James Weston, director of sales and marketing for Hillman Products Company, Springfield, Massachusetts, faced the problem of taking action to improve the company’s distributor and dealer relationships, which had steadily worsened. The effect of the worsening relationships was reflected in the latest sales report, which recorded a 12 percent sales decline during the past year and a 17 percent decline over the past two years.
Hillman Products Company manufactured a wide line of power tools, such as saws, drills, and sanders, for use by the home handyman. Hillman products were distributed nationwide through ninety distributors, who, in turn, sold to more than 8,500 retail outlets. During the past two years, the number of distributors handling Hillman products had dropped from 115 to 90 and, while the number of retailers had remained about the same, sales per dealer had substantially declined.
Several factors combined to cause high turnover among Hillman dealers, as well as to contribute to declining sales for Hillman products. Locations of many Hillman dealers were unfavorable. Dealer sales personnel were untrained and poorly informed about Hillman products. Few dealers did any advertising for the Hillman line. Virtually all dealers carried competing lines and devoted little effort to selling the Hillman line. Many retailers bought in small quantities, often a single unit of each Hillman product, so sales were frequently lost to competitors because of stockouts.
Dealers showed little loyalty to Hillman products. They knew little and understood less of the company’s history, policies, performance, or capabilities. The sole contact the dealers had with Hillman was through the distributors and their salespeople, who themselves were often poorly informed. Many Hillman dealers expressed dissatisfaction with the company and its distributors for actions such as overloading dealers with more products than they could ever hope to sell in a given period and, especially, for the lack of company support in local advertising.
Hillman distributors criticized dealers for what they claimed was deceptive dealer advertising and ignoring the manufacturer’s suggested retail prices. Some distributors had dropped the Hillman line and taken on competing lines. Weston believed that immediate action was necessary to prevent further deterioration of the situation and to improve distributor-dealer relations. Consequently, he proposed (1) establishing a distributor-dealer relations staff and (2) retaining a management consultant.
The distributor-dealer relations staff would determine attitudes toward Hillman and its policies and make recommendations for the improvement of relations. Weston hoped that this would result in better understanding between Hillman and its outlets and would improve communications. To help distributors and dealers sell more Hillman products, the distributor-dealer relations staff would plan and implement a program of sales development, promotion, and mechanical service assistance for dealers.
The management consultant would survey fifty of the most successful Hillman dealers to determine the best methods for merchandising products. Information from the survey would be used in designing and implementing the program of sales development, promotion, and mechanical service assistance.
Weston believed that these two measures would reverse the alarming situation of poor distributor-dealer relations and would pave the way for more efficient marketing.
Evaluate Weston’s proposal for improving Hillman Products Company’s distributor-dealer relations. Give the reasons for your position.
Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.