Advantages and disadvantages of agents and distributors
As a broad guide, selecting an agent allows an exporter to retain greater control of the product or service in the market. The exporter keeps responsibility for distribution, after hours service and marketing and promotion, ensuring control over branding. However, the exporter also bears all the costs and carries the credit risk.
Distributors often take on more responsibility and consequently carry more risk. Exporters give up a degree of control but share marketing and promotion costs and the distributor handles more in-market work, holds stock and provides back-up service to clients.
Inappropriate partners and distribution structures can be very hard to change. Go through a thorough research process and interview a number of candidates before making an appointment. The most crucial factor is that you and your representative get on well, have open two-way communication and high levels of trust.
Appointing an agent or distributor
Draw up a list of possible representatives and then visit the market to meet them in person.
Factors to consider when making an appointment include:
- Levels of trust and rapport
- Due diligence
- Knowledge of the market
- Sole or multiple agency
There are a number of success factors for growing an effective relationship with your representative:
Give your representative ongoing support. Visit them and bring them to visit you. Keep your website up to date with reliable and consistent consumer and technical information.
Communicate clearly and often. Deal promptly with enquiries from your representative and let them know if there are problems at your end.
Set up a pricing model and stick to it. Under-pricing to gain market share will work against you in the long run.
Formal agreements
New Zealand Trade and Enterprise (NZTE) recommends exporters have a Heads of Agreement or Exchange of Letters with a new agent or distributor.
The written agreement should cover products, territory, timeframe, termination and review clauses and performance targets.
Many exporters confirm the appointment of a representative with a handshake, a practice NZTE does not support. At the opposite end of the spectrum, it is usually unnecessary to have lawyers draw up a formal agreement at the outset.
Performance agreements help you quickly and easily identify areas that need attention. These might include regular reports, regular visits and conversations with customers to find out how your representative is performing.
