Five principles of effective channel and distribution management
One of the most challenging elements of market entry in China is the “last mile” – the final stage of distribution and channel management needed to get a product to a customer. For businesses looking towards China (projected to be the world’s largest economy by 2050) for growth, finding a solution to the “last mile” is critical to success.
Organisations taking a systematic and involved approach to distribution and channel management will often outperform their competition in revenue and customer approval. In our experience, there are five key elements that appear consistently amongst top performing international firms in China.
“Efforts to build trust, commitment and loyalty should be prioritised alongside economic objectives”
1. Deal with channel conflict directly:
In a market characterised by non-traditional and opaque channel structures, it is imperative that roles and accountabilities are formalised within collaborative agreements. Positive and negative incentives can be effective, though unless communicated and embedded through effective training can prove meaningless.
2. Build long-term loyalty into collaborations:
Efforts to build trust, commitment and loyalty should be prioritised alongside economic objectives and cultivated through both emotional bonds and deference to ego. Economic incentives are necessary – you would give your friend attractive terms after all. However, top performing companies recognise the importance of good favour and invest in fostering a genuine feeling of commitment to partners.
3. Nurture brand equity:
Vigilance in brand positioning and pricing across the entire sales ecosystem is imperative for sustained growth – brand erosion disincentivises trading partners and customers alike. Given the ambiguous and overlapping nature of channel structures, the need for discipline, training and an agreed strategy is paramount.
4. Systematically embed a culture of flexibility:
Organisations demonstrating both operational and cultural flexibility have significant advantages in responding to change, disruption and opportunity. This agility comes from maintaining strategic leadership, building strong and empowered teams who can take decisions in line with strategy, and training all staff on processes for escalation.
5. Put customers at the centre:
To ensure a tight focus on the customer, companies need to put in place meaningful metrics that are transparent to sales representatives and trading parties. Co-created customer service standards used to track and monitor feedback from the front-line, as well as operational protocols and procedures designed around core customer concerns (such as speed of delivery) can be delegated to enable rapid decision-making, consistency in approach and improved customer focus throughout sales representatives.
Moving into the Chinese market doesn’t have to seem like an intimidating prospect. The companies that can master the specific conditions of the Chinese market in a disciplined way can turn sales opportunities into above-market growth. If European businesses want to grow, they need to find a way to complete the “last mile”.