Over the last 10 years, industry experts and consultants have promoted the elimination of distributors when speaking to manufacturers, suggesting that "removing the middle man will lead to increased profits." However, many industrial firms are successful using channel partners to add value via on-hand inventory, specification fulfillment, and stronger local relationships.

Many products are best suited for manufacturer-distributor throughput, so the question becomes: How does a company with say, 30 percent market share, lose seven out of 10 sales? Assuming that the distributor is devoted, properly staffed and liquid, what is his rationale for the lost business? More importantly, what are the manufacturer's steps for corrective action?

We asked our distributors to give us their rationale for lost business. The feedback was extensive, but six themes emerged. By crystallizing these concepts into "buckets," we were able to tackle the necessary action steps to stimulate growth. These buckets contain generic themes with specific responses, making them useful to a broad spectrum of manufacturers.

This bucket establishes the classic third-party antagonist for the distributor to deflect any criticism for the business lost. ("You don't offer the product, but your competition does.") A flexible manufacturer will recognize this up front and offer a better product, depending on the customer requirement, usually at the same price as the competitor. This selling philosophy was established and perfected by Ritz-Carlton hotels and Nordstrom department stores. The "Ritz-Carlton" effect, whereby a customer may receive an upgrade if his requested room type wasn't available upon arrival can be threaded into the industrial world with the appropriate creativity. Nordstrom and Ritz-Carlton are promoting a "customer for life" concept. Shouldn't we, as manufacturers, aspire to such "customer for life" status with Ford, Eli-Lily or ABB? Offer an upgrade for the same price and watch the buy-in accelerate.

OEM and turn-key systems constantly arrive in one geographical area having been built and shipped from another region. The arriving system will, from time to time, feature a competitor's product as standard equipment. When the distributor arrives on the scene, the distributor naturally holds the manufacturer responsible, perhaps explaining the business as "untouchable." It is difficult to motivate a distributor to capture business from an OEM with a landed competitive product on the scene. The first goal is to get the name and address of the "black box" supplier, usually found on the serial tag or plate. Try paying out a $100 check to the distributor salesperson who provides coordinates for an OEM that features a competitor's product in tow, and watch each distributor salesman begin trudging behind a waste treatment system or solvent recovery unit to find the name and address of the OEM firm. From there, the manufacturer can communicate to the OEM at the point of production.

Remember the product you left too long on the market, or the one that passed all fit, form and function testing in-house and then couldn't withstand the beating given to it by the end user? Along the way, we have all had our eye blackened from a non-performing product. When that happens, the humbling process can be turned into a dividend once you go back in with a new, innovative product.

Provide analytical data to support the new product and offer a "bounty" on the competitor's product. Provide free spare parts for a year if the customer will pull out the competitive product and replace it with yours. Set up a "lunch-and-learn" session for all employees—on your dime, complete with logo hats, shirts, etc. "Try/Buys" are also essential. Simply state that you understand that your first product failed to get the job done, yet the new, innovative replacement is at least worthy of a 90–120 day trial period (with set-up costs incurred by the manufacturer). A "no-lose" scenario is required in the eyes of an initially scorned customer to get back in the door.

No distributor likes to admit that he or she has a staff member who may be driving by customers to get to the next call. Phrases like, "I thought that building was too small to produce anything," or, "It looks like a warehouse," are commonplace. Customer cloning programs can help eliminate such drive-bys. Cloning by SIC/NAIC codes will make sure that if you have success selling your product to a paint factory, other paint firms should follow suit in the distributor's geographical area. Some salespeople simply make "milk runs" and work with their long-standing customers. This path-of-least-resistance format can be resolved by offering a special bonus plan for landing new customers.

This can be paired with the "price is king" bucket. The best offense against these two lost business buckets is a strong total cost of ownership presentation, which leads to an audit of your customer's competitive products and their long-term costs. Factoring in spare parts usage, energy consumption, and built-in design safety, landing an opportunity to walk into the potential customer's facility and demonstrate measurable cost savings when using your product sends a strong message to a skeptical customer.

It's important that the lost business buckets described here reflect distributor input. This helped us, as a manufacturing company, interpret the information, then present action steps that were palatable to our channel partners. It also illustrates that communication between channel partners is vital, and that lost business can be recovered when distributors and manufacturers work together.