Creating Profit Through Alliances - business models for collaboration E-book

Distribution agreements and franchising These forms of collaboration each seek to increase the number of sales points for your product or service. This can be in the form of your own shop, an Internet channel, or by being included (as brand) in the assortment of a larger store. Your distribution channels ensure that the customer encounters your products or services more quickly and can purchase them more easily. Generally speaking, a distribution channel fulfils the following functions:         Information: to gather and spread market research and intelligence Promotion: to develop and spread announcements about special offers Contact: to communicate with potential buyers Matching: to adjust the offer to a quantity that meets the needs of the buyer , including assembly and packaging Negotiation: to reach agreement about the price and other conditions concerning the offer Physical distribution: transport and storage Financing: applying capital to maintain stocks and incur costs before payments are received Risk taking: to maintain stocks of products and invest in processes without guaranteed sales. If distribution takes the form of a distributor placing a number of the supplier's products on his shelf and adjusting his purchase depending on the sales, this does not meet the criteria of a partnership. There is hardly any risk sharing, and certainly no joint operational management. This changes as soon as the supplier and distributor decide to work together in marketing, sales and delivery. As a result, the distributor will take a greater interest in the supplier's product or service. It may be that the distributor, in return for taking a greater interest, will demand the exclusive distribution rights for his region or customer group. In case of franchising, the relationship becomes closer yet. Here, the distributor enters into an exclusive bond with the supplier, no longer working under his own brand name but only under that of the supplier. It is no longer or hardly possible for the distributor to sell products or services of another supplier, and the distributor/franchisee is bound to strict rules with respect to shop interior and marketing communication. For both exclusive distribution and franchising, the parties share in the risk that sales may disappoint and thus not justify each other's efforts and investments. In case of a distribution agreement the distributor holds the reins, and the supplier will want to steer along through generic marketing. In case of franchising it is generally the supplier that holds the reins, and the franchisee will want to steer along with respect to his own sales area. The value of a partnership for a supplier can be quantified by considering the effort the supplier would have to make in order to set up an alternative means of distribution that achieves the same effect. Relevant aspects to consider here are:       elaborating a shop concept; leasing or buying and then furnishing commercial space; leasing or buying and then furnishing sales offices; hiring, training and managing sales personnel; conducting local marketing campaigns and developing sales promotion activities; tending to the financing and possibly the storage of goods. 39

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