International Marketing Export Promotion Agents V Distributors A

International Marketing & Export Promotion Agents V Distributors

A marketing channel is a set of interdependent organisations involved in the process of making a product or service available for use or consumption. Channel Definition

Although there a number of different “Routes to Market” Deciding between an Agent or a Distributor is the most common decision facing most SMEs in export markets……so what’s the difference between an Agent and a Distributor…………. Route to Market

• An Agent generates sales between a principal (supplier) and its customers and is rewarded by earning commission – usually tied to the value or volume of goods/services sold. • Title, possession or risk in goods does not ordinarily pass to the agent at any stage. One reason why an agent receives less remuneration than a distributor. • In an agency agreement the supplier has control over key areas such as marketing strategies, product price lists, and the customer base. • The contract for sale of goods/services is between the supplier and its customer, with the agent acting only as a facilitator. Agents

• Under a distributorship agreement, the supplier or manufacturer sells its goods/services to the distributor who then sells onto its own customers adding a margin to cover its own costs and profit. • In purchasing and reselling the goods, the distributor contracts both with the supplier and with its own customer and title to the goods in question normally passes to the distributor. Distributors

• Exclusive Distributorship – supplier agrees to sell his goods/service only to the distributor within a certain defined territory. • Sole Distributorship – supplier appoints a distributor as his sole or only distributor within a territory, but reserves the right to supply the goods directly to customers in that territory. • Non-Exclusive Distributorship – supplier has complete freedom both to sell directly and to appoint another distributor in that territory. • Selective Distributorship – supplier agrees to appoint a distributor only if they meet certain criteria. Common Forms of Distributorships

Comparative characteristics of Agents and Distributors Factors for Consideration Agent Distributor Control over price and other terms of sale Yes No Ability to dictate choice of customer Yes No Direct contact with customer Yes No Close control over Marketing Yes No Ability to offload risk of stock No Yes Commission payable Yes No Compensation payable for termination/expiry of agreement Yes No High risk of Competition law issues No Yes Simpler tax position No Yes Agent v Distributor

Financial Factors Marketing (Customer Related) Factors Facilitation of imports Channel Relationship Purchases Customer Relationship Payment After Sales Service Pricing Distribution Risk Burden Promotion Critical Factors Agent v Distributor