In Phase Three, you may start working with brokers to move into a new region or target a particular account. This is both exciting and requires a clear strategy to manage brokers effectively. It is not helpful to have a broker secure a series of accounts spread out across the country with high slotting fees and a lot of promotional requirements. Instead, be sure to align your broker towards your sales strategy of saturating region by region through the natural and specialty channel with low placement fees.
In this knowledge article, we will look at best practices for setting your sales strategy and managing your brokers towards that.
#1. Establish a Sales Strategy that you can Articulate
Before you can manage a broker effectively, you need to understand and be able to clearly articulate your sales strategy. In it's simplest terms, your strategy should focus on density with low placement fees. This will keep your cost of sales and cost of fulfillment in line with your three financial goals.
- Pick your Next Region -- Where do you want to build density next? The region you choose doesn't matter as much as consistency. Brands get into trouble when they target multiple regions without the sales movement to support it. Imagine the fulfillment and sales costs of sending and selling a few cases to Texas, a few to Arizona, and a handful to California? Compare that with a single distribution center for all of those orders in one region. Remember, new regions increase fulfillment and sales expenses to build the necessary density.
- Create a list of A-Level target accounts - Retailers are assigned a priority letter based on industry standards, experience with chains, and shopper demographics with A-Level being the priority. For instance, retailers like MOMs Organic or Wegmans fall within the A-Level category. Create your list of A-Level target accounts in the region you chose. Make sure your target list has low (ideally no) placement fees.
- Secure Regional Drivers - Regional drivers are key accounts within each region and classified as A-Level. Other retailers look to these regional drivers on what new products to carry in their own stores. By leveraging regional drivers, you can build success stories that serve as proof of concept and gain credibility when approaching other retailers.
#2. Select Brokers with Experience in the Region and Channel
Brokers specialize in different accounts, regions, and channels. They also vary in the number of brands they represent. When you are looking at different brokerage groups, make sure you are selecting someone that has experience and specializes in your target region and channel. It's not helpful to have a broker that secures deals in conventional accounts with high placement fees in California when you are focused on specialty in New York.
#3. The Deal Matters - Don't Pay too much for a Broker
Brokers make their money by charging a commission fee, typically somewhere between 5 to 10% of sales that they secure. On top of this, some will also charge a retainer to make sure they hit a certain minimum amount of income.
All of this is to say that the arrangement you make with your broker matters a lot on return on investment. When negotiating with a broker, make sure:
- Broker commission is based on sales AFTER promotions
It's important that your metrics of success match up with theirs. You are not after more doors just because. You are after more profit.
- Retainers are as low as possible
Retainers are not good for you. It means the broker is paid regardless of whether they secure additional sales for you.
#4. Don't Accept Bad Deals
As a business owner, it's important to remember that brokers are not always aligned with your interests. While they may have the skills and relationships to secure sales, they are incentivized by commission. This means that they may push through bad deals that may not be beneficial for your business, just to secure a sale.
It's important to establish clear guidelines and expectations when working with brokers. Make sure that you communicate your sales strategy, target accounts, and desired placement fees, so that brokers are aware of your priorities.
Additionally, it's important to regularly check in with your brokers and analyze the deals they secure to ensure that they are aligned with your business goals. By taking a proactive approach to managing your brokers, you can ensure that you are maximizing your return on investment and building a successful business.
Effectively managing brokers in Phase Three requires a clear sales strategy and proactive oversight. By establishing a sales strategy focused on density with low placement fees, you can align your broker towards your goals of saturating region by region through the natural and specialty channels.
Brokers are there to support your sales goals. It is not about who they have relationships with or how they want to sell your product. It’s about saturating your target region with A-Level accounts! Concentrate broker efforts on your list of A-Level accounts in your target region and channel.