Exclusive Contracts with Distribution Companies and Channel Partners

Manufacturing companies struggle with the question of whether they should grant exclusive rights to dealers or distributorswho are selling their products. 

In order to properly answer that question, companies need to thoroughly analyze both the ROI and the opportunity cost of the relationship. This requires considering the potential market share gained/lost with the relationship. In other words, how much market share do they currently have and how much potential market share can they capture with an exclusivity.

For example, if you are a manufacture and one of your dealers represent  1% ofthe potential market share in their geography, do you really want to offer themexclusivity?   If you offer exclusivity and they do not work theterritory properly, you have removed 99% of the markets potential. For this reason, exclusivity should be granted based on each dealers ability to capture the highest market share. Contracts should have renewal dates so that the relationship can be continuously monitored and reevaluated.

Lori Williams has released two new e-books available in PDF format and on Amazon for Kindle. Visit www.BusinessSimplyPut.com and click in ebooks to learn more.

 

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