Make Agriculture
Distribution Channels
Work for You: 3 Steps
to Reward Your Channels
Number of words
506
Time to read
3 minutes
Value
Priceless
Who should read this
Commercial/marketing professionals in the agriculture business
If you sell through agriculture distribution channels, you already know the following simple fact: this is a long term game. Trust isn’t built in a quarter – it’s earned over years.
In most countries, manufacturers of seeds, crop protection products and other farm inputs, sell to ag-distributors who then sell to smaller retailers or directly to farmers. Distributors are not simply moving products from one place to another. They are actively involved in marketing and play a significant role in shaping farmer decision-making.
Manufacturers often ask themselves: “Which distributors do I want to work with?” and “How can I influence my channels?”
At the same time, ag-distributors are managing thousands of products and constantly deciding which suppliers to prioritize and which ones deliver the most profit.
The most effective way for a manufacturer to drive the desired distributor behaviour is by creating a clear commercial pricing policy. Discounts and rebate payments are proven to reward distributors for their services and to help achieve business goals.
There are three key steps to consider when building your terms and conditions:
Step 1: What should you reward?
Start by asking: what are your company’s commercial objectives? Are you trying to drive sales volume or improve margins? Do you want to reduce logistics costs, ensure on-time payments? Are there specific activities you want your distributors to carry out, such as promoting new products or expanding into new regions? All of what mentioned above?
To get this right, list all your commercial goals, rank them by importance, and align your commercial spending with the behaviours that matter most.
Step 2: Which customers and products should you reward?
Create product segments based on how differentiated and profitable each product is. Then design your terms and conditions so that your most differentiated products support the pull-through of more commodity-like offerings.
Apply segmentation logic to your customers. Build three to four customer groups based on segmentation criteria. This allows you to focus not only your budget but also your time and commercial effort on the customers that matter most.
It’s a common mistake to skip segmentation. (Don’t do it!) Segmentation of customers and products will help you to design your incentive in a structured manner and also help your commercial team to focus effort on segments you care most about.
Step 3: How should you reward?
Build smart, pay-for-performance criteria. Always tie incentives to clear, measurable business targets-the more your distributor contributes, the greater the reward.
Make sure your conditions support sustainable business growth. Include time-based elements such as early ordering and on-time payment, and ensure that targets are realistic and transparent.
Bottom Line
Commercial price policy with smart incentives are your tool, as commercial manager, to drive your channels, as well as farmers. It’ is highly recommended that you follow these three steps when if your company wants to keep long-term relationships with both distributor and customers.
Get In Touch
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