Success Strategies in Channel Management

1. Success Strategies in Channel Management Partner Relationship Management

2. The Benefits of Strategic Partnerships in Channel Strategy Strategic Alliances: Their Nature and the Motives for Creating Them Do Alliances Outperform Ordinary Channels? Principals That Drive Improved Channel Collaboration: Positive Channel Relationships All partnering is based on a few common denominators: Why Forge a Strategic Distribution Alliance? Upstream and Downstream Motives Things that cause bad dealer relations Objectives In Dealer Relations Complaints About Dealers Guidelines that can help in partnering with customers and suppliers

3. Strategic Alliances in Distribution • Marketing channels are typically composed of multiple organisations, each pursuing its own interests. Because these interests are competing, channel members often fail to cooperate with each other, and even work at cross-purposes. • Strategic alliances in distribution are forged to solve this problem.

4. In a strategic alliance, two or more organizations have connections (legal, economic, or interpersonal) that cause them to function according to a perception of a single interest, shared by all the parties. An alliance is strategic when the connections that bind organizations are enduring and substantial, cutting across numerous aspects of each business. A distribution alliance exhibits genuine commitment. Commitment exists when an organization desires the relationship to continue indefinitely. However, this in itself is not enough to make an alliance. The organization must also be willing to sacrifice to maintain and to grow the relationship. These sacrifices may take the form of giving up short-term profits or of not pursing other opportunities, preferring instead to devote the organization's resources to the alliance. Strategic Alliances: Their Nature and the Motives for Creating Them

5. Commitment is difficult to observe. Many organizations profess commitment to each and every one of their business relations. This encourages pleasant interactions among people in upstream and downstream organizations, but is seldom an accurate description of how their organizations really deal with each other. True commitment is often revealed rather than professed. In contrast, superficial commitment is disguised, presented as though it were real. Usually, the disguise is not effective. Of course, one spouse may be committed when the other is not. This is a situation of asymmetric commitment. The marriage analogy is misleading in one important respect: Channel organizations can and do have multiple alliances simultaneously. A better analogy is to a deep friendship. These are difficult to build and costly to maintain, putting a natural limit on their number. Strategic Alliances

6. The Benefits of Strategic Partnerships in Channel Strategy • By developing alliances, partnerships, interdependencies with outside partners and working together on creating better value, organisations can leverage the expertise of others, and achieve better overall results—such as greater output and broader, more innovative offerings.

7. Explicit Strategy. Win-Win Value. Channel Participation. Value Synchronization. Value Segmentation. Performance Equals Brand Promise. Customer performance should mirror brand promise. Customized Interaction. Understand the differences and work with them. Channel Scorecard. Measure the success of collaborative efforts. Use these measurements for continuous improvements. Link channel performance and rewards to specific metrics. Principals That Drive Improved Channel Collaboration

8. Community Building. Organizational Alignment. Customer service isn’t about just appearing to be nice to customers. It is concerned with the building of bonds (relationships) with customers and other partners (like suppliers and facilitators) to ensure long-term relationships of mutual advantage.. The supply/marketing channel In Relationship Marketing, customer service needs to be seen not just with its distributors and ultimate consumers , but also its upstream relationships with suppliers and perhaps even the supplier's suppliers. Principals That Drive Improved Channel Collaboration

9. Partners have a common objective. Each partner wants to improve their performance. Partners have common strategies for achieving their objective. Their methods are based on mutual need-seeking and mutual need fulfilment. Partners have some common risks. Each partner has something of value to gain or lose. Partners present a greater, common, defence against others who are not included in the partnership. Here are some guidelines that can help in partnering with customers and suppliers: 1. Add value to each other. Find ways to improve achievement and productivity so that both profit by the relationship. 2. Be a team - supportive of each other, not competitive. 3. Avoid surprises. Plan and work according to plan. 4. Be open and aboveboard with each other. All partnering is based on a few common denominators:

10. Understand each other's frame of reference. Learn to see things from the other's point of view. Be reliable. 7. Anticipate partnership problems and opportunities and capitalise on them. Treat each other as people. Concentrate on the personal elements as well as business ones. 9. Make the relationship enjoyable. Both partners should prefer to work within the partnership rather than within any other relationship because it is enjoyable as well as rewarding. Guidelines that can help in partnering with customers and suppliers

11. We expect to be doing business with them for a long time. We defend them when others criticize them. We spend enough time with their people to work out problems and misunderstandings. We have a strong sense of loyalty to them. We are willing to grow the relationship. We are patient with their mistakes, even those that cause us trouble. We are willing to make long-term investments in them, and to wait for the payoff to come. We will dedicate whatever people and resources it takes to grow the business we do with them. We are not continually looking for another organization as a business partner to replace or add to this one. If another organization offered us something better, we would not drop this organization, and we would hesitate to take on the new organization. Some manifestations of this outlook show up in statements such as these, made by the committed party about its channel partner:

12. Complaints By Dealers Nature of Agreement Dealers and franchise operators register many complaints about the agreements or contracts they must honour in order to retain their relationships with principals. Generally, the complaints are that there is little flexibility and a great many specific requirements and limitations. Most complaints in this area arise from a lack of understanding of the reason behind these requirements. Pricing Policies Whether prices are set, suggested, or influenced by the principal, it is easy for the dealer to object to the policy that sets them. Things That Cause Bad Dealer Relations.

