|
Selling Through Wholesalers: Finding a
Win/Win Relationship for Sales Reps
by Jack Evans
The growing presence of distributors and wholesalers in the home health
care (HHC) marketplace is an inescapable outcome of managed care and
consolidation. HHC providers, hospital systems, and manufacturers are
striving for either regional or national penetration in response to
managed care's focus on covering all members in their respective
geographic areas. The resulting consolidation and alliances offer
single-contract one-stop shopping - often at the cost of the local sales
representatives who originally serviced these local accounts.
The Value of Distribution
The recent growth of distributors and wholesalers in our market has
followed this consolidation trend by affording cost-efficiencies on
several levels:
- Smaller local accounts can still receive the product selection and
service levels that manufacturers can no longer afford to offer
direct;
- Larger regional and national chains can take advantage of the
inventory management, drop-shipping and high service levels; and
- Manufacturers can "cherry-pick" which accounts they will
keep as direct, house accounts and turn the rest over to distribution.
The shift in pharmacies from scripts to health and wellness has also
driven this transition, because pharmaceutical distributors found that
their customers were demanding home health care information and products.
The major pharmaceutical distributors with HHC programs include McKesson,
Bergen Brunswig, Cardinal, Amerisource, Bindley Western and Neuman.
Although these HHC programs only represent marginal gross sales when
compared to pharmaceuticals, their profitability is not being ignored by
the parent companies.
Remember the Rep?
Too often, independent manufacturers representatives are being
eliminated from this new supply chain. Once distributors are in place,
some manufacturers question the value of retaining MSR's or paying them
commission on these sales. Unfortunately, these manufacturers are missing
an important aspect of distribution: distributors and wholesalers sell
programs, not products.
Distributors and wholesalers are effective promoters for manufacturers,
but they do not have the sales staff nor the mandate to detail and sell
product in the field. Manufacturers that channel sales through
distributors and then drop their MSR's find themselves waiting for
reorders that never appear. In contrast, the mass market's volume sales
affords manufacturers the option of using merchandisers to drive reorders
at the store level.
Without MSR's to periodically visit accounts, check stock, conduct
product trainings and detail new products, merchandising becomes a default
process. Top sellers remain out-of-stock while customers go elsewhere to
satisfy their needs, and the remaining stock usually gathers dust.
Everyone loses when this happens: the customer is no longer satisfied; the
retailer loses not only a sale but a repeat, loyal customer; the
manufacturer watches a loyal account disappear; and finally the
distributor drops the line for lack of movement.
However, with MSR's working the product line in the field, this
negative scenario can quickly be turned around. The role of the MSR today
is more than simple order-taking. They must wholeheartedly embrace
category management for everyone's benefit:
- Accounts need help in managing their inventory, identifying what to
and not to reorder, merchandising categories, utilizing planograms and
promoting products.
- Manufacturers need help in targeting specific markets and accounts,
training accounts on products, identifying merchandising and marketing
tools needed by accounts and understanding what accounts need to
sell-through their products.
- Distributors and wholesalers need help in monitoring products at the
store level, implementing promotions, launching new lines and
generating reorders.
Tracing Reports Encourage Teamwork
One issue remains to be resolved before manufacturers, MSR's and
distributors and wholesalers work together as a team. How are the MSR's
paid on sales through these channels? The bottom line is that MSR's will
not service accounts for which they are not paid commission. And
manufacturers will not pay commission unless they can document sales at
business locations that buy from the distributors and wholesalers.
Distributors and wholesalers maintain the sales information by
territory and account that both MSR's and manufacturers need, but many
will only provide these tracing reports for fees that are often
prohibitive for many manufacturers to pay on a monthly basis. These
reports range in price from $30 to $300 per month and in complexity from
simple printouts of gross sales by zip codes to EDI transmission of daily
sales per individual accounts.
Problems arise for manufacturers attempting to pay commissions on these
sales when some tracing reports do not identify the individual accounts or
regional warehouses to where their products were shipped. Manufacturers
need to document account-by-account sales in order identify the percentage
of sales on which commission is due to their reps. Tracing reports need to
provide specific information, such as the name, address and zip code of
all customers making sales transactions, the product reorder number, the
unit measure of sale and the net dealer cost.
When proper credit is given where due in the form of commissions, then
MSR's can perform their valuable role in facilitating the supply chain
movement of product from manufacturer to retailer to consumer. Without
this support from the trenches, the entire distribution system grinds to a
slow crawl. With their support, everyone profits from the increased sales
in this new era of national distribution in home health care.
|
