Translate Business Strategy into Channel Strategy
The Challenge: Our client, a manufacturer of a key ingredient used in modern industrial machinery, plays a key role in the major advances that have taken place in machine tools and robotics. Their end customers span the full spectrum of industrial sectors in North America as well as around the world. In recent years, management noticed a significant increase in the noise level from key distributor relationships. Even more alarming, they were encountering margin deterioration. Customers were shifting their focus from the technical advantages inherent in their products to a price-based competition.
Assessment: Working with this client, Blue Canyon developed a detailed assessment of the customer chains associated with this firm’s business, many of which reflected numerous and complex market segments. Some involved working with end customers in the development of next-generation robotics. Others involved supplying repair and replacement parts for decades-old machinery. Our team developed a clear understanding of the economics of each of these customer chains and of the factors that determined success vis-a-vis competitive offerings within each market segment.
Strategic Solution: As a result of these insights, different business models were deemed appropriate for use in different customer chain structures. The first model involved a small number of large, global end customer relationships that were best handled on a manufacturer direct basis, without involvement of channel partners. We recommended the firm create a global accounts team to handle these relationships. Across the majority of the market segments, however, channel contributions were important to success. Among these market segments however, the roles of our client and its channel partners differed widely. In this business model, authorizations were restructured, incentive structures were reworked, and annual action plans were developed with each distributor to reflect this learning and ensure “win-win” collaboration.
Results: This client has seen double-digit increases in sales and profits in each of the major market segments in which it is operating, and channel partner relationships have returned to a healthy, constructive state.