“We recently concluded our annual sales conference for our distributors nationwide. Most of them complained they are now getting smaller margins (as a percent of sales) from our business. Our company has reduced the sales performance incentive to our distributors and rechanneled this to below-the-line promotions.  As a result, our distributors significantly increased their sales.  What is the best way to make them understand that our strategy will provide them long-term benefits?”   - Vic Timcia
 
My wife and I recently attended a sales conference of RFM Corporation held at the breathtaking natural seaside environment of Pico de Loro, Batangas. It was for me a mixed feeling as I used to work for RFM and now attending the annual conference as one of their distributors. My former boss, Joey Concepcion III, CEO & President of RFM Corp, led the conference from day one to finish capped with a still energetic refrain from Joey’s father, Mr. JoeCon himself. As a distributor, I noticed how much RFM prepared time and other resources to offer a fun-filled and inspiring conference for its distributors. Joey truly knows how to motivate his distributors and make them feel they are part of his team as succinctly echoed in the conference –  One heart. One fight!
  
If most of your distributors came out from your conference grumbling about their lower margins, then I’d say your conference was a disaster. So, your question desires to make your distributor appreciate the supports or investments you make to help them sell your products faster. Let me give you some tips.
 
Inventory of your sales team. First, begin by taking stock of how your sales team is creating value to your relationship with your distributors. How is their integrity to your distributors? How is their level of competency in managing and leading distributors?  Since distributors complain of low margin, how is your sales team’s financial fluency? Do they speak the distributor’s language? Many salespeople handling distributors today can't read a balance sheet, a P&L report, and wouldn't even recognize return on investment ratio. 
 
Share information. Show your distributors the impact to sales of your marketing and sales initiatives. For example, show them the comparative sales off-take before and after running an above-the-line or below-the-line promotions. Share the level of investments you made to help them deliver higher sales revenue. Your sales person must be able to numerically articulate the impact of your investments to the distributor’s business.
 
Focus on asset turnover. Since a distributor’s assets components are largely current (i.e. minimal fixed assets), the key to increasing its return is by increasing its profit margin and current assets turnover. Instead of looking at margin only as a percentage of net sales, redirect distributor’s attention to the importance of asset velocity particularly inventory and receivables turnover.  This is where you are helping them. The more sales off-take, the more likely the customer will pay the distributor on time, and the faster inventory turns. Even at now lower percent Profit Margin, your distributor can still increase its return on assets (let’s just focus on receivables and inventory here) because of higher asset turnover. Return on Assets is computed by multiplying percent Net Profit Margin (i.e. Net Profit after taxes / Net Sales) by Asset (again, just focus on accounts receivables + merchandise inventory) Turnover (Net Sales/Assets).
 
Your distributors are extensions of your company. They are part of your sales force. Bring them to one heart and one fight!
 


 
Emilio “Bong” Macasaet III is Partner and Chief Distribution Strategist of Mansmith and Fielders, Inc. (www.mansmith.net), the leading marketing and sales training company in the Philippines.  For inquiries, please email info@mansmith.net, call (+63-2) 584-5858 /412-0034 or text (63) 918-81-168-88. Please also send your marketing, sales, strategy and innovation questions to mentors@mansmith.net.