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Managing Complex Channel Relationships in the New Economy
Last month, Blue Canyon Partners Principal, David Hartman, moderated a session at the Strategic Account Management Association’s 50th Annual Conference on managing complex channel relationships. The session, held twice over a two-day period, was attended by more than 50 strategic account managers, business executives, and corporate leaders who participated in lively discussions around channel consolidation; new, emerging channels; channel competition; and channel succession. The sessions confirmed that channel consolidation, new channels emerging whether supported or not, and channel adoption of competing and other product lines, are all issues that are top of mind. Following are four key takeaways from these sessions.
1.) The Landscape Has Changed, Now What?
During the economic recession, a number of changes emerged within channels across industries. Channels contracted, channel partners expanded goods and services, and channels consolidated, which enabled channel partners to survive. Suppliers also were faced with their own set of challenges. As channels took on competing product lines, including low-cost Chinese products, sometimes private labeled by the channel itself, greater pressure was put on the supplier to differentiate its product, invest in its brand, and ensure that its value proposition was clearly understood among its channel partners.
Coming out of the economic recession, the landscape has clearly changed, which has forced suppliers to assess the new landscape and adapt. Questions to consider include, “How do you thrive in this new environment and how do you most efficiently manage the channel?”
2.) In this New Environment Channels Can be a Partner, Competitor, or Both
During the sessions, participants were asked if they consider their channel partner to also be a competitor. Nearly 70 percent of poll respondents chose yes. Obviously, having a good relationship with your channel partners, particularly at the executive level is critical. However, both session panelists—Denise Hampton from Zebra Technologies and Bill Moore from SKF who have 50 years of combined experience in channel design, strategy, and development—offered additional options to effectively manage channel relationships in this environment, including:
- Invest in marketing along the customer chain—to the channel and its end customers. Suppliers are competing for the mindshare of both audiences. Staying in front of end customers is important, because they are ultimately requesting the product.
- Create agreements with distributors as to what markets they should sell into, so both parties prosper. In some instances, you may find that distributors are selling products into a niche that you do not compete in, or that is too small.
- Have an open dialogue with distributors on what is the best way to service the end customer. Don’t make the conversation all about price. Focus on where you both provide value.
- Have a strong value proposition. If the channel can’t communicate your value, it opens the door for lower cost competitors to take away market share. Whatever you can do to solidify your company’s position against competitors who are all about price, the better position you will be in.
- Offer incentives, such as partner programs, functional rewards, discounted rebate programs, buyer rewards, cost-savings plans, etc.
3.) Cost to serve is Nebulous
Although many organizations recognize the benefits channels serve, it comes at a cost. In some instances that cost can be much higher than what is planned and/or difficult to assign a specific dollar amount. One area yet to be resolved for many suppliers is cost to serve tied to new, non-traditional channels, such as Amazon Supply. Many business-to-business companies do not view Internet distributors as true channel providers, because they cannot effectively communicate the value, and cannot provide the same level of service and support as a traditional channel. Yet, the cost to serve this channel can be burdensome to suppliers who have yet to solve how to segment the market on the support side, as most manufacturers provide support to anyone regardless of how they purchase the product.
4.) Beyond the Economy — Globalization
As customers expand around the globe, serving them in the same way becomes a major challenge, particularly when operating in a multi-country, multi-channel environment. The consensus among panelists and participants is that there was no single solution. Recognizing the challenges early on is critical, and looking at areas such as cost to serve and distributor compensation models was also suggested.
Channel relationships can be complex, particularly in a changing world. Unlocking value is ultimately the end goal, but the key is how one manages the relationship and creates value. The conversations showed that while there are a number of challenges and opportunities that have been addressed, there are others that still need answers.
Download the complete Executive Summary and conference slides.