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Price list integrity from the supplier to the distributor will ultimately have an impact on the wholesaler’s
effectiveness in establishing new distributor customers. When a supplier “gives everybody a special
price,” it is an indication that the supplier’s price list is not truly what the market will pay for their products.
In these cases, wholesalers will be less effective at using the supplier’s price list to create new distribution
for that supplier.

Another reality is the fact that occasionally, a large-order direct customer may elect to switch to buying
a line from a wholesaler even if he has to pay a higher price. If he is already receiving weekly shipments
from wholesalers, it may well make economic sense to improve his ROI on that line by adding it to the
wholesaler order. He may be facing space constraints in his warehouse, or have service or relationship
issues with the manufacturer. In this case, the manufacturer’s revenue will be reduced to his wholesaler
price basis (probably truckload), while his total cost to serve may go up. These factors may offset some of
the benefits of being in wholesaling. In most cases, the price offered by the wholesalers will determine
which customers purchase from them. If the wholesaler is offering pricing better than the defined LTL
brackets, more of this activity will surely occur. If the wholesaler maintains pricing integrity, larger volume
customers ordering from wholesalers will be minimal.

Having a large-order distributor switch from direct to wholesaler service can trigger an emotional response
from the manufacturer. It is important to quantify the actual impact of such a move before taking action,
beginning with understanding whether you are dealing with an isolated case, or are in fact seeing a
significant transition in your business.

If it is an isolated case involving one or two distributors, the manufacturer might consider tolerating the
situation. There is no doubt that a distributor will “be happier” if he can get your line from a wholesaler,
with all of the benefits and little or no price increase. Although it may feel like a win/lose situation, there
may be an opportunity to convert the distributor’s “happiness” to volume and profit growth for your line.
Working with your wholesaler representative, the crux of the message could be, “We’re supporting you
via our wholesaler program; let’s talk about the new products, replacement of marginal competitors, and
other growth opportunities enabled by our barrier-free wholesaler strategy.”

It is also important to note that the most successful wholesaler/supplier programs involve joint selling and
marketing efforts to the LTL distributors purchasing from the wholesalers.

Communicating Intent to your Distributor Customers

Influencing customers to buy (or not buy) from wholesalers requires a combination of disciplined
pricing practices, healthy working relationships between the manufacturer and wholesaler, consistent
communication, and Sales Force buy-in to the wholesaler strategy. The behavior of the manufacturer and
wholesaler sales forces during the rollout will do more to support (or undermine) the Target Customer
strategy than the formal communication from each.

As an example, if a manufacturer and wholesaler agree that all distributors averaging less than 10,000
lb. per order are targets, each must behave in a manner that will support this strategy. Potential problems
include:
■ The manufacturer offering truckload pricing to small-order distributors, creating a disincentive for
conversion to wholesaler service at a higher price
■ The wholesaler offering truckload pricing, luring large-order distributors to reap the benefits of
wholesaler service without a price premium
■ The manufacturer sales force steering small-order distributors away from redistribution, due to fear
of losing relationships, sales credit, or representative commissions

Done properly, the formal communication and behavior of the manufacturer and wholesaler will result in
a wholesaler customer mix that closely reflects the target list.
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