Emergence of a new breed of channels

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Value addition is a potentially powerful word in the channel business. But unfortunately it has become such a cliché today that both customers and vendors have started turning a deaf ear to any entity that uses the term to differentiate itself from the pack.

By Mandeep Gupta

Sunday, August 28, 20011: Emerging trends

After the rise and consolidation of broad based volume distributors, it is clear that the Indian electronics market is witnessing the speedy emergence of a new breed of channels—super retailers and direct marketing specialists. Both these entities invest hugely in infrastructure and technology, criteria that many channel partners find difficult to emulate. However, systems integrators have evolved over the years to play a key role and bridge the gap between progressive channels and their partners.

To explain this further, let me quote a recent snippet from a leading Indian business daily. “A Pune-based two-wheeler manufacturer has announced plans to float a direct selling company which will focus on financial products, consumer items and PCs.”

Traditional vs new approach

A progressive vendor constantly tries to build and evolve effective value networks. A marketing channel is an integral link within this chain — an interface between customer and vendor.

Traditionally, channel decisions were based on the evaluation of the pros and cons of a direct sales force vs. indirect channels. In a diverse economy like India, the decision had been in favour of indirect channel partners — mainly to reach diverse and widely spread out target segments.

However, with the advancements on the Internet, in telecommunications and in organised retail, vendors will now increasingly have a choice of newer and better alternatives than the traditional indirect channel route.

Direct marketing channels (the Internet, telemarketing, direct contact specialists, etc) that provide a direct interface with the customer are best suited for low to medium involvement products. This enables vendors to make a trade off between the value added per sale and the cost per transaction. In fact, they may adopt strategies to switch customers to low cost channels, even if it requires giving incentives at the initial stages. However, they should be aware that the definition of ‘low involvement’ products will increasingly cover products which look complex today.

A new image

For a partner, the immediate concern should be to look at the business mix in the same way as one looks at the customer/accounts mix. There must be a continuous upgradation up the value chain on the key solutions.

For low involvement/low cost items, it is important to bring in cost efficiencies on distribution and implement high involvement, localised value adds/perks for differentiation.

One should always bear in mind that the bread and butter will come from the solutions designed around the high involvement offerings.

A simple way to specialise in solutions is to raise your benchmark to the level of the best vendors or systems integrators in that solution category. Avoid their overheads, but match their capabilities and skill sets.

For an example, a vendor reorganised its business to create efficient solution providers for its customers. As part of the move to go indirect a few years ago, it also extended the same opportunity to its partners. There was a conscious investment made to build similar levels of solution capabilities within each partners’ offices.

The result—A vibrant team of solutions evangelists who didn’t need to first talk price to customers. These partners truly understand the customers’ needs and propose solutions based on the total cost of ownership, yet are budget-bound. Customers in turn appreciate the special expertise and are ready to pay sensibly for the value rather than limit themselves by the ‘lowest price’ criteria.

For any partner, a solution evolves only when the partner is active in all stages of the sales cycle spanning lead generation, qualifying cases, pre-sales, closures, logistics, installation and commissioning, collection, post sales support and the most crucial activity of account management.

What a partner should do

The solutions specialist partner must create value around its organisation beyond the sales or service commitments. There must be an effort to brand that value and market the same. For example, M/s XYZ Inc is itself a brand with certain values over and above the vendor brand it represents.

Further, the partner must invest strategically in good talent and effective systems beyond the mandatory networking (the contacts). The partner must not only proactively invest in the upgradation of its main solutions, while offering solutions that complement the related needs of the customer.

Partners graduating towards solutions must know that vendors do not engage channels partners only for a business advantage, but they still need those who are responsive. Vendors prefer channel members who have the ability to adapt in a volatile and ever changing market scenario.

What’s in it for the channel partner?

A high degree of commitment to the vendor’s long-term plans and an inclination to align with its mission statement gives impetus to the vendor to invest more in the channel infrastructure. The ideal situation can be exclusive commitments by the partner being made to selected vendors to become solution specialists in a particular line of business.

In a market in which we will witness increasing channel alliances facilitated by the Internet and the latest technology, it is critical for every box mover to seriously introspect his future.

Every related need of the customer and every constraint faced by the vendor can be looked at as an opportunity to create and offer a solution. A solutions specialist channel partner can thus create a win-win situation for both the customer and the vendor.

The author is country manager, channel business, Emerson Network Power India

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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