Most businesses have distribution channels. And the balance of power with those channels is often a key strategic consideration that drives the product portfolio decisions and even acquisitions.
What is distribution clout? As with many strategic concepts, thinking can be clarified by drilling it down from an abstract concept to a practical “moment of truth” – when the salesperson is sitting down to negotiate with the distributor, who is stronger? Who needs favours from the other more?
Put this way, it is clear that it is far from a straight numbers game. Judge whether each brand builds or absorbs clout. If the salesperson has a large weak brand in the portfolio that requires them to negotiate constant sales-push from the distributor, it absorbs clout. On the other hand, a small niche brand could be so popular with loyalists that they would change distributor to get it, contributing to clout. If delisted, the distributor would suffer disproportionately to you.
Being human, it is hard for salespeople to be indifferent to the volume of weak ‘portfolio’or ‘price-fighter’ brands, leaving the opportunity for the distributor to use them as a soft punch-bag, to extract concessions on stronger brands.
The next time you debate distribution clout, try shifting your organisation’s mindset to see it as a function of pull-through, not size.