Sales channels and the Web

by Richard Seltzer, seltzer@samizdat.com, www.samizdat.com

The following article is based on a chat session held March 30, 2000. For the edited transcript of that and other sessions, see www.samizdat.com/chat.html

This article was heard on the radio program "The Computer Report," which is broadcast live on WCAP in Lowell, Mass., and is syndicated on WBNW in Boston and WPLM in Plymouth, Mass, and is also available as RealAudio at www.thereport.com

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The Web is a new way of connecting people to people. It fundamentally changes relationships between companies and their customers and between companies and the indirect channels they use to work with their customers.

Indirect channels include distributors and sales reps and brokers and value-added resellers, as well as physical stores and even Web-based affiliate programs. The problem arises in computer manufacturing and also in the automotive business and insurance and stock sales -- many very diverse industries.

Even before the Web, the relationship between