Manage Channel Conflict
The Challenge: As a major supplier to the construction environment, our client’s products are visible across all types of facilities projects, from home renovations to the construction of major industrial complexes. Their products are sold through various distributors who were selected to provide extensive coverage across geographic markets and across various construction specializations. One distributor relationship was particularly important, accounting for over 20% of this firm’s sales. In recent years though, this relationship had deteriorated. Sales and margins, which had previously been strong, had dropped below what the firm was realizing through other distributor relationships and below even reported industry averages.
Assessment: Through our research, Blue Canyon has identified the most common critical factors causing manufacturer-channel conflict. We collected data to compare this troubled relationship against benchmark comparisons of other significant major channel relationships. The insights that emerged from this assessment enabled us to understand the dynamics of this key channel relationship. It was determined that two specific factors – margin management and relationship processes – were in the troubled range. Looking at the economics of the business and interviews with executives in the channel organization provided further insights into the detailed problems that existed.
Strategic Solution: Margin issues were determined to have a geographic focus, and were related to operations rather than to sales and pricing. Our client collaborated with this distributor to rework several business processes that resulted in a strong single-digit margin improvement. We also helped our client and this distributor develop and implement formal relationship processes to ensure that important, strategic topics were discussed, not just the day-to-day issues. The new processes ensured that these priority discussions and decisions were addressed and that they were translated into “What-Who-When” action plans.
Results: The relationship is solidly back on track, with performance again outpacing the various benchmarks used by both organizations to assess business health.