By Patrick Gouin, senior advisor at Invigors & chief executive officer at Max & Tite International
When it comes to European leasing, there are some essential facts. The one I want to focus on is that distribution channels are essential to any equipment manufacturer sales strategy. Based on market averages, indirect sales as a proportion of total sales continues to increase for lessors: up to 75% in “yellow goods”, 90% in agriculture, and 60% to 70% in technology.
But signing a vendor program with a given manufacturer does not mean signing with its distribution chain.
Additionally, dealers are independent with their own strategies and practices, and so are free to adopt the financing offer that suits their best interests.
Dealers also build up and own their portfolio of customers, gathering a collection of strong relationships and contacts.
Manufacturers and dealers are technically and functionally good at managing their equipment distribution. They are less at ease when it comes to distributing a financing offer.
Some financiers believe they do know how to work with dealers by operating a simple referral model supported by some incentive and occasional channel events. This traditional way does not really differ from a direct approach, hence it is not a tailored indirect distribution model.
A true distribution model should more reflect a vendor finance model where the “dealer vendor” is the one to promote, structure and sell the financing offer.
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This means a clear split of tasks and duties between the parties, and requires the dealer to be fully equipped in terms of sales financing education, marketing programs, and sales tools, including front-office systems at the point of sale. They must have reporting and monitoring tools with easy-to-deal-with processes.
For the financier, to support its distribution network with the appropriate services, the following must be considered:
- channel marketing
- “feet in the street” channel animation
- portfolio and asset management
- specialized credit assessment and the engagement of a ‘help desk’.
The funder must also consider any other ‘easy to deal with’ ancillary services including fast payment, simple document and processes.
The benefits for the financing company of its own distribution channel over a referral system are substantial, as any professional distribution model brings minimized sales costs in leveraging the distribution network sales force.
It also grows the “financing” sales force and field presence, gives enhanced market control and greater customer retention and more recurrent and more regular business via dealer installed base co-management. Other benefits include optimized loyalty; increased conversion; increased margins and other income through additional services.
The reality is that a synchronised joint pipeline allows a better ‘financial selling’ approach. It allows minimized risk; the sharing of customer information; support for recovery; close dealer portfolio monitoring and minimized asset risk through agreed residual value policy.
Asset management and remarketing are also benefits of distribution channel management.
It’s easy to say, but not so easy to execute! True distribution channel management is not common enough in our industry, so evaluating the best practice and methodologies is key.