In the struggle for survival, the fittest win at the expense of their rivals because they succeed in adapting themselves best to their environment,” wrote English naturalist, Charles Darwin, in his famous theory of evolution. This statement holds true in today’s times, which represent a competitive economic jungle. Competition is fierce and will continue to sharpen its razor edge as we sink deeper into the marshes of recession. Only the fittest, most resourceful prevail, while the weaklings are weeded out. In consideration of this rather pessimistic but realistic line of thought, the electronics power conditioning industry has realised the utmost need for channel partners to further promote and propagate their businesses. Channel partners have two potent attributes that are drawing manufacturers to them like moths to a flame. They ensure wider geographical coverage and provide professional support to end-customers, thereby leading to greater demand and consequently, increased sales. Most companies in the power electronics segment are employing channel partners nowadays to enhance business and these lucky mascots of the industry are rapidly emerging as the true partners of the manufacturers. Without them, it would be difficult for manufacturers to reach as many people and the latter are acutely aware of this fact, some freely admitting to it, others adopting a less flattering approach.
By Rutaksha Rawat
Sunday, April 19, 2009: Direct vs channel marketing
For Arun Ghosh, MD & CEO, Hita Technology Pvt Ltd, “Hita’s channel partners are basically dealers, who promote its brand as well.” Hita has approximately 100 channel partners across India. It also has channel partners in South Africa, Dubai and Egypt. About 80 per cent of Hita’s business is conducted via direct marketing and the remaining 20 per cent through the channel.
UpsINVERTER.com has 1,000 channel partners placed all over India and abroad. It has channel partners in Bangladesh, Srilanka, Nepal, Nigeria, South Africa and Kenya. “In our domain, it is impossible to survive without channel partners. It is they who are directly related to customers and generate the sales for the manufacturers,” affirms Yogesh Dua, MD, upsINVERTER.com. More than 90 per cent of upsINVERTER’s business is operated through channel partners and only 5 per cent through direct marketing, whereas the remaining 5 per cent of its business is conducted through OEM supplies. “Bigger clients tend to buy from companies directly, but retail supply items are totally covered by channel partners,” adds Dua.
Powernet Solutions Pvt Ltd has channel partners across Karnataka, Andhra Pradesh, Tamil Nadu, Kerala, Maharashtra, Delhi and West Bengal. “Channel partners influence our business by introducing new clients and providing annual maintenance contracts (AMCs) for old machines,” informs S Sumanth Kumar, director, Powernet Solutions Pvt Ltd. About 60 per cent of Powernet’s business is conducted through direct marketing, while 20 per cent is carried out through channel partners and the rest is operated through dealers/value added resellers (VARs) and OEMs.
Su-Kam has 6,000 channel partners across India. Most of its institutional business is carried out directly. For retail, however, it is entirely dependent on its channel partners.
Criteria for appointment
One cannot take the selection of a channel partner lightly. The wrong candidate could swindle money, divert funds, return unsold products or worse, tarnish a company’s reputation in the market.
Su-Kam appoints distributors, who in turn, have dealers and sub-dealers. “They must have prior experiencein creating anetwork andshould have a sound financial background. Preference is often given to those who are from the power backup background. While appointing, we go mostlybyreference.Ithas proved to bethecorrect choice till now. Wherever our presence is less, in terms of geographical coverage and exposure, we invite channel partners through print media and choose the most befitting candidates, based on theirprofilesmatchingourrequirements,”reveals Kunwer Sachdev, CEO, Su-Kam.
Su-Kam is also present in over 75 countries in all seven continents. Their major business comes from Africa, Nepal and the Middle East. They have recently forayed into the US and Australia, too. “For our international business, we try to go for established names only. The search is mostly conducted through the internet, but sometimes people approach us themselves as well,” expatiates Sachdev.
“We look for location of the outlet, investment options, public relation skills of the proprietor, and his long-term expectations from the venture. We invite applications, finding out specific details about the vendors, verifying those details through available sources and finally granting appointment,” explains Dua.
HITA, on the other hand, has only dealers. It does not appoint distributors because it doesn’t ask its partners to stock and sell. “We assess them on the basis of their’s and their customers’ profiles and also pay attention to the segments they claim to be strongest in, apart from their financial capabilities. Since our direct marketing team is strong, it seeks out reputed dealers in the concerned areas and also finds out about their reputational backgrounds from our existing clients,” divulges Ghosh.
According to Kumar, “Channel partners must possess commitment, work ethics and should be technically sound. We either poach channel partners of competitors who are dissatisfied with their principals’ products and support, or build channel partners from our existing dealers and resellers by guiding them properly,” he lets on. “Manufacturers are always on the prowl for dynamic dealers who can closely monitor the market, as well as the nature of clients’ demands. An ideal channel partner should be honest in business dealings, financially sound and have good contacts, along with the potential to multiply them,” opines Niraj Kumar Mishra, CMD, Ekta Telecommunication and Systems. Ekta Telecommunication and Systems has 28 channel partners in Jharkhand, Bihar, and Orissa and one overseas, in Ghana. About 70 per cent of its business is conducted via direct marketing, while the other 30 per cent is carried out through channel partners.
Channel expectations
The partners are giving aplenty to their principals, but are they receiving enough in return? “They desire good margins and adequate brand imaging of products. They want the products to be made so popular by brand imaging that the demand becomes a ‘pull’ demand (people getting attracted to the products), rather than a ‘push’ demand (them pushing products onto people). We conduct many motivational sessions, channel partner meets and annual meets at our head office to keep our channel partners motivated and encouraged,” says Sachdev.
“They want good, quality products at reasonable prices and prompt service support,” shares Ghosh. “From us, they expect quality goods, commitment, reliable services, brand awareness, better featured products and healthy margins for themselves,” remarks Dua. “Retaining a channel partner is directly proportionate to the honouring of commitment attribute of a company. The more you adhere to what you promised or proposed, the more loyal your channel partner will be. We, at upsINVERTER.com, proffer various sales schemes for dealers and distributors,” he adds. “Channel partners expect support on price and warranty during competition. They also want us to periodically update our products in order to meet new market requirements. Channel partners will be with you as long as your products are commercially and technically acceptable by clients. If you make it difficult for channel partners to sell, then they will obviously look out for greener pastures,” reasons Kumar. “On an average, I would say that they are looking for wider margins,” Mishra surmises
Trouble in paradise?
Is the channel really the revenue-inspiring bed of roses that it appears to be, or does it bear hints of the thorns of dishonesty and corruption? Manufacturers have found their golden egg-laying hens, but like everything in life, nothing’s perfect. Some manufacturers have serious grievances against the channel partners.
“Payment cycles are a problematic issue, unless you are extremely firm about payment terms right from the beginning,” sighs Ghosh.
“Their feelings sometimes effect product sales and consequently, company policy. It is very demoralising to launch a product you believe in and for your channel partners to not exhibit adequate energy or enthusiasm towards that venture. They tend to go more by field reports to build up confidence about the reliability of a product, which is a very slow and tiresome process. However, they do help us in selling products they have faith in, which, are also ours, so that has an equalising effect,” says Dua.
“Channel partners can sometimes divert funds if they are not closely monitored. Difficulties also arise when the channel partner decides to quit, or if he contemplates taking on more than one supplier at a time,” says Kumar. “Channel partners feel insecure and want to have more than one supplier for the same product. They feel that they will be left high and dry if the principal’s company folds up,” he explains.
The future will unfold
The changing dynamics of the market place are bound to increase the relevance and value of the channel further in times to come.
SELECTION CRITERIA
- Channel partners must have prior experience in creating a network
- They should have a sound financial background
- Preference is given to those who are from the power backup background
- Location of their outlets is taken into consideration
- Investment options are given preference
- Their public relation skills matter
- Long-term expectations from the venture are considered
- Their’s and their customers’ profiles are assessed
- Segments they claim to be strongest in are looked into
- Business generation skills; should be able to closely monitor the market and nature of clients’ demands
- Commitment and work ethics
- Should be technically strong
- Good contacts, along with the potential to multiply them
