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Channel Management

Channel Management: Recurring Dynamics in B2B Markets

Executives in the business-to-business (B2B) world know that a company’s channel management strategy is fundamental to its success, and leveraging relationships with channel partners can help create win-win relationships for the channel. However, certain channel dynamics have the potential to cause headaches, and muddy the principles that would otherwise guide these organizations to profitable growth. Blue Canyon has identified three common challenges in B2B channel management and outlined strategies that can help organizations address these dynamics to create an effective channel strategy.

Online Marketplaces in B2B
The first major dynamic in B2B channels is the development of online marketplaces. Many B2B companies don’t have successful online marketplace capabilities, including: targeting B2B buyers online, having an industrial strength infrastructure, and achieving an intuitive business-to-consumer caliber customer experience. Feeling compelled to keep up with the trend, some companies shoot before aiming, planning to develop their own e-commerce engine without much understanding of how or why. In a recent discussion with an industrial component manufacturer, the company indicated a fear of obsolescence without action and a penchant to go compete with Amazon. This mindset can potentially push organizations out of its strengths and dilute its offering. The principle to address this concern is to understand the value of all channel partners and align priorities with customers’ needs. By matching channel partner competencies to customer chain priorities, a greater understanding of what value-added capabilities your organization may need to consider will emerge. While this understanding may indicate the need to bring on e-commerce capabilities, it is important to align the needs of the market first. Making major investments that don’t align with customer needs is the fastest way to irrelevance.

Aging Workforce
The great poet Mick Jagger once said, “What a drag it is getting old.” A very prevalent issue in B2B channels is an aging workforce, which causes a lack of clarity around continuity and succession. This is especially challenging for smaller distributors and family-owned businesses. The decisions of these businesses will cause ripples throughout the channel, either determining how to be viable going forward, or moving towards alternative solutions, including merging with other distributors or disappearing entirely. When there is a generational change occurring, there are significant impacts on the vitality of the channel to market, especially in lower tech industries. The principle to address this trend is an actively managed channel, which requires strong communication and collaboration with its partners. Understanding how an organization will deal with succession requires a level of open communication about expectations and planning for the future.

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Consolidation
Consolidation within the channel can have both benefits and drawbacks for manufacturers. There are obvious negative economic implications of channel partners consolidating, including a change in buying power and increasing pricing pressures, but it also provides an opportunity to simplify the channel and allow for more sophisticated and strategic customer relationships. The principle for how to address these concerns is to select the right relationships to elevate to the highest possible level – to a strategic partnership. Involvement in research and development, sharing best practices, developing trust, and aligning your capabilities to your customers’ needs will discourage the bullying of price pressure and help create win-win relationships with these high potential customers. Whether or not channel consolidation has positive or negative results is very dependent on whether it is anticipated and appropriately addressed through the creation of best-in-class relationships.

Conclusion
These three challenges–the emergence of online marketplaces, an aging workforce, and consolidation–are top of mind for many B2B organizations today. Understanding the needs of your customers and the entire customer chain can help an organization make directionally sound decisions. By developing a deep understanding of customers’ needs and aligning priorities, actively managing the channel, and elevating relationships into strategic partnerships, your organization can be best prepared to continue to drive profitable growth, whatever channel dynamics lie in the road ahead.

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