Winter 2006 / No. 66
Distribution alliances—retail
or wholesale?
Carriers sometimes
look to create partnerships with other organizations to gain
additional or new channels of distribution. This concept can
make a lot of sense—if you chose the right partner. One
common mistake we see is that carriers don’t always understand
the difference between companies that are “retailers”
versus “wholesalers.”
Many times, wholesalers
are more well-known than are retailers. But wholesalers aren’t
always a good option when it comes to capturing distribution
capabilities. Why? Well, wholesalers generally develop relationships
with other large companies and then depend on those companies
to do all the distribution. For example, let’s say an
insurance carrier develops an alliance or partnership agreement
with a third party to provide sales support tools to the carrier’s
brokers. A carrier looking to develop a distribution alliance
with the third party would likely be disappointed, as the sales
support vendor does not have any direct relationship with the
distributors. While the vendor may be “doing business
with” hundreds of brokers, the broker is actually doing
business with the insurance carrier (the vendor’s client)
and often has no relationship with the vendor. Because of this,
the vendor has little influence with the broker. Another common
example is a TPA that provides administrative services to a
carrier. The TPA may have many brokers “using” their
services but the real driver of the relationship is with the
carrier.
But there are service
vendors who are retailers and develop relationships with brokers
directly. These types of organizations have greater potential
for distribution alliances as the organization has some level
of influence over the broker.
For more information
on forming effective and profitable distribution alliances,
contact Eastbridge at (860) 676-9633. |
