A recent project provided an opportunity to examine the relationships between a machinery manufacturer and the dealer network through which they went to market. The project was motivated by an executive in the manufacturing firm who observed that “Relationships with our dealers are getting out of sync. More and more frequently, there are issues that are getting in the way of doing business. And without our dealer network solidly behind us, we’re out of business in a heartbeat.” This executive knew that their sales were driven by dealer activity, and that the relationships with the end customers that used this firm’s machinery were the responsibility of those dealers.

Channel conflict is nothing new. For most businesses that go to market through dealers, distributors, wholesalers, VARs, integrators, and other channel partners, it is an all-too-common fact of life. The best organizations recognize the many ways in which conflict can surface, and monitor relationships carefully to ensure that things don’t go too far in the wrong direction.

A number of years ago, we did research into the sources of conflict between manufacturers and their channel partners[1]. Over and over, the same seven themes surfaced as sources of conflict, spanning diverse industries and quite distinct categories of channel organizations. Some of these themes were predictable. Margin management, for example, fell at the top of the list. Simply stated, if one of the partners to a business relationship isn’t making money, conflict will surface and the relationship can be assumed to be in jeopardy. Other themes were a bit unexpected. Pricing, not prices, was a frequent source of dissatisfaction for channel organizations that saw the pricing process as unworkable and interfering with sales[2].

In the work with this machinery manufacturer and its dealers, many of the same themes appeared once again, as did the criticality of the message included in the Turkish proverb used as the title of this article. Interviews with executives in two dealer organizations provide insight as to both the need to listen and strategies to avoid conflict and misalignment between manufacturers and their dealers.

The first dealer organization was a rather large one, with multi-state operations and quite a few individual storefronts. This dealership was a family-owned organization, with a long history and deep roots in many of the communities that it served. One of the owners provided the following thoughts:

“Every year, [the machinery manufacturer] visits with us and tells us of their exciting plans for the year – new products, new programs, etc. There’s usually a dog-and-pony show, some fancy new brochures, and most years we can fit in a round of golf and a nice dinner before they head off to their next visit.

“But here’s what never happens. They might casually ask us ‘How’s business?’, but they’ve never asked us to present our own business plans for the coming year. Now we’re not as big as [the machinery manufacturer], but we are a fairly sizeable business and we take running our company seriously. We put plans in place that we think are the right ones for our market and our customers.

“Let me give you an example. They visited here not too long ago, and unveiled three major new initiatives for the coming year, telling us that these would be the route to success for us and make us a lot of money. But from our perspective, only one of the three really fit into our plans. We’ll run with that one, and what they are doing is good and will reinforce our own efforts. But, to be honest, the other two initiatives aren’t going to get a lot of attention, and we actually think one of them is a bit misguided.

“We’ve have been happy to share our opinions with them, but they never asked. Basically they came here to tell us what they were doing, not to listen to what we were doing.”

The second example occurred during discussions with another dealer, in this instance, a smaller organization that only had two locations in a mid-sized Midwestern city. The message that was provided by one of the executives in this firm was as follows:

“We respect [the machinery manufacturer], and they’ve been a good supplier for a long time. Our customers like their product, by and large. But we see a big issue. I can’t put a number on this, but all of us here believe that the cost to sell and the cost to serve have skyrocketed in recent years. I’m honestly not sure we’re making money on this line any more, and I can tell you our salesmen groan a bit when they get a call from [the machinery manufacturer] with a ‘hot lead’. That’s a real warning flag. The sales guys usually do cartwheels if someone gives them a lead to a prospect, but that’s not the case here.”

While this dealer’s concern about whether they were making money on this machinery product line was troubling, this executive’s response to a question about how the manufacturer had reacted to this message was even more so:

“I raised this topic once in a meeting a few months ago, and basically had the door slammed in my face. It was like I had insulted their mothers. They got totally defensive. I was told that other dealers weren’t citing this problem, and that the lead generation program that [the machinery manufacturer] had initiated was getting a lot of praise from other dealers. They didn’t quite tell me I needed to get new salesmen, but that was almost the message.”

These two examples underscore the importance of gaining strong, clear messages from the market and of taking action to address the issues that are included in these messages. Most manufacturers have some sort of voice of the customer program in place to ensure that they get feedback from their end customers, the individuals and organizations that use their products. But far too few have similar programs in place to listen to the issues, concerns, and ideas of their channel partners, organizations that are often critical participants in the customer chains that connect manufacturers to their end customers.

Effectively listening to a business partner is quite different from listening to an end customer in business-to-business markets – and radically different from listening to messages from customers in consumer markets. In business-to-business markets, the insights that can emerge from effective voice of the customer programs focused on end customers are typically centered around the customer’s experience in using the product – covering metrics like reliability, durability, ease of use, functionality, ease of maintenance, and many other metrics. Such voice of the customer programs are also likely to develop insights about key surrounding services – warranty repair, parts availability, etc. – and also about key economic considerations – energy efficiency, maintenance costs, costs associated with downtime, etc. Best-in-class programs go even further and explore the unmet needs of such customers and their vision as to how future product evolution will even better serve their needs.

While that information is clearly important to the manufacturer and also to their dealer network, its focus is quite different from what needs to be learned through “voice of the channel partner” initiatives. The two examples provided earlier spotlight the quite different nature of the learning that can emerge from listening to channel partners. Had the machinery manufacturer asked two simple questions of the dealers cited above, they would have accumulated a wealth of potentially valuable information.

Asking the large multi-state dealer “What are your growth priorities for the coming year?” would have allowed them to see where their own ideas aligned and where there were not matches. Asking this question far enough in advance to allow plans to be developed taking the information into account could have been invaluable. It’s not that the dealership’s ideas were necessarily the best ones, but it is clear that misalignment between the plans of the manufacturer and the dealership was a prescription for failure. Investing in listening could have averted such misalignment, and turned into pure gold.

Asking the smaller dealer “What can we do together to make more money on our line of machinery?” would have similarly initiated a process through which the disconnect between the manufacturer’s pride in its lead generation program and the groans from the salesmen could have been understood and resolved. Again, it’s not clear that the salesmen were right in seeing this product as being a money-loser when you took into account the cost of selling it. But having the sales team looking to other products as the place to focus their activity is certainly a major problem. Listening to this issue, avoiding a defensive reaction to what was heard, and collaborating with the dealership on solving it could have once again been pure gold.

An effective program of listening to channel partners must focus on the key themes that determine whether the relationship is generating shared successes or not, and identify the sources of conflict that are getting in the way of the ability of both organizations to reward their shareholders through collaboration. Such programs can be an important complement to initiatives designed to hear messages from end customers, and help manufacturers ensure that all of the links in their customer chain are strong and able to handle the challenges of the markets in which they operate.

Author: George F. Brown, Jr.