How to analyze customer risk when product is sold via dealer network?

by a searcher

3 years ago

I am looking at an opportunity where the product is sold through a dealer network to end (commercial) customers. How should this be evaluated akin to customer concentration, churn, etc? Basically, what are the risks that need to be evaluated for this kind of product distribution system?

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searcher from University of California, Berkeley - Haas School of Business

Even bluechips have this problem. I think DD vs operation analysis are different. For DD: 1. concentration, 2. trend vs comp 3. assess channel internal and external benchmark vs actual, 4 review contract vs performance 5. SWOT you vs channel to see who has the channel power etc.

3 years ago | like reply | 0 likes

searcher from INSEAD

You need to investigate two areas:
(1) - distributors continuing to offer your products
+ how many brands for a given product type they hold? how they decide how many and which ones to hold?
- they can be restricted with shelf space, working capital, or just don't see differentiation between different suppliers
+ how these brands (manufacturers) differ in terms of value prop to end-customers
- why end-customer select a particular brand
- do customers come back to buy the same brand again, and if not - why
- which brands do they recommend and why
+ how these brands (manufacturers) differ in terms of conditions to the distributor (e.g., payment terms, margin opportunities, incentives for sales people, ...)

(2) - end-customers continuing to purchase your products
if your product is a part of a bigger machine, you can pretend to be interested and ask for details - e.g.,
+ which supplier of (x product) do you use and why?
+ what share of total manufacturing cost does product X account for?
+ where do you buy product X? why at this distributor?

For both (1) and (2) you can cold-call distributors and end-customers.
We usually use interns / sub-contractors to run such market surveying

3 years ago | like reply | 1 like

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