By Dave Anderson
Anderson Evolution Consulting
A number of years ago, I attended a dental trade conference in Santa Fe, New Mexico, where a speaker made a presentation to dental distributors and manufacturers about what the future would bring. She predicted that businesses would experience lower sales profit margins, but would realize higher net profits due to increased operational efficiencies. One key point she made was that a spirit of partnership between manufacturers and distributors was extremely important for companies to realize the efficiencies.
I was surprised to hear groans from some of the manufacturers in the audience when the speaker made this comment. The two people next to me worked for a large manufacturer. I could not help but overhear them mutter, “That kind of partnership will never happen.” I was working for a large distributor at the time, and from my perspective we had great relationships with the manufacturers and worked closely with them in a partnership. Apparently, some of the manufacturers (and probably some of the distributors) in the audience did not share my view.
Later that year, I heard a speech from a CEO of a large, publicly-traded dental products manufacturer. To my surprise, he said that, without any doubt, their company’s customer is the dentist, not the distributors of their products. It apparently made no difference to him that his company sold their product only through distribution, and the audience was mostly distributor management and salespeople. Frankly, I really did not understand his point of view.
Later in my career, I worked for a large equipment manufacturer. On occasion I would hear this same sentiment at our company meetings. We had a number of spirited debates about who was the customer. Those discussions helped me have a better understanding of the challenges that manufacturers face when selling through distribution, and why some manufacturers and distributors may not feel they have a partnership.
One challenge is rooted in the growing complexity of the dental equipment business. As the number of manufacturers has grown, and the number of similar products offered by any one manufacturer has exploded, it has become more difficult for distributors to stay knowledgeable about the products. For example, 30 years ago there were only three manufacturers offering panoramic X-ray products in the U.S., and each company offered only one product. Today, there are over a dozen manufacturers of panoramic X-ray systems offering over 50 products.
Knowing that there are a lot of alternatives to consider, dentists expect their distributors to have a good knowledge of the products to help guide them through the buying process. If a distributor promotes only one or two product alternatives, dentists often feel that they’re not getting the whole story. On the other hand, if a distributor discusses a number of different manufacturers’ products, a manufacturer feels that the distributor is not being a good partner. Often the manufacturer’s reaction is to try to take more control of the sale by working directly with dentists to assure that the dentists get the order.
Manufacturers must develop products that solve problems for dentists, the end users of their products. Having a good understanding of the dentists’ world is critical to good product development. Manufacturers conduct focus groups and surveys, and listen to input from dentists to create products that will solve their problems. It is understandable why many manufacturers look at dentists as their customers. However, manufacturers must work to develop products that solve problems for the distributors who buy the products, addressing profitability, parts availability and cost, technical service, and installation aspects of the product. In this sense, the manufacturer looks at the distributor as the customer.
So who is the customer? I believe that the answer lies in following the relationships. Rarely are there ongoing direct communications and business relationships between the manufacturers and the dentists using their products. The manufacturers’ ongoing business relationships are with the distributors. The distributors’ relationships are with the dentists as the customer, and with the manufacturers as the vendors. When manufacturers sell products through distribution, they must keep in mind that the products will only be sold if the distributor has or can build trusting business relationships with the dentists, and if the distributors have similar relationships with the manufacturers. In my experience, when manufacturers begin talking about dentists as their customers, distributors are less likely to embrace promoting that manufacturer’s products. The trust is gone.
To build the spirit of partnership with distributors, manufacturers need to develop product training programs, promotions, and business practices that benefit the distributors. This, in turn, builds an understanding with distributors that “this manufacturer has my back.” Manufacturers can focus on taking care of their distributors. The distributors, with their established client relationships, feel good about promoting that manufacturer’s products. It is more efficient and effective for manufacturers to get their distributors excited about selling their products than to view the distributor as a barrier between them and the dentists, and trying to control each sale by maneuvering around the distributor.
Distributors, of course, have responsibilities to their partnerships with the manufacturers as well. This includes participating in manufacturers’ educational and training events so they’re prepared to present products with adequate knowledge of them. They also need to be candid with manufacturers when they’re not promoting their products so the manufacturers know what they need to do to earn the business.
When there is a true partnership between a manufacturer and distributor, everyone wins. The distributors get great support from the manufacturers, so they look good in the dentists’ eyes. The manufacturer’s sales and market share grow. Dentists appreciate and benefit from the partnerships, too. When a product problem occurs, dentists only want it fixed and don’t care about whose fault it is. Working together, the distributors and manufacturers can work quickly to resolve issues.
Over the past 30 years, Dave Anderson has worked with one of the largest distributors of dental products and services in the U.S. in sales, sales management, marketing, office design service, and business management roles. He has also worked with one of the world’s largest dental equipment manufacturers for a number of years. In these capacities, Dave has worked closely with dentists, and has an understanding and appreciation for the challenges that dentists are faced with when making purchasing decisions. He has also created a website with information and reviews on dental capital equipment and related services called The Dentist’s Voice at www.TheDentistsVoice.com.