Difference Between Exclusive and Non-Exclusive Agreement
The difference between exclusive and non-exclusive agreement refers to how vendors and partners work with each other.3 min read
Updated October 21, 2020:
The difference between exclusive and non-exclusive agreement refers to how vendors and partners work with each other. Exclusive agreements exclude competitors for a set period of time, while non-exclusive agreements allow for competitors, often as motivating tools.
It's important to know the difference between exclusive and non-exclusive partnerships, so you choose the right agreement for your company.
Exclusive Partner Agreements
Exclusive agreements give vendors and their partners the chance to work with each other for a certain period of time without competitor interference. When you sign an exclusivity agreement, both of you work together in a specific market to sell a product or service. This exclusivity gives partners the freedom to develop the market with no worry that a competitor will take some of that market in which they've invested time and effort.
Vendors may grant exclusivity when they have the right partner because it affords them more commitment from the partner. It also gives them the following:
- More room to get into the market
- A better chance to build a sales pipeline
- A chance to see faster success
The key for vendors who want to successfully implement exclusive partnerships is to approach partners' sales engines the same way they sell directly.
Parties who have a strong commitment to joint success will take steps to invest in the relationship. They'll work together in the marketing and sales process to remove cost at each step and focus on effectiveness. Vendors should make sure their partners have adequate support to optimize this exclusive partnership. It's essential to have full transparency and clear expectations from the start.
Both parties should agree on a measurement system that keeps track of progress toward their mutual goals. By acting almost as a single organization, they can maintain top performance. The right tracking system may help vendors build stronger relationships with their sales partners. Both parties can work toward achievements together when their incentives and milestones are aligned.
Measurement systems may also help partners stay on track, since a vendor may decide to revoke an exclusivity agreement if the partners don't meet performance targets. This tactic can act as an effective deterrent because no one wishes to jeopardize the exclusive relationship.
Limited exclusivity may be granted to the following in order to give the partner space to maximize results:
- Particular industry sector
- Particular region
- Particular customer type
- Particular application area
There may be an upfront fee or guaranteed commitment of order levels before granting exclusivity.
If a vendor has a long sales cycle, it's often advisable to have activity-based targets to ensure commitment. Using activity-based targets, vendors can often discover early on if the partnership isn't working. They may then decide to terminate exclusivity due to non-performance.
Non-exclusive agreements allow for competing partners. They don't offer the comfort of exclusivity, but the competition can prove to be motivating. To avoid confusing customers, vendors must manage competing partners and avoid selling direct in the same market.
A vendor may award prospect exclusivity to a partner to give it enough time to start a sales process on a list of target companies. The vendor may revoke this exclusivity after a specified period and award it to another partner. To encourage deal registration, incentives may be used, such as commissions or better product discounts.
The biggest appeals of non-exclusive agreements are increased opportunity and total market coverage.
Vendors are able to readily adjust if customers decide to switch providers when there are numerous players in the market. Vendors may also have increased market intelligence, along with motivated salespeople who, when properly equipped, are willing to work hard to develop opportunities and close deals.
A major trade-off for non-exclusive agreements is the signal it sends to partners. Sometimes, this type of agreement has a negative impact on a partner's commitment level. Vendors should be clear about their objectives to prevent misunderstandings. When vendors and partners have complete information, they can choose the best agreement for both of them.
Vendors can make partners successful. There may be numerous vendors vying for a partner's attention, so vendors must carefully balance the right number of partners with the market demand. This ensures each partner's commitment and increases the chance of success.
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