13. Inadequate Help from Principal Dealers frequently have justifiable complaints about inadequate information, instruction and cooperation. Direct Sales Whenever the principal makes a direct sale and deprives the dealer of his profit on that sale, the dealer is likely to be angry. Overloading and Short Ordering Dealers complain when the factory ships more than they want and they complain if it ships less than they want. Both make dealers unhappy and result in protests, controversy and even a rupture in the relationship. Things That Cause Bad Dealer Relations

14. Unrealistic Quotas Unrealistic and arbitrary determined quotas is one of the greatest sources of dealer complaint. Too Many Dealers Every dealer wants to earn a larger income. Therefore, he naturally wants to tap the largest possible territory. When the principal opens new dealerships and reduces the territory of existing dealers, this can mean a financial loss for the older dealers -and that leads to objections. Arbitrary Contract Termination Dealership contracts or franchise agreements are usually set up with the idea of permanence but sometimes they must be cancelled. When the principal ends the relationship, the action may be, or may appear to be, arbitrary. Forced Purchases of Supplies Occasionally this means purchase of spare parts; more commonly, it shows up in the franchised food business where franchise holders are required to buy supplies from the principal. Things That Cause Bad Dealer Relations

15. Principals complain that their dealers do not sell enough, that they do not follow instructions and that they want too much help. Inadequate Sales This is the perennial and universal complaint about dealers. Failure to Follow Instructions Most producers provide dealers with complete and comprehensive instructions covering every detail of operation. Dealers, being independent, frequently apply their own interpretation or even completely disregard the rules and regulations. Unreasonable Requests for Help Dealers do need help and they can get it, but in many cases the demands become unreasonable. When the principal is asked to do most of the dealer's work, he feels that the dealer is not earning his commissions. Complaints About Dealers

16. The main purpose in a dealer relations program isto build and maintain a dealer organisation that will enable the principal to conduct a profitable business. The objectives of such a program are to retain good dealers, to acquire new dealers, and to improve the performance of both. . Retaining Good Dealers A good dealer is a valuable asset to any selling organisation. Such a dealer assures that a definite and profitable sales volume can be attained. Good dealers need to be retained, not only because they are profitable, but also because it costs a great deal less to keep a dealer than to acquire a new one Objectives In Dealer Relations

17. Why Forge a Strategic Distribution Alliance? Upstream Motives • At minimum, producers must respect downstream channel members before building an alliance with them. Some producers have a `do it in house–technical' culture that prevents them from understanding, respecting, and trusting intermediaries to any degree." • In the longer term, the producer/supplier seeks to erect barriers to entry by future competitors. One of the best possible barriers is a good distribution network. The reason a channel is so valuable a barrier is that, unlike a price cut or a product feature, it is so hard to duplicate. A committed channel may refuse to carry or to actively promote an entrant's brands. Finding another that works as well as a distribution alliance is a challenging task for many producers.

18. The motives of downstream channel members to build alliances revolve around having an assured and stable supply of desirable value offers. Consolidation is a motive here: As mergers and acquisitions concentrate market share among a few producers in many industries, downstream channel members commit to the survivors to maintain product supply. Channel members seek to cut costs via alliances. The best of all worlds is achieved when stock costs are cut and the channel member suffers fewer out-of-stock situations. Downstream channel members, such as distributors, also build alliances to differentiate themselves from other distributors. By positioning themselves as the producer's preferred outlets for desirable brands, distributors differentiate their assortment and related service. Distributor differentiation is often based on a strategy of offering value-added services Why Forge a Strategic Distribution Alliance? Downstream Motives

19. At first glance, the answer seems to be "yes." Committed parties trust each other, and trust today enhances performance tomorrow.' Trusting parties will do more for each other, going so far out of their way to help each other that their actions resemble altruism rather than economic profit maximization. Differentiation and commitment go together. Producers whose marketing strategy is to differentiate their offerings (as opposed to a solely cost leadership strategy) are more likely to build closer relationships with channel members. In general, commitment today means cooperation tomorrow. Do Alliances Outperform Ordinary Channels?

20. Positive Channel Relationships • Developing Positive Channel Relationships • Step 5 Securing Channel Memberships • Step 4 Motivating Channel Members • Step 3 Selecting Channel Members • Step 2 Screening Prospective Channel Members • Step 1 Recruiting Prospective Channel Members