenges of each distribution model. Blue Canyon determined that the client should pursue the first model in the short-term, and the regional distributor strategy in the long-term.
Strategic Solution: Blue Canyon proposed that the client should pilot the first model in two territories based on attractive returns on investment. Blue Canyon developed frameworks for the client to discuss details of the model to incentivize the key distributor’s participation and ensure minimal impact on other distributors in the pilot territories. Blue Canyon found that there were opportunities in the second model (the regional distributor model), but the risks for channel conflict and loss of distributor relationships required other longer-term revisions to be implemented first within the current channel network.
Result: The client used Blue Canyon’s analyses and frameworks to embark upon formal, detailed discussions and negotiations with the key distributor regarding the benefits and challenges of implementing each model. Both parties determined that the first model looked attractive and should be piloted—assessing if the future financial benefits of implementing this model nation-wide would give our client and its key distributor the required return on investments. Furthermore, the pilot would indicate the potential impact this alternative model would have on our client’s other distributors.