channel conflict!!!

Let me start with saying that I know that this discussion point is a very controversial discussion point. However as this is such an important matter, will I choose to pick up the discussion and look forward to different meanings and approaches.

The first question many companies address in wetter they should go direct or indirect with their sales and what about possible channel conflicts. Often the answer is do it--especially since the popularity of the Internet. The key, however is to avoid most of the channel conflict that will arise.

Channel conflict occurs when the vendor (you) and the partner, or different partner types (retail, VAR, mail order, Internet) compete for the same business. I say “most” of the channel conflict, since it is fine to have some conflict--partners may compete, and there may be some of the business that you can take direct . For example, you might go direct with massive deals that are too big for a partner to finance (such as a 1.3 billion deal overseas), or very small deals that don’t require any special training/installation/consulting--hence won’t provide margins for your partners who make money on their ‘value added’ services.

To minimize conflict you could:

1) Segment the products (different products are sold through different partner types or channels)
2) Setup exclusive or limited territories
3) Sell direct at a higher price than the average street price
4) Setup different promotions for different partners--rotating so they all have advantages at different times
5) Provide MDF/Co-op and let the partners choose to establish their own competitive advantage
6) Setup partner levels--rewarding higher margins and support for higher authorization (the partners choose whether they can be competitive)
7) Setup a process to determine if a customer has worked with a partner prior to taking the business direct (so you don’t steal business they cultivated), etc.

There are multiple ways that you can reduce conflict--the key is to be aware that it could exist and of your ramifications (short and long-term), and that you do something about it to keep your partner and revenue targets satisfied.

One vendor long gone, Ashton Tate, had a terrible problem with channel conflict (they would sell direct and undercut a prospect the partner had cultivated)--as a result, their partners hated them. They still sold their products since they were so popular (dBase), but were rooting for a competitor to take them out--which happened.

It is also a problem if you have no conflict, since it usually indicates that you don’t have enough sales coverage--there could be parts of the market you are not covering (missing RFQ’s, not knowing about the opportunities, your product is not sold where the customers traffic, etc.).

I truly hope that this gave something to think about!


Regards your Channel Sales Moderator – Mark