How Can Medical Device Companies Find a Distributor to Increase Sales and Growth in Latin America
Foreign manufacturers that have been involved in penetrating new overseas markets understand that finding the right distributor is a challenge. Most relationships that initially seemed promising, begin to deteriorate when the distributor doesn't meet its sales goals. In most cases, these misalignments can be avoided through careful and professional due diligence and planning. The problem is that most medical device manufacturers don't have the time or experience to do it well.
Successful commercialization of your medical product in a particular market depends a lot on the type of medical product distributor you choose as a partner. Once you have determined which medical product markets best match your business development goals and registered your product according to regulatory requirements, selecting a distributor that best complements your sales and marketing strategy is crucial.
You should develop a clear plan of action to search, find and select the right distributor for your product. It is important to create a distributor profile and then search following the criteria on this document. You should also have a clear value proposition to present to potential distributors on the first approach, identify their strengths and weaknesses, compile evidence of their track record with products and companies similar to yours, and then assess pre-selected distributors for a final selection.
Foreign manufacturers that have been involved in penetrating new overseas markets understand that finding the right distributor is a challenge. Most relationships that initially seemed promising, begin to deteriorate when the distributor doesn't meet its sales goals. In most cases, these misalignments can be avoided through careful and professional due diligence and planning. The problem is that most bio/pharma and medical device manufacturers don't have the time or experience to do it well.
Foreign manufacturers should research and qualify new distribution partners throughout Latin America. It is important to choose a reputable distributor when entering this market, as the wrong one can lead to missed sales opportunities, poor relationships with end users and a damaged brand name.
Finding the right medical device distributor takes the skills of a chess grandmaster
Assessing Medical Product Distributors
Having a clear and professional approach to identifying and evaluating medical distributors maximizes the chances of selecting the best possible partners for you. This approach concentrates in five main areas:
- Finding potential local distributors
- Assessing local distributors
- Evaluating and qualifying potential distributors
- Selecting distributor(s)
- Defining working details with selected distributor(s)
Finding potential local distributors
Finding the best medical distribution partners is in many ways just as important as obtaining regulatory registration for your medical product. Before finding and screening potential distribution partners for your chosen medical products markets, you should first have a clear idea of your business development strategy.
Once this strategy has been defined the following key considerations should be utilized:
- Who your current competitors in the chosen medical product markets are
- Where your competitors are concentrated
- How the competing products compares to those of its competitors in terms of quality and cost
- Reimbursement as a possible issue in chosen markets
- How well-served the chosen markets already is by products similar to yours
- What the future growth trajectories for your chosen markets are
You could first use LinkedIn to filter distributors by country. If you do a LinkedIn search with the keyword "distribuidor" (Spanish for distributor) and select the Medical Device industry, you should be able to have an updated list of potential member distributors. You then will have to go through the list and then contact each one of the candidates and promote your medical product and gauge their level of interest. This approach may not give you good results without conducting in-country due diligence on your final list of candidate distributors.
I suggest you follow the U.S. Commercial Service, International Trade Administration's recommendations for companies looking to export their products to LatAm.
- It is strongly recommended that U.S. companies process the registration under their name and not under the local distributor's name or else the U.S. company will not be able to change or add distributors during the lifetime of the registration, which is 10 years.
- To secure an agent, representative, or distributor the foreign company must execute a contract that meets the provisions of the Colombian Commercial Code. This contract must be registered with the chamber of commerce where the agent/representative is located.
- The U.S. Commercial Service recommends that U.S. companies consult a local attorney to execute an agency or distribution contract and to thoroughly vet the prospective partner by conducting a background check.
- U.S. suppliers should be aware, however, that their ability to compete in Colombia could be hampered by unfair business practices such as contraband, counterfeiting, intellectual property rights violations, under-invoicing, money laundering, and dumping.
Assessing local distributors
When evaluating potential distribution partners you should be addressing the following areas for your product and market:
- Characteristics of the medical product
- How many regions/cities you would like to target
- Type of medical product, if it’s either a new and unique product or a high-volume, low-margin product, etc.
Evaluating and qualifying potential distributors
You should create a profile in order to evaluate and qualify potential distribution partners in the chosen medical market(s). This profile should incorporate details about your medical product as well as your overall business requirements. You then match those requirements to the distributors best suited to assist you with your sales efforts.
The distributor profile should include information about your medical product such as how simple or complex it is, whether the medical product uses novel or advanced technology, among others. The distributor profile should also contain your business goals as well as identify the medical product markets in which you plan to sell your medical product.
Using the distributor profile, you then create a pre-screened list of potential medical product distribution partners. This list may vary from five to 40 distributors depending on the regional or national scope of your business development strategy. You then go through the process of qualifying the listed distributors to identify the best potential matched partners for your business.
Your qualifying process should entail contacting each distributor on the list and providing them with your product’s technical and pricing information as well as product samples if necessary. In addition, you should interview interested distributors to assess their actual capabilities and to gather details on how they would launch your product in their markets.
Once you have the list of pre-screened distributors, you then proceed to coordinate more in-depth in person conversations the potential distributors.
You should now analyze additional factors about the pre-selected distributors, such as:
- Personal rapport
- Confidence of the distributor with your company, product, and chances for success
- Financially stability
- Recognized associations the distributors are linked to
- The number of employees the distributors have, in particular, sales staff
- Inquire with retailers, customers and other exporters about the distributors
- Ensure distributors are not representing other product lines too similar to yours – avoiding
- conflicts of interest and competing products
- Ensure the distributors have an understanding of competitive products and prices
- Network of representatives and/or contacts
- How many years’ experience they have in the market sector
- Knowledge of the local market and willingness to give you the benefit of his/her local market knowledge.
- Distribution terms, pricing, payments preferences, etc.
Following this qualification process, the list of potential medical distribution partners will be considerably smaller—only those firms best matching the requirements set forth in your distributor profile will remain. At this point, you have information enough to make a final determination.
Defining working details with selected distributor(s)
Once the local distributor(s) has been selected, the next step is drawing up workable terms to be included in the legal agreement with the new distributor partner. Some of the issues that you should consider include exclusivity, sales regions to be served, cancellation terms, among others.
Seek help of an experienced market access expert in Latin America
Working with experienced consultants ensures that distributors are chosen objectively and evaluated with your specific business needs in mind. Interventional Concepts is capable of providing consulting services to help you search, find, evaluate, and choose the right distributor(s) in Colombia.
About Julio G. Martinez-Clark: Julio is CEO of Interventional Concepts, Inc. —a Miami, FL-based market access company for medical device companies looking to expand their market and sell their products in Colombia —and the rest of Latin America. The company offers a wide range of market access options including regulatory product registration, legal representation, distributor search, and trademark registration. Learn more.