While we may not be able to eliminate the age-old conflict between manufacturers and its dealers, or among dealers in a given territory, brand marketers can take concrete steps to decrease the amount of channel conflict experienced in supplier-channel relationships. The channel conflict that we’re addressing in this article is two-fold:
Direct channel conflict – experienced between supplier (manufacturer) brands and channel partners (dealers, resellers, distributors, franchisees, agents) based upon their differing goals and objectives.
Inter-channel conflict – experienced between competing channel partners in the same geographic region, which can bubble up to the supplier (manufacturer) brand.
Illustrating examples of Direct channel conflict
|Issue:||Manufacturer/ Supplier Brand||Channel partner|
|Product/Service Sales||“Sell my brands and the best mix which have the highest margins”||“Sell any brand and mix that the retailer wants – weighted to what is most lucrative and easiest to sell to the consumer”|
|Owning the consumer||Manufacturer owns consumer – and is ultimately responsible for quality, in-warranty service, product safety recalls, etc.||Channel owns the consumer – and is ultimately responsible for sales process, local customer service, after-sales service|
|Marketing||Provides marketing assets, promotions and assistance and funding to entice channel to promote its brand||Promotes all brands carried, and leans toward those it makes the most money on, are easiest to sell, and gets the best funding package to promote.|
|Competition from Manufacturer direct sales||“We need the option of direct sales, based upon consumer demand and competition”.||“I don’t want to represent manufacturers that compete with me. You’re taking sales from my pocket”.|
Illustrating examples of Inter-channel conflict
|Issue:||Manufacturer/ Supplier Brand||Channel partner|
|Geographic Density of Product/Service Sales||“We need to increase sales and have easily available options for consumers to purchase from”||“I don’t want another retailer nearby selling the same brand”|
|Fairness in promotions and pricing||“We reserve the right to offer special promotions and pricing to specific partners based upon volume or other criteria”||“Why does another channel get a better deal than I get”?|
|Fairness in granting sales through online-only retailers||“We need to increase sales and let consumers buy how they want to buy”||“Online retailers have an unfair advantage in not needing to invest in a physical storefront and equipment like I do”|
Being an interactive agency since the mid-1990’s working with major manufacturers selling through channels has given JGSullivan Interactive a ringside seat to many channel conflict discussions…some with swift conclusions.
In the mid-1990’s a major home appliance manufacturer (and client) made an off-hand comment to a Wall Street audience about the possibility of selling online direct to consumer. By the time that executive’s plane landed back at corporate their largest retail channel partner (with hundreds of locations nationwide) was on the phone and none too happy…forcing a walk-back of those statements.
Another manufacturer in the office furniture space rolled out a direct to consumer sales channel and it took two years of hard selling for it to be profitable and accepted. Along the way concessions were made to help both parties benefit from sales and leads generated.
Other manufacturers have studied and piloted direct to consumer sales, (some successfully), but the channel conflict most often encountered surrounds day-to-day marketing programs, funding and promotions. Let’s explore several solutions to channel conflict issues across the spectrum.
For manufacturers that sell considered-purchase durable goods through independent channel partners, they often suffer from not being able to capture the actual sale when a consumer is on their brand website. Typically consumers visit several manufacturer websites before visiting a few retail showrooms, or for convenience sake, just shop online from a big-box store website. Selling direct to these consumers, around the independent dealer, causes channel conflict…and doesn’t take advantage of the infrastructure and customer service of the independent dealer network. Instead, manufacturers should consider a collaborative commerce system, whereby the consumer selects a nearby dealer from a list of participating dealers from the brand website and goes through a standard checkout process for the products and services desired. The sale data is routed to the dealer for fulfillment and completed just like any other sale. The brand website gets evaluated now on actual sales generated, versus visits or other soft metric…while dealers make the easiest sale ever….opening their email and browser to find a sale waiting to be fulfilled.
For an example of this click here: http://e-marketing.deere.com/ViewAllProducts.do
This collaborative commerce process can also be personalized for each participating dealer (where there is no consumer step in choosing a dealer), with a unique URL referenced from the dealers website. This provides the dealer with an easy, hands-free way to provide ecommerce right from their website with no costly fees or need to constantly administer their own e-catalog.
For an example of this click on Buy Online in the right corner here: http://padulabrothers.com
Did you know that when a consumer is on a manufacturer’s brand website, surveys show they prefer that brand 2:1 over other brands? Why then do these same brand websites offer dealer locators that link directly to dealer or agent websites that prominently feature competitor logos? For manufacturers looking to protect their brands in that tricky handoff to a dealer, they should consider a dealer website program that both protects their brand, but also offers dealers a trusted marketing platform that can be managed by the dealer. Far from the tombstone websites of the past, today’s dealer website platforms can look as unique as the dealers branding, while ensuring the trademarks, promotions and product information from the manufacturer brand are featured…especially to those consumers looking for that reinforcement from the dealer locator mentioned above.
A website program like this also provides brands with an excellent vehicle for increasing the exposure of apps and widgets that are helpful in the sales process. Examples of this are configurators, product selectors, product comparison tools and quote engines. These apps typically reside on the brand website, but can easily be published on thousands of channel partner sites to gain important exposure in local consumer searches.
Another tactic often used in combination with dealer websites and collaborative commerce programs is revenue sharing. This is common when a two parties are partially responsible for the sale. In some cases the cost of the website or collaborative commerce program is assessed annually as a participation fee for the dealer to help the manufacturer offset the cost of the program setup and hosting. It can also be levied on a per sale basis though this is less common.
For supplier brands that sell across a multitude of channels, sometimes keeping unique programs and promotions exposed to only those partners eligible is a challenge. Knowing that another channel partner is getting a different deal is the cause of many heated field sales discussions. In order to keep all these various promotions segmented and only exposed to the channel eligible, the solution is for the dealer marcom portal to have groups and permissions capabilities. Today’s adbuilders, digital asset management systems and marketing resource portals should have configurable groups and permissions built in, so only the right information is exposed to the right audience at the right time. Doing this helps keep friction down to a minimum.
Another tactic used by brands in conjunction with their marketing portal is to utilize a tiered dealer program. Having a “best dealer” program identified with specific requirements and tangible benefits – clearly identified – is a great way to package these programs and self-fund them at the same time. One client grew best dealer volume from a thousand to five-fold in a few short years with a structured program as described. This gives the dealer recognition for achievement and a motivational tool to reach for the next level.
We understand the ongoing challenge
We understand that channel conflict is a never-ending challenge. There are fundamental differences in how supplier brands and channel partners view the world as we’ve discussed, but solutions exist and issues can be worked through to find a mutual interest with your channel partners, so they can grow their business while you protect your brand.