A number of years ago, I attended a dental trade conference in Santa Fe, New Mexico, where a speaker made a presentation to dental equipment distributors and manufacturers about what the future would bring. She predicted that businesses would experience lower sales profit margins, but would realize higher net profits due to increased operational efficiencies. One key point she made was that a spirit of partnership between manufacturers and distributors was extremely important for companies to realize the efficiencies.
I was surprised to hear groans from some of the manufacturers in the audience when the speaker made this comment. The two people next to me worked for a large manufacturer. I could not help but overhear them mutter, “That kind of partnership will never happen.” I was working for a large distributor at the time, and from my perspective we had great relationships with the manufacturers and worked closely with them in a partnership. Apparently, some of the manufacturers (and probably some of the distributors) in the audience did not share my view.
Later that year, I heard a speech from a CEO of a large, publicly-traded dental products manufacturer. To my surprise, he said that, without any doubt, their company’s customer is the dentist, not the distributors of their products. It apparently made no difference to him that his company sold their product only through distribution, and the audience was mostly distributor management and salespeople. Frankly, I really did not understand his point of view.
Later in my career, I worked for a large equipment manufacturer. On occasion I would hear this same sentiment at our company meetings. We had a number of spirited debates about who was the customer. Those discussions helped me have a better understanding of the challenges that manufacturers face when selling through distribution, and why some manufacturers and distributors may not feel they have a partnership.
One challenge is rooted in the growing complexity of the dental supplies business. As the number of manufacturers has grown, and the number of similar products offered by any one manufacturer has exploded, it has become more difficult for distributors to stay knowledgeable about the products. For example, 30 years ago there were only three manufacturers offering panoramic X-ray products in the U.S., and each company offered only one product. Today, there are over a dozen manufacturers of panoramic X-ray systems offering over 50 products.
Knowing that there are a lot of alternatives to consider, dentists expect their distributors to have a good knowledge of the products to help guide them through the buying process. If a distributor promotes only one or two product alternatives, dentists often feel that they’re not getting the whole story. On the other hand, if a distributor discusses a number of different manufacturers’ products, a manufacturer feels that the distributor is not being a good partner. Often the manufacturer’s reaction is to try to take more control of the sale by working directly with dentists to assure that the dentists get the order.
Manufacturers must develop products that solve problems for dentists, the end users of their products. Having a good understanding of the dentists’ world is critical to good product development. Manufacturers conduct focus groups and surveys, and listen to input from dentists to create products that will solve their problems. It is understandable why many manufacturers look at dentists as their customers. However, manufacturers must work to develop products that solve problems for the distributors who buy the products, addressing profitability, parts availability and cost, technical service, and installation aspects of the product. In this sense, the manufacturer looks at the distributor as the customer.
