Building a network of international medical device distributors for key markets is a critical step for many businesses. Three steps not to shy away from:
- Do your due diligence
Research, research, research. Learn about the medical device distributors available in a territory and identify their key strengths. Do the specialise in certain market segments or capital equipment; are they large or small; do they focus on particular geographies? Who are their previous and current customers? Can you speak with them?
The more information you can build up, the better judgement you can make on who would be the best partner.
Think about payment terms. Revenue generation is great, but cash flow is just as important. Many distributors will expect credit terms because their customers may not pay anything for up to two years. Until the money is in your bank account you are just a charity. Payment terms are a key area of negotiation.
- Set up & manage the relationship with care
Key to setting up a distributor relationship are knowledge and senior management time. Think of your distributor as a partner not just as a customer. Ask yourself, ‘What can I do to help my distributor sell more?’ rather than ‘How can I sell more to my distributor?’
You can run your network from your head office, meeting with your medical device distributors two or three times a year at congresses. This is cost-efficient but not necessarily the most effective in gaining sales and profit. Alternatively, you can hire experienced people based in the region who already know and have worked with most of the distributors and understand how the market there works. Such personnel would be a valuable asset if they have the appropriate level of expertise but being more senior, they will cost more.
Be wary of employing someone at sales-rep level from another company or distributor.
They may not have the senior management experience that’s required to select, manage and work with distributors.
- Make changes when needed
If you’ve been communicating well, giving appropriate support and treating your distributor as a partner, yet sales have not been up to expectations, what next?
Why isn’t it working? Is it something you’re doing (or not doing), or is it distributor-linked? Have the market dynamics changed? If so, has your product been left behind? Does it really have the potential you expected? Have new, differentiated competitors been launched? There are also differences across countries – some products are successful in one country but not another.
A long-term relationship with your medical device distributor offers lots of intangible benefits, but it shouldn’t be one that just drifts along. This crucial relationship should have regular objectives, which should be pushed aggressively to maximise revenue and profit.
This is an abridged version of an article published on MedTech Engine, our platform for innovators in medtech.