The second in a series on improving your standing with your distributors
In our last article (Winning Distributor Attention), we began a journey of discussing the importance of and challenges in understanding your distributor in order to better address their needs while getting what you want from them as a growing winery. The first critical step is shifting your mindset from one that is “inside-out” to “outside-in.” That means moving away from a mentality of “my business goals are what the distributor should pay attention to” to one of “understanding and solving my distributor’s needs and business interests first.” The challenge is, how do you find out what is most important to your distributor, how do you leverage this information once you have it, and what benefit will it yield you? The following steps will lead you to a better understanding of your distributor, and with that, the ability to position your business as a partner in solving their needs.
Uncover Their Critical Success Factors
What is a critical success factor? These often get confused with goals. Once we know a customer’s (or in this case distributor’s goals) we assume we have the full story. But goals are only half the story. Critical success factors (CSF’s) are: the few select areas of activity that must go right in order for the business to meet its goal. In essence, these are the deal breakers for businesses. When critical success factors are not met, goal achievement will not be possible. And they aren’t obvious to the naked eye. They require investigation and inquiry. While public companies do publish goals, they do not publish CSFs. Private companies, which includes most distributors, publish neither.
The only way to know what is important to your distributor is to ask them. While many of their CSFs will either be unimportant to you, or something you cannot help them with, if you uncover something that is critical that you can improve for them (and it helps you too), then you have uncovered gold. Any senior manager within your distributor will know their company’s CSFs, and these CSFs drive how they direct their part of the distributor’s operation. With three simple questions you can gain valuable insight into their critical success factors and yield valuable information that your competition lacks.
- Goals: What are your goals over the next 12-18 months?
- CSFs: What needs to happen in order for you to reach Goal X? You must ask this question for each goal.
- Test if it is critical: If you don’t accomplish X, will you still be able to reach your goal?
Once you understand what is most important to your distributor, your challenge is how to use the information to your benefit.
Let’s consider a fictitious distributor. Big Dog Distributors (BDD) has been on an acquisition spree over the last few years and is now a major player in the Midwest. At the same time BDD has invested millions of dollars in upgrading their inventory and accounting management systems. To pay for this investment, BDD needs to increase its margins 10% in real terms for the next three years. That is one of several BDD business goals. But the critical success factors are much more informative and helpful to you. Let’s say you go through the inquiry above and find out that they must:
- Accelerate revenue growth of fast-moving, premium and value wines in their portfolio
- Gain a stronghold in three of their newly acquired mid-west markets – Illinois, Indiana and Ohio – where there are several large grocery and mass liquor chains.
- Add an operating shift in their main distribution centers.
If you are a small- or medium-sized winery, you might wonder what do these CSF’s have to do with me? Let’s assume you, Little Dog Winery – a LEED certified winery on a beautiful and prestigious stretch of Silverado Trail, schedules a top-to-top meeting with Big Dog Distributor to discuss their priorities for the year. The pride and joy of your portfolio is the winemaker series – a line of high margin super-premium Napa Single vineyard appellation Cabs. In fact, the most recent vintage release earned a 99 in Wine Spectator. You have also launched a (lower priced) premium product tier – mainly California and central coast reds and whites – which has done well as an exclusive launch in a key West Coast grocery chain but has gotten little focus from you and your team since then.
What might you focus the top-to-top meeting on if you lacked information about BDD’s critical success factors? Likely, topics such as the brand’s recent accolades, winemaking process and LEEDs certification would be central arguments as you struggle to garner time, attention, and priority with BDD.
On the other hand, when you understand BDD’s critical success factors, how might you frame and focus the conversation differently? In this scenario, could you influence and support their CSF related to fast-moving, value & premium wines? Certainly. Could you help them increase their foothold in grocery accounts in the Midwest? Possibly. Can you help them with their additional warehouse shift? Probably not. However, if your goal for 2018-19 is to move into the high-end market in the Midwest, you might find your goals are misaligned with BDD’s critical success factors, and as a result they seem unfocused on you and your brands. Often wineries mistakenly believe this is simply because there are so many other wines in the distributor’s portfolio. But the larger issue is that they have other priorities. However, if you focus on your newer premium line with BDD, during your ride-with help the reps sell that portion of your offering, and adjust your strategies so that you can move your high-end products through other channels or in other markets, you might find BDD pays more attention to you than you originally expected.
In your jam-packed days, you most likely prioritize your activities around the work that will move your winery toward your quarterly and yearly goals to improve revenue, profit, productivity, or quality. These activities are your critical success factors, and while they may be similar to the winery next door, your CSFs are, in fact, unique to your business. The same is true for every distributor, no matter how big.
Every winery works with distributors at two levels. Top-to-top meetings throughout the year focus on aligning priorities and goals and negotiating terms of agreement. This is the time to learn about and validate their CSFs. On a tactical level, you and your team work with distributor sales reps during market visits. These account calls provide an opportunity to leverage what you have learned and in some small or large way, help them both meet their CSFs while influencing their selling behavior.
In the next article, we will discuss how to apply critical success factors knowledge during distributor ride-withs.