Creating and overseeing an Authorized Dealer Program can be an enormous undertaking. Implementing a successful program will require a thorough understanding of your distribution channel’s unique characteristics and challenges, a strong vision of how you hope to improve your channel, knowledge of the legal and business pitfalls inherent in these programs, and close coordination across your company. This is why these programs often take many months to create and roll out.
However, you do not need to feel overwhelmed by this project. You can break it into manageable stages, as we will show you in this lesson. In fact, we will offer tips and guidance for each stage of the process, from planning and drafting, to administering your company’s Authorized Dealer Program.
In this lesson, we will review:
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The details to establish when creating your program
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Checklists for developing and overseeing the program
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Best practices for a successful Authorized Dealer Program
Key Details to Establish When Creating Your Program
Before you can begin vetting retailers for your Authorized Dealer Network, you will first need to define how you want the program to operate: the rules, the consequences for violating those rules, the resources you’ll need to manage the program, etc.
Many of the details you’ll need to consider will depend on your company’s distribution channel, size, industry, how and where you currently sell, and other factors. Here are some best practices to get you started:
1. Establish rules governing where your dealers may buy your inventory.
If you sell through a network of wholesalers or distributors, you will want to establish a rule that your authorized dealers may buy your inventory only from your authorized distributors and wholesalers. This means you will need to update your Distributor Agreement to reflect this rule. (We will discuss how an Authorized Dealer Program affects your Distributor Agreement in Lesson 5.)
For example, your retail partners should be allowed to buy products only from your authorized wholesalers/distributors and from your company directly (if you have an in-house sales team).
In other words, your authorized dealers will not be allowed to buy from other authorized dealers, or from sources not on your approved wholesaler/distributor list.
2. Establish rules governing where dealers may sell your products.
This will be another useful way to limit distribution-channel leaks. You may limit your authorized dealers, for example, to sell only to end-user customers. In other words, they may not offload your products to other dealers.
You may decide to limit your authorized dealers to selling only on their websites, and not allow them to sell on specific marketplaces such as Amazon, Walmart, or eBay.
If you divide your resale channel geographically, you may also include rules limiting authorized dealers to sell only within the territories you’ve assigned to them.
3. Establish rules for handling your products and representing your brand.
You will also want to give your authorized dealers clear guidance on how you expect them to handle your products, as well as the brand you are trusting them to represent.
For example, you might want to set up rules for how a dealer must store your products to ensure quality control. This could include keeping your inventory in a secure facility, storing it at specific temperatures, selling your products only in their original packaging, sending you regular reports on the serial numbers of the items the company has sold (if applicable), etc.
Note: These rules can benefit your brand in several ways. First, they will give you more control over the quality of your products all the way to your end-user customer’s front door.
A second benefit is that these guidelines can help you establish a “material difference” between retailers who are legally reselling your inventory and those who are not. When a brand charges a retailer with selling the company’s products without permission, a common defense these rogue sellers offer is the First Sale Doctrine. This legal principle states that if you purchase a product, you can legally resell it without violating the brand’s intellectual property rights. This is why it is legal to resell used books on Amazon.
But there are a couple of exceptions to the First Sale Doctrine, including when the retailer is selling a “materially different” product. With quality-control guidelines like the ones described above as part of your resale guidelines, you can build a legal challenge to any retailer offering your products without your permission—because the odds are they will not be following those guidelines.
Note: To benefit from the “material difference” exception, a brand needs to actively monitor its resale channel for rogue sellers and infractions of the set guidelines.
You might also set up guidelines instructing dealers on how they are allowed to use your company’s sales copy, images, logos, trademarks, and other intellectual property. (This should extend to how your resellers may use your brand’s trademarks in paid search advertising, search engine marketing, and other digital marketing campaigns.
4. Define penalties for violations of these and other rules.
After you’ve established the rules of your Authorized Dealer Program, you will need to determine how to enforce them. Specifically, what consequences you will issue for violations.
These consequences can include penalties such as temporarily cutting off a dealer’s access to your products and even permanent expulsion from your network.
Keep in mind, defining your penalties and publishing them to your resale channel are only the first steps in protecting your brand. Equally important will be monitoring your channel for violations and taking swift and aggressive action against violators.
The only thing worse than not having these agreements and policies is having them and failing to enforce their rules. That approach will only encourage bad actors to continue violating your rules and chase away the honorable partners in your Authorized Dealer Program.
5. Update your Wholesaler/Distributor Agreements accordingly.
Once you implement your Authorized Dealer Program, you will need to let your wholesale and distribution partners know they are now allowed to sell your products only to retailers on your authorized list, and that they must also refrain from selling even to authorized dealers if those dealers are on your temporary “Do Not Sell” list.
This means you will need to:
- Create, maintain, and give all of your distributors access to an up-to-date version of your authorized dealer list.
- Create, maintain, and regularly send your distributors your most current “Do Not Sell” list, and insist they not sell to any retailer on that list.
- Update your agreements with distributors and wholesalers to reflect these new rules, as well as any consequences for violations.
6. Identify (or hire) the people you’ll need to oversee the program.
Another important consideration will be the resources your company decides to spend developing and managing your Authorized Dealer Program.
This means one of your first decisions will be how to staff this project. Will you hire a dedicated role for this, such as a Manager of Authorized Dealer Partnerships? Or maybe a Brand Protection Specialist?
Note: We can tell you anecdotally, based on many stories we have heard from our customers, rolling out such a program from scratch, assuming you try to do it all manually and in-house, can take upwards of a year. Which leads us to our final point…
7. Decide if you want a software platform to help roll out and manage the program.
Finally, you will need to decide early on what processes and technological tools you will use to roll out and oversee your Authorized Dealer Program.
Keep in mind, this program will require constant vigilance. Monitoring your brand’s presence across the internet at all times, looking both for violations from authorized dealers and for unauthorized retailers advertising and selling your products.
Logistically, this can become an ineffective and time-intensive undertaking if you attempt to manage it manually with in-house personnel continuously monitoring online marketplaces and eCommerce sites for violations.
You can eliminate a lot of the steps for setting up, implementing, monitoring, enforcing, and maintaining your Authorized Dealer Program with an automated online solution, like TrackStreet’s Online Dealer Portal.
Checklists for Developing and Overseeing the Program
A list of all the tasks and to-dos you need to complete will depend on your company’s unique circumstances and objectives for your program. Here’s a rough overview of the things you will want to do to get your Authorized Dealer Program up and running.
A checklist for defining the program:
- Set rules governing where your dealers may buy your products
- Set rules governing where your dealers may sell your products
- Set rules for handling your products and representing your brand
- Define the consequences for violations of these rules
- Appoint or hire the right people to administer the program
- Draft your standard Authorized Dealer agreement
- Determine if you will need or want the help of a software platform
A checklist for vetting dealer applicants:
- Develop dealer application and questionnaire
- Research dealer’s reputation online: star ratings, reviews, content, use of images from other brands, etc.
- Conduct a search of dealer’s business address and other contact information
- Check dealer’s credit history
- Review dealer’s other lines, check those brands’ authorized dealer and MAP policies (if applicable), and investigate whether dealer adheres to them
A checklist for onboarding dealers:
- Add dealers accepted into the program to your Authorized Dealer list (the list you will share with your in-house sales teams and wholesale partners).
- Send Agreements to all Authorized Dealers for signing.
- Distribute relevant assets to all Authorized Dealers: logos, sales and marketing materials, pricing sheets, training materials, your MAP/MRP/UPP policy (if applicable), etc.
A checklist for supporting your dealers:
- Issue digital dealer badges, allowing dealers to immediately identify themselves as authorized representatives of your brand.
- Give your dealers anytime access to your latest product catalog, pricing guidelines, etc. (ideally via a self-serve online dealer portal).
- Develop and maintain a portal online for ongoing asset management, allowing dealers to access your latest videos, sales material, etc.
A checklist for managing your program:
- Implement regular training companywide, to make sure everyone knows the program is in place and their role in supporting it.
- Develop a process (or deploy an automation tool) for continuously monitoring the internet at all times to ensure your dealers are abiding by your guidelines.
- Develop a process (or deploy an automation tool) to continuously scan for unauthorized sellers advertising or listing your products for sale.
- Monitor product reviews, star ratings, and other consumer generated content related to your brand to identify any issues with a given dealer.
- Create your “Do Not Sell” list for violators, and make sure your in-house salespeople and distributors always have an up-to-date list.
Best Practices for a Successful Authorized Dealer Program
Finally, here are some overarching best practices to keep in mind as you progress through each stage of developing, implementing, and managing your Authorized Dealer Program.
1. Make your program a companywide effort.
To make any reseller program successful, you will need everyone in your organization to be aware of the program, understand its significance to your company’s health, and know what to do if they’re ever confronted with a tricky reseller issue.
Just one uninformed employee picking up the phone and innocently making a bad decision about a reseller’s request can lead to serious problems for your brand.
It is important that as you prepare your Authorized Dealer Program you build a program and schedule for regular employee training, education, and coordination.
2. Automate as much of the program’s management as possible.
Consider just some of the steps you will need to take if you choose to manually set up and run your Authorized Dealer Program:
- Set up inbound call support to field dealer requests to apply.
- Distribute your application to each dealer.
- Pull and review dealers’ credit.
- Build and maintain an account for each new dealer, with contact information, product details, and other applicable information.
- Distribute your agreements to new dealers for signing and be ready to update and re-distribute all agreements each time you make any changes to the program.
- Send new dealers all relevant assets such as intellectual property, sales collateral, etc.
- Distribute new sales content and other assets to all dealers when your company produces them.
- Implement a digital dealer badging system that helps authorized retail partners verify that they are part of your trusted circle of resellers.
- Monitor the entire internet at all times for potential violations from your authorized resale channel (as well as from unauthorized sellers).
For most businesses, this is simply not a feasible strategy. It will consume too many internal resources and will still leave the company at risk of missing violations online because the eCommerce landscape is too vast and can change too quickly to monitor manually.
This is why you should instead implement an automated brand protection platform that includes a fully functional online dealer portal to manage all of these tasks for you.
3. Issue digital dealer badges.
According to research reported in Forbes, 75% of online shoppers place more trust in a site that has a trust icon, and 61% say they’ve actually stopped short of completing an online purchase because they didn’t see a trust logo. All of which makes dealer badging a clear best practice for your Authorized Dealer Program.
We will discuss dealer badging in more detail in a future lesson. For now, just understand that the practice involves creating digital trust icons or badges emblazoned with a message such as, “Authorized Dealer: Click to Verify.”
Note: For dealer badging to be effective, you will need to make these digital icons live links. When a shopper clicks on a retailer’s badge, it should open a window on your company’s website verifying that, yes, the dealer is part of your official resale network.
Coding and implementing these live icons can be a time-consuming task. This is another reason to sign up for an automated brand protection platform that also offers an automated dealer badging solution.
4. Execute and maintain dealer agreements online.
When you begin a program like this, you will need to determine early on how to send out your Authorized Dealer Agreements, gather signatures from dealers, and store those agreements.
If you do this manually by sending each agreement by email and asking for a signed copy faxed or email back you will soon face a logistical and organizational challenge. Each time you make an adjustment or addition to your standard agreement, you will need to send out the new document to every dealer and ask for an updated signature.
When manufacturers realize this challenge, they don’t update their agreements or send out messages to their dealer network explaining their new guidelines. When you change the standard agreement and fail to secure a signature from your dealers, those changes are not legally binding.
This is why you should instead use an automated online dealer portal. This portal should include a dashboard that, among other things, lets you maintain your standard agreement online and can easily push out a request to all of your dealers at the same time when updates have been made to the agreement that require a new signature.
5. Implement an automated system to monitor your brand, 24/7, across the internet.
One of the first signs that a company in your distribution channel is violating your guidelines could be a retailer advertising your products at below your MAP price levels.
This is because a rogue seller is far more likely to violate your pricing guidelines than a retailer that went to the trouble of applying for your Authorized Dealer Program. When you spot a retailer offering your products at prices that violate your MAP policy, that is a good indication that someone (a wholesaler, distributor, in-house sales rep, or one of your authorized dealers) has sold your inventory to someone they shouldn’t have.
This is why successfully managing your Authorized Dealer Program also requires you to keep a close eye at all times at your products’ retail prices online. And because the internet is too big for your company to manually monitor and enforce your MAP policy, another best practice is to implement an automated MAP monitoring and enforcement solution.
In addition to the many other benefits of having a software app watching the entire internet for violations of your reseller pricing, automated MAP monitoring can also lead to early clues that someone is violating the terms of your Authorized Dealer Program.
Let’s see how much you’ve learned with the following short quiz.