Agents & Distributors

An agent is a company’s direct representative in a market and is paid commission, while a distributor sells products on to customers after buying them from the manufacturer – their income comes from the profits they make on the difference.

Market entry through working with an agent or distributor can have several advantages, such as reducing time and costs to market-entry as well as gaining the local knowledge and network of the agent.

However, there are some drawbacks to this approach. Employing a third party results in an additional cost to your products and you may also lose some control and visibility over sales/marketing. It also has implications for intellectual property rights protection, increasing the risk of your product being copied or counterfeited.

Given the above considerations, companies need to select agents and distributors carefully. Some of the frequently asked questions are in the following checklist. You should also conduct due diligence to verify this information.

Background

• Company size, history and ownership (private or state-owned)
• Quality and quantity of the sales force
• Customer feedback and trade/bank references

Distribution Channels

• Regional coverage
• Types of outlets covered and frequency of calling
• Transportation and warehousing facilities

Are They Right for You?

• Does the agent/distributor have a genuine interest in representing your product?
• Can they benefit from actively promoting your interests (is it a win-win)?
• Do they also represent any competing companies/products?
• Can you communicate effectively with your counterpart?

Once a working relationship is established, the agent/distributor needs to be managed actively, this may be achieved by:

• Visiting as regularly as is practicable at a senior management level – this shows interest in, and commitment to, the agent and the market. This will also provide you with an opportunity to learn about conditions in the market and see how your products are faring.
• Working closely with the agents to show them how they can profit from your products.
• Helping to prepare marketing and sales plans for the agent.
• Providing regular training for the sales staff and after-sales training for the technical staff in the UK.
• Linking performance to incentives and agreeing milestone targets.