Marketing without conflict
by Andrew Shedden
The marketing opportunities arising from the judicious use of technology appear to be a many-splendoured thing. The truth is somewhat more prosaic. Like the proverbial two sides of a coin the Internet offers marketers opportunities and problems. Many companies struggle greatly devising a strategy to simultaneously embrace the Web ‘s marketing power without destroying their current distribution channels in the process.
What channel are you watching?
Generally speaking distribution channels evolve in the following fashion. During the product introduction phase the supplier usually handles distribution to the end user. The supplier often provides a great deal of customer education and technical expertise in order to make the product known and understood.
Once the product enters the growth phase technical expertise and distribution begins to be outsourced, as less supplier-based customer education is necessary to effectively market and distribute the product.
In the maturity phase distribution channels further broaden, as buyers tend not to need technical expertise from their channels. Mass distribution and total market coverage usually characterizes a product in maturity.
In order to cover the marketplace thoroughly and effectively there’s bound to be some overlap in terms of your distribution channels. Many companies struggle with how best to streamline distribution channels while minimizing the conflict with other channel members. Having your company directly competing with your distributors, who in turn are competing with your wholesalers, is a recipe for disaster. Small degrees of intermittent channel conflict are bound to arise and most companies have procedures and policies to reduce or eliminate these conflicts.
Conflict costs
Most clients we deal with voice channel conflict as their single biggest concern when marketing on the Internet. Channel conflict can be defined as two different distribution channels competing for the same sale with the same brand. If you want to see more conflict in your business than you’ll see during a Jerry Springer marathon start down the road to e-commerce without carefully performing your due diligence.
If you really love me why are you looking at another?
The key problem posed by the Internet in disintermediation. Customers want to buy directly from suppliers and reap the savings created by eliminating the “middle man.” For this reason many current channel members (partners) feel very threatened by e-commerce. If your partners even suspect you’re directly competing with them you’ll quickly see conflict and ultimately, non-performance within distribution channels. But what strategies can you employ to keep your partners happy?
1. Don’t utilize e-commerce
That’s right, you read correctly. Not selling your products on line is the simplest, most obvious, and most often overlooked strategy. Many of our clients profiting greatly on the Web have no intention of ever directly utilizing e-commerce. The marketing strategy to employ if this is your choice is to use your site as an information resource on behalf of your dealers. Spend your time crafting and writing your site to answer questions and provide meaningful information for prospects. Encourage prospects to visit or contact your dealers directly by providing them with links. Be sure to allow your dealers the chance to advertise and promote on your web site.
The most common objection to this strategy is the concern that suppliers have about revealing their dealer lists to the big bad business world. This concern is a very real if you don’t have a solid relationship with your dealers. If your dealers are being lured away you don’t have much of a relationship. Frankly, if you’re working hard on an effective Internet marketing strategy on behalf of your dealers they usually are happy and relieved they aren’t being circumvented.
2. Fully embrace e-commerce
This is the highest risk strategy most companies can employ. Under this model you make a full commitment to e-commerce in spite of your current distribution channels. Due to price and logistical considerations this is not an option for many suppliers. The only way in which this is effective is if you are a very powerful manufacturer selling products or information with a high profit margin, high volume, and a low distribution cost. Furthermore, this is a strategy that should be best utilized from the outset, such as with Dell computers.
3. Directly involve your partners
The third strategy you can employ is to directly involve your partners in your e-commerce initiatives. There are several ways of getting your partners on board.
Balance of compensation
One effective strategy is to compensate your channel partners on the basis of total market share regardless of the source. Sales goals are then based on total volume and encourage cooperation amongst all channel members.
Change the roles
Change the role of your channel partners to one of logistics and not of selling. Another option is to redirect orders directly to your partners. In either case you need to offer compelling proof that your partner will benefit form the new arrangement.
Provide a subset
Another strategy is to sell a subset of your products on your web site. You can do this by selling products that aren’t traditionally sold by your partners. Offering a separate private label line for sale on your site will discourage direct comparisons.
Channel conflict is a very real problem in the Internet age. Be sure that you carefully consider and actively involve your channel partners in your e-commerce initiatives.
