Why Choosing the Right Distributor is Vital for Commercialization Success

Businesswoman Chosen by a Claw Crane Arcade Game

By Lauretta Ihonor, MBBS

Screen Shot 2016-07-19 at 12.59.31While making plans to bring a medical device to market, focus must, of course, be given to key factors, such as design, development and raising capital. However it is never too early to start thinking about distribution, because a product’s success ultimately rests on its ability to reach the customers it was developed for.

Michael O’Rourke is the founder of Scotia Vision Consultants, a US-based ophthalmic consulting business specializing in drug delivery and medical devices. Scotia Vision works in a US-European partnership with medeuronet, to help ophthalmic medical device companies build a bridge to and from the US or Europe.

Over the past seven years, Michael has helped bring numerous innovative products to the US and European market and knows just how vital securing the right distributor is to commercialization success. Here he tells medeuronet his top tips for securing the best distributor for your product when attempting to enter a new market.

“The sooner a company starts thinking about distribution, the better. If you’re determined to conquer a specific market, you’ll probably begin by approaching investors. But they will soon ask that all-important question: ‘How are you going to distribute it?’ And when they do, you’ll need to have a well-researched answer,” says Michael.

Michael O’Rourke

Indeed, he believes the first key step to success lies in getting distribution plans underway long before a product is ready for market release.

“You really have to start thinking about this when the product is one or two years away from approval. It could take maybe 12 months of negotiations to actually get a deal done with a distributor, so I believe the 12 to 18 month mark is a reasonable point to start approaching potential distributors.”

While it’s wise to for all medical device companies to develop a distribution plan of action at an early stage, Michael emphasises there is no single strategy that is universally right for all. Instead, it is important for a company to determine the proportion of a specific market it wishes to reach and then find a route that will facilitate this.

For example, a company wishing to enter the European market could adopt one of three strategies:

  1. Set up its own organisation in Europe and establish a specific sales force and marketing team – although this will require a significant degree of local knowledge to execute effectively.
  2. Work with a partner that meets all distribution needs, from importing the product from its country of manufacture, to storage, order fulfilment, dispatch, invoicing and returns.
  3. Make a business development deal with another company that is established in Europe and allow them to licence the product into their own portfolio.

Once the type of distribution strategy a company wishes to use has been established, it’s time to find the distributor that’s the best fit. And this, says Michael, is the make or break step, as “there is a precise list of criteria a company should aim to tick off when trying to find someone.”

  1. Screen Shot 2016-07-19 at 12.28.08Make a list of currently established distributors in your target market and within your specific field

“Getting these all-important names should ideally involve networking and researching the recognised players in your industry, but don’t forget to get recommendations from people who have gone through the process themselves. There’s truly nothing stronger than word-of-mouth for identifying the best distributors,” says Michael.

He adds: “Once you have a list of five to 10 names of potential distributors, check if any have a product that is a direct competitor to yours. If they do, eliminate them as a candidate.”

  1. Screen Shot 2016-07-19 at 12.30.19Develop a clear plan of action to present to potential distributors on first approach

While distributors are always looking to expand their portfolios, a company must still show potential distributors that it is worth working with. Demonstrating that it has well thought-out plans, strong focus and realistic expectations is an effective way to do this on first approaching a potential distributor, says Michael.

“You must know exactly what it is you want to do in the new market rather than just say ‘I want a distributor’.

He explains: “If you’re hoping to develop a presence in Europe, for example, you’ll need to approach distributors with a clear profile of your technology, target market potential, expectations of your ideal distributor and the exact plans you have for Europe – do you want to distribute in just one country or are you looking a pan European distributor to give you a presence in multiple countries?”

  1. Screen Shot 2016-07-19 at 12.31.17Physically go and meet the potential distributors

Once a short list of potential distributors has been drafted along with a clear commercialization plan for the product (including timescale to launch), the next step is to schedule face-to-face meetings with the top five to six distributors a company is considering.

And while this can take much organisation, it is worth making sure these meetings take place in person rather than virtually, says Michael.

“You can pick up a tremendous amount of information from this type of approach,” he explains.

“Firstly, you’re able to meet them, see their own organisation for yourself and judge how professional and capable they really are.”

After this initial meeting, in which you will have communicated your commercialization plans in detail, the second stage is to ask each distributor to come back to you with a proposal that outlines how they can make your product successful in their own country.

This, says Michael, is key in revealing how motivated a distributor is and sets the tone for your future relationship.

“I would want to see a plan from them. It doesn’t have to be enormously detailed, but it would need to outline their vision, strategy, sales force, and plan for launching and managing the product in the relevant countries.

“This plan would demonstrate their level of interest and give you a sense of how proactive they are.”

  1. Screen Shot 2016-07-19 at 12.34.39Do not overlook chemistry

Any agreement entered into with a distributor marks the start of a long relationship. And according to Michael, a question worth considering before moving forward with any distributor is: Can you work with them in the long term?

“You have to look upon a distributor as a partner and an extension of your team. If you don’t have a distributor who’s happy to communicate back to you, that’s likely to be problematic. There needs to be trust and respect. A good working relationship benefits both parties because the distributor will also be getting their own revenue from your product.”

  1. Screen Shot 2016-07-19 at 12.38.43Ask for evidence of their track record with products and companies similar to your’s

While a professional, motivated and engaged distributor is advantageous, the decision to move forward with them should rest on what they can actually deliver. The only way to know this is by looking closely at their track record.

“Ask them what exactly they have done, what their success rate is, and ask for the names and references from other companies they’ve worked with,” Michael advises.

“If your product is something very innovative, it’s important to check that the distributor has experience in launching disruptive state-of-the art products,” he adds.

“This is really important because it takes a completely different approach to launch a product that’s’ highly innovative or disruptive than something that’s just the norm.”

How to tell you’ve found ‘the one’?

Screen Shot 2016-07-19 at 12.39.37Once you’ve found a distributor that meets the outlined criteria, the next step is to put together a comprehensive agreement.

Michael believes that such an agreement should lay out the precise expectations your company and the distributor have of each other so there are no surprises along the way.

“Those expectations should range from sales expectations (monthly, quarterly and annually), the level of financial input the distributor will be making, and how both companies will communicate with each other.

“Once the agreement has been confirmed and both parties are happy, the ideal scenario is to let the distributor get on with it and not micro manage them,” he adds.

“But don’t forget you do need a way to track their progress and make sure they are delivering the expected results.”

As Michael explains: “Ultimately it comes down to sales – that’s the ultimate measure if a distributor is working for you.

medeuronet’s EU commercialization service offers a comprehensive solution to companies seeking to enter and succeed in the European market. Acting as a European partner, medeuronet provides everything a medical device manufacturer needs, from product import, to storage, dispatch to customers, full customer service process and complete back office support.

If you are seeking product commercialization within Europe, read more about the EU commercialization solution at http://www.medeuronet.com/momentum/.

Contact us to learn more about how you can succeed:

medeuronet at innovate[at]medeuronet.com

Michael O’Rourke at  Scotia Vision Consultants

 

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