Distributor sales reps have many responsibilities – introducing new
products, growing market share for key manufacturer partners, finding
new customers, and much more. I’d argue that your single most important
job is to sell the value of your company’s distribution services
– to differentiate your company from its competitors, and to ensure
that your customer understands the value of using a distributor vs
For this month’s Smart Selling column, I thought it might be
useful to review all that ways that distributors add value – real,
measurable financial gains – to healthcare customers.
The value of reduced transactions
transactions is at the core of a distributor’s value and it drastically
reduces costs for your customers. Imagine how many transactions a
hospital or nursing home customer would incur by buying products from
several hundred manufacturers in a world that had no distributors.
Imagine how many full-time employees would need to be hired just to
manage the processes that the customer would have to take on.
Consider accounts payable as one example. Industry averages show that
the full cost of paying an invoice is around $15 per invoice and can
run as high as $40. (It’s less if payments are all done electronically,
but that’s less common when a healthcare provider is paying a small
direct-selling manufacturer than when paying its prime vendor
distributor.) These estimates are based on the time required to process
the payment and the cost of that time in staff wages. Whatever the
actual cost for your customers, they save substantially when they deal
with just one distributor rather than with hundreds of direct-selling
This same type of savings is repeated in the customer’s purchasing department and in the receiving process.
The value of reduced finance costs
Cash flow is essential to most healthcare providers, who depend
on third-party reimbursement for the majority of their revenues and
often must wait weeks or even months to receive that reimbursement. By
providing a reliable source of products, and delivering on short notice,
distributors reduce the amount of money providers must dedicate toward
inventory, thereby improving cash flow. Inventory reductions also reduce
costs for storage space and lessen the risk of loss from product
obsolescence or damage. In addition, distributors offer favorable credit
terms that allow customers to better manage their cash flow.
The value of efficiency
Distributors work with their customers to evaluate how medical
supplies are purchased and to find ways to improve the processes related
to ordering, receiving, redistributing, and paying for medical
products. In physician offices, for example, doctors and nurses see
hundreds of patients and don’t have time to order medical supplies.
Distributors solve this problem by managing inventories, developing
standard orders, and offering customized ordering platforms.
Hospitals have more people and more expertise in supply chain, but
often, too much staff time is spent on activities like breaking cases
and redistributing supplies. Distributors can significantly help these
customers cut costs through redesigning processes to reduce or eliminate
staff time required to order, distribute, or use products.
The value of information
Distributors help their customers make better decisions by
providing them with accurate data and information related to purchase
history, product characteristics, product alternatives, and more. For
example, a nursing home customer might use purchase history data from
its distributor to determine its highest-dollar product categories, in
order to develop standardization goals and save money. In the physician
setting, distributors are a valued source of information on new
technologies and products. For example, they often show their physician
customers how they can attract more patients or increase efficiency by
investing in new types of equipment that allow them to perform more
procedures in their offices.
The value of reliability
The value you provide starts with the things your company does
every day such as delivering product and taking orders over the phone.
Your customer may be so accustomed to your reliability in these areas
that he or she may not even see these services as adding value, but they
certainly do. Likewise, standard services such as prompt delivery, high
fill rates, credit services, multiple ordering methods, and customer
service all are valuable services that every distributor provides.
Although you don’t control the services your company chooses to
offer, you can control whether your customers are aware of their
value. Know your services and use them as important selling tools to
increase the value you bring to your accounts.