Don’t Manage Your Channels by Crisis

Anyone who has reviewed their 401(k) statements lately has received a very personal and immediate measure of just how the last four weeks of financial turmoil have affected them.

Take that urgency you may have felt about wanting to catch up as quickly as possible, multiply it by the number of companies that use distribution channels, and you get a sense of the angst and frustration over the lack of sales through retailers, dealers, distributors and channel partners today.

Rank and Spank vs. Nurture and Grow

One manufacturer of specialty vehicles in Southern California is taking a “rank and spank” strategy to its dealers, only taking the top 40 percent forward and not renewing contracts with the rest. They call this their “rank and spank” strategy, where only the dealers who deliver sales on quota or above get to keep selling their vehicles. Senior management no doubt sees this as an opportunity to get rid of longstanding unprofitable dealers as well.

With everyone cutting back, it’s no surprise that this specialty vehicle manufacturer is the norm and not the exception. Trimming back channel partners now, while offering significant cost savings today, may lead to major problems in the future.

Here are some considerations to keep in mind before cutting deep into your channel to save on costs:

  • Are inconsistent quoting and special pricing requests leading to error-filled orders, causing lost sales opportunities? One of the world’s best-known tractor and earth moving equipment companies has eight different quoting systems available to its dealers. These eight quoting systems range from dial-up based systems to state-of-the-art quoting and product configuration systems.

    Yet there is no coordination point to all these systems, and orders often require multiple calls and discussions with customers to get them right. What if this very well-known company created an order management hub and coordinated all these orders? They would be able to drastically cut down the cost per order and also hold onto customers lost to competitors due to errors.

  • Are team selling and dealer collaboration happening, or is it everyone for themselves? Those dealers, distributors and channel partners that will be able to withstand an economic downturn are becoming more attuned to team selling and the use of partner portals to track and close opportunities. The use of channel collaboration management applications and suites to accomplish this is what differentiates Phoenix Technologies, the software and electronics component manufacturer, from its competitors, for example. As the company’s sales cycles are highly focused on OEM accounts, the need for collaboration management applications is critical.
  • Low-performing dealers often have small or no service centers and little expertise; consider auditing this function and ranking service performance first. This is certainly the case in the auto industry, were the lowest performing dealers have little if any consistent customer service performance. They have no standardization to how they manage quotes for service, and little quality control.

    The dealers who regularly shuffle between secondary and third-level auto brands have infamously bad service. If your channel resembles these attributes, complete a service audit to see if they can potentially improve through training.

If you are looking to cut back the number of dealers, distributors and channel partners you have, first look at these three process areas and see if they can be improved. Quoting, pricing, team selling and collaboration, and service must be evaluated as part of a dealer’s total ability to perform.

Louis Columbus is senior manager, enterprise systems at Cincom Systems and a former senior analyst with AMR Research. He has worked with enterprise clients on defining solutions to their channel management, order management and service lifecycle management strategies. He also teaches graduate-level international business and marketing courses at Webster-Loyola Marymount University and University of California, Irvine. He is the author of 15 books on technology and two books on analyst relations. His book, Getting Results from your Analyst Relations Strategies, can be downloaded for free. You can contact Louis on Twitter at @LouisColumbus.

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