Monday, November 21, 2005

Love Thy Distribution Channel

I blog mostly about creating context with customers. Underlying that theme is the concept of loving your customers. They go hand in hand. You can't fake love and customers sniff out fakers a lot faster with gazillions of active bloggers.

The same goes for your distribution channel. If you sell through partners, treat them like partners.

Take Toshiba. As reported in VarBusiness, the once-vaunted notebook manufacturer fell from grace awhile back, losing its leadership position in B2B notebook sales as it dined on surging commercial sales. A large part of the blame, its channel executives admit, was a bungled channel strategy. Pricing across the channel was inconsistent, and its own direct- sales Web site often undercut partners.

The mistakes were costly, as partners stopped pushing or, in some cases, selling Toshiba products. Toshiba's revenue stream is now inverted from its B2B heyday; today, the commercial market accounts for more than 60 percent of its sales. And partner satisfaction? It took last place in this year's VARBusiness Annual Report Card for notebooks.

A data storage client of mine a few years back made the same mistake. The Indirect Channel Group put together a blockbuster direct mail program to make sure its Value Added Resellers were primed to sell Imation products to their customers. At the same time, my client's Retail Channel Group ran a promotion that undercut the pricing offered to VARs. Channel conflict is an ugly thing.

Growing business is paramount, particularly in the midmarket. Toshiba believes premium value, innovation and performance can win the day. Its strategy includes a heavy emphasis on educating partners on Toshiba's value proposition and how its products stack up against competitors. But it acknowledges that growing market share will require demonstrating that partners can make a respectable margin on its products.

Contextual Wisdom says says playing games with channel partners brings down even the best of companies.


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