Channels are a critical aspect of any business model and will continue to be. Disintermediation exposed the gaps in the customer experience and created a massive challenge for manufacturing and reselling organisations alike. There is a new order in place for channel alliances, and many companies need to raise their game. Here is how to play the new game.
For decades, B2B organisations managed to increase their geographical reach, grow sales, transfer risk and serve customers better thanks to their channels of authorised resellers, distributors, or partners.
The local organisations built solid models and enjoyed healthy profits. The manufacturer would support their channel with training and marketing efforts in exchange for focus and business results. Apart from getting healthy margins on sales, local partners were responsible for the provision of services and the overall relationship with the customer. The local representation of well-known brands was a push to their business credibility and value.
End customers enjoyed access to high-quality products and services created elsewhere and benefited from stable relationships with the local players. Their procurement departments became powerful acting as tough negotiators forcing suppliers to adapt to their conditions.
Then disruption hit.
It was a win-win-win, or so they all thought until technological disruption allowed other companies to enter the game. Disintermediation had already been the name of the game in B2C for some time. Who needs a travel agency when you can book flights and hotels online? Who wants to pay for a wholesaler when we can all buy directly from a digital channel?
Innovation is the path to relevance and business growth, so it never ends. New players found plenty of opportunities to up the game in their favour. Many traditional companies and resellers had severe technological limitations affecting their response times, their ability to innovate, or their overall cost. They could not compete with the new digital players.
We live in a world of liquid consumer expectations. B2B customers expectations changed since it was the only way they could remain competitive themselves. Who needs an IT service provider when I can move my IT infrastructure to the cloud, pay just for what I use and have all updates done for me? Why would I wait for long turn-around times for quoting and order processing when I usually do this in real time on my phone for pretty much any other purchase?
Digitisation eliminated low value adding intermediaries and replaced them with a new breed of disruptive digital ones.
Channel players look for reinvention.
Channel players need to find a way to be relevant, and this requires bringing innovation to every part of their business model. From communication and marketing to knowledge and specialisation, to the way they charge for their services or the way they partner with other companies to build value.
For a start, it is essential to show how important you are to your customer. As a channel player, you are now competing against (and maybe partnering with) a digital giant´s marketplace, so you need to be different. In B2B, the people aspect is as important as the value of your solution. Careers are on the line when customers make decisions. Think about the impact you have on your customer, the consequences of anything going wrong. If they were to replace you, who would be doing what you do if something was not going according to plan? Who would be there to save the day?
By not communicating the value of what you do, you risk being replaced by someone else, not necessarily because they can do a better job, but merely because they can articulate it better. In the UK, KFC´s logistic provider did not show their value and got replaced. What happened to KFC later highlighted the real importance of that provider. You need to remind customers of how important you are to them and present yourself as a source of innovation.
Manufacturing companies need to rethink how to partner.
The first step is to eliminate any barriers affecting channel partners; this is the effort and friction they face when selling, ordering, learning about, getting help with any of your products. Friction costs credibility and money and, guess what, it does not build loyalty.
Then it is time to create value for the customer and your channel. Capturing data from your product in the field and building valuable activities to prevent damage, facilitate adoption, or drive usage in a way that aligns with the customers’ objectives. Grant your partners access to this information to create new business models in which the partner has a significant role to play. Models based on service levels and automation which represent a wider choice for your customers and brings partners closer to you.
The principal vs partner model is not sufficient. The new channel model is equal-to-equal based on specialisation. Partners realised a long time ago they needed to take more responsibility for their destiny. Partner support is about creating new business models for the partner, bringing them in contact with other organisations and creating opportunities for them.
Stay Relevant helps organisations transform their business models and their ability to build strong partnerships to be relevant to their customers.
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