Dallas men’s clothing firm J. Hilburn offers an example of the problems that can quickly appear as a business diversifies it’s offerings to expand its business. The 50-person company works with style advisers who will visit a customer at home, take measurements, and send the information back to Hilburn, which creates custom fit garments. Without physical stores, the company could provide bespoke clothing at close to standard size pricing. But Hilburn wanted to expand online, which meant competing with the very style advisers who helped the company grow in the first place.
The owners ran into a problem that cases many. The idea of leveraging distribution and reseller channels that can help you sell more is tempting. But there’s a lot to handling channel partners, and many the person with a business administration degree has made terrible missteps that can cut sales and destroy credibility with the very people you want to help promote your business. Making channels work takes some thought, analysis, and control.
Channel Conflict A company has channel conflict when it effectively goes around its partners to make sales (or allow a competing partner to close business) that a channel partner otherwise might have made. In the channel partner’s eyes, the company either unfairly competes with the natural price advantage it enjoys or plays favorites. Managers have to moderate the desire to pull in business. Don’t seriously undercut the prices of partners. (That has the added benefit of avoiding general price erosion.) Segment channel players wherever possible so each has an area of concentration, making it less likely that partners step on each other’s toes. And if you must reach out directly, consider crediting the appropriate partners, so they don’t feel that they’re sacrificing their livelihoods and wondering why they should bother to do business with you.
Communications Strong communications are always important in business. But they are especially critical in managing channel distribution because you now have third parties representing your company to your ultimate customers. The indirect relationship with those people can make it difficult to identify problems or improve sales, marketing, support, and product design. Furthermore, you’ll need to coordinate with the channel partners to carry out marketing campaigns, have someone follow up on leads, and expand your business. Communications with those partners is the lynchpin in achieving your company’s aims.
Measure When sales don’t come directly to you, it becomes difficult to track whether marketing programs work, understand how customers react to new product features, and create product or service demand forecasts. Similarly, channel partners depend on you to provide the information necessary to properly sell and even support your wares.
But a channel partner could deal with many other companies as well as yours, so staying top of mind is a challenge. Creating a strong working relationship and developing a comprehensive communications program is a key to success.
Distributors and resellers or retailers can do a lot of good for your business. Be sure that you use them effectively and that you don’t hamper your own progress.