How Does Marketing Work in Two-Tier Distribution?

What is two-tier distribution?

A route to market with two businesses between the manufacturer and the end customer. The manufacturer sells to distributors (also called wholesalers), who stock the product and sell it to dealers, contractors, retailers or resellers, who sell to the end customer. It's common in building products, HVAC, electrical and plumbing, outdoor power equipment, auto parts and technology, where distributors serve thousands of local businesses no manufacturer could serve directly.

Why is marketing harder in two-tier distribution?

• The manufacturer often doesn't know who its dealers are. The distributor owns the relationship and the sales data.
• Dealers carry many brands, and the distributor sells many more.
• Distributors have their own brand, programs and priorities, which may or may not include yours.
• Marketing funds pass through two hands, and can stall at either.
• Sell-in (to distributors) is easy to see; sell-through (to customers) is not.
• Nobody sees what dealers actually run, so nobody can tell what works.

Who does marketing need to reach in two-tier distribution?

Three audiences, each needing different marketing:

• Distributors and their reps: why to stock and push your line. Sell sheets, catalog pages, training, margin and program details, and materials they can use to sell to dealers.
• Dealers: how to sell your product to their customers. Co-branded campaigns, point-of-sale materials, samples, training and co-op.
• End customers: why to want your product, and where to buy it. National advertising, and the dealer-level marketing that captures the demand locally.

Most programs are strong on one and thin on the others. The gap is usually the dealer, who sits furthest from the manufacturer and closest to the sale.

Who does what: manufacturer, distributor or dealer?

• The manufacturer builds the brand, creates the campaigns and materials, sets the rules and funds much of the marketing.
• The distributor sells the line in to dealers, trains them, stocks and delivers point-of-sale materials, and often runs its own dealer programs and events.
• The dealer runs the marketing in its market, under its own name alongside yours, and makes the sale.

Write it down with each distributor: who sends what to dealers, who pays for what, and what data each side shares. Most two-tier marketing problems start where those answers were assumed.

How do marketing funds flow in two-tier distribution?

Commonly in one of three ways, or a mix:

• To the distributor: the manufacturer gives the distributor MDF for its own marketing, events and dealer programs.
• Through the distributor: the distributor passes co-op to its dealers, under the manufacturer's rules or its own.
• Around the distributor: the manufacturer runs co-op for dealers directly, with accruals based on dealers' purchases through distributors, which needs the distributor's sales data.

Each works; the failures are funds that stall at the distributor, dealers who don't know what they have, and the same activity claimed twice at two tiers. Clear rules on who may claim what, and one view of balances, prevent all three. More in MDF vs. co-op advertising and how co-op claims and reimbursement work.

Whose brand goes on the marketing?

It depends on who it's for. Marketing to end customers is usually co-branded manufacturer and dealer: your product and brand, the dealer's name and contact details. Marketing to dealers is often co-branded manufacturer and distributor, so the distributor can sell your line under its name. Three logos on one piece rarely help anyone. Set the rules per audience, and lock them into the templates. See brand control vs. local flexibility.

How does a manufacturer reach dealers it doesn't sell to directly?

• Agree with distributors to share dealer lists or sell-through data, and what you'll use it for.
• Give dealers a reason to register with you directly: a listing in your dealer locator, certification, co-op, leads or better marketing.
• Offer distributors a co-branded way to deliver your marketing to their dealers, so they stay in the relationship.
• Route leads from your advertising to registered dealers, with the distributor in the loop.

Respect the distributor's relationship. Reaching dealers is meant to help them sell more of your line, not to go around the distributor.

How do you avoid channel conflict in two-tier marketing?

Make the rules visible and stick to them. Be clear about territories and who serves which dealers and customers. Route leads to dealers in a way distributors can see and trust. Don't sell around your distributors, and give them credit for dealer activity in their territory. Apply advertised-price and promotion policies consistently, where you have them; your legal team decides what those can say.

How do you get distributors to back your marketing?

Show them it sells more. Give their reps tools they can use with dealers, co-brand what goes to dealers, fund their events, and report back which dealers in their territory activated your campaigns and what it produced. Distributors back programs that make their dealers more productive and make them look good. Launches are where this matters most; see how to launch a new product through dealers and distributors.

How do you measure marketing in two-tier distribution?

• Sell-in to distributors and sell-through to dealers and customers, where you can get it.
• Dealer activation by distributor and region: which dealers launched campaigns or ordered materials.
• Leads routed to dealers, and what happened to them.
• Fund use at each tier.
• Results for dealers who use your marketing, compared with those who don't.

More in how to measure the ROI of partner marketing.

Where does OnBrandify fit?

OnBrandify is the Marketing Hub for brands that sell through partner networks, including manufacturers selling through distributors and dealers. Campaigns, catalog items, fund programs and disclaimers are set by partner type, tier and region, so distributors and dealers each see the marketing made for them, co-branded for whoever runs it. Partners at both tiers order materials and use their funds in the same place, and you see activity by partner. See manufacturer and dealer marketing, or request a demo.