Motivating your international channel partners

Business Horizons, March-April, 1990 by Bert Rosenbloom

Motivating Your International Channel Partners

How do we get our distributors and dealers to pay more attention to our products and promote them more aggressively? At one time or another most manufacturers have asked that question, especially those who rely on independent channel partners for much of their distribution. In highly competitive markets, with so many manufacturers competing for the same customers, distributors and dealers can afford to be choosy about which manufacturers' products they will push. Getting them to push your products is what motivation in marketing channels is all about. This is hardly a new challenge for U.S. manufacturers.

What is new, however, is the internationalization of motivation in marketing channels. With so many U.S. manufacturers interested in marketing their products overseas, and needing foreign distributors and dealers to do so, the motivation of channel partners needs to be addressed from an international perspective as well as a domestic one. Foreign distributors and dealers, just like their U.S. counterparts, can pick and choose the products they will promote to their customers. They need to be motivated to emphasize your products. But as tough as it is for U.S. manufacturers to motivate their domestic distributors or dealers, it is even tougher in the international arena. The environment, culture, and customs affecting channel relationships can be very tricky for the uninitiated. The experience of the Bose Corporation with its Japanese distributor provides a good illustration.

The Bose Corp., founded by Amar Bose in the early 1960s, is well known in the United States as a manufacturer of audio speakers of outstanding quality and technical superiority. During the mid-1970s, in an effort to build international distribution, Bose attempted to break into the Japanese market. The results were disastrous. After three years of intense effort, the company sold fewer than 100 pairs of speakers in Japan and had no choice but to pull out of the country.

Reflecting some years later on what went wrong, Amar Bose identified the key problem as the failure of his marketing people to establish close personal ties with their Japanese distributor. As Bose would eventually realize, Japan is an intensely relationship-oriented society. Personal connections are the very essence of doing business nibonsbiki (Japanese-style). Such personal relationships, if they have not already been established through old-school ties and family friendships, can often only be developed through long hours of social contact and even late-night drinking bouts. Not knowing this at the time, Bose's export sales staff did not take the necessary time, face-to-face, with its Japanese distributor to convince it of the advantages of Bose's unique direct/reflecting audio technology, which bounces sound waves off walls rather than sending them directly toward the listener.

Bose's failure to gain the support of its Japanese distributor is not, of course, unique to this company or country. Numerous other U.S. firms have failed all over the world because they did not know what it took to motivate their international channel partners.

GETTING PARTNERS MOTIVATED

Motivation, whether in the context of domestic or international channels, is the process through which the manufacturer seeks to gain channel-member support in carrying out its marketing objectives. Three basic elements are involved in this process:

1. Finding out the needs and problems of channel partners;

2. Offering support to the channel partners that is consistent with their needs and problems; and

3. Building a continuing relationship (partnership).

Finding Out the Needs and Problems of

International Channel Partners

The U.S. manufacturer that feels it has a good handle on the needs and problems of its domestic channel partners can be in for a rude awakening when it ventures into foreign markets. The needs and problems of foreign distributors and dealers can be dramatically different from those in the U.S. One of the most common differences is in the size of international channel partners. Many foreign wholesalers and retailers, for example, are quite small by U.S. standards. This is particularly true in the less-developed countries of Asia, Africa, and Latin America, but it also holds even for some highly developed countries such as Japan and Italy. When large U.S. manufacturers deal with relatively small foreign channel partners, their differing needs can cause serious communication problems. For instance, many small foreign wholesalers and retailers have little desire to grow larger. Thus they are not diligent and aggressive in promoting a U.S. manufacturer's products. From the growth-oriented U.S. manufacturer's standpoint such channel members may be viewed as lazy, when in fact they are simply operating according to their needs, which do not place a high priority on aggressive efforts to grow.

Many foreign channel partners at both the wholesale and retail levels may also be financed to a much lesser degree than is typical in the U.S. They may be able to stock only limited assortments of products, and they expect consignment arrangements and very long credit terms of up to one year, as is common in Japan. So instead of providing financing for the U.S. manufacturer, many foreign channel partners actually may be in need of financial assistance from the U.S. manufacturer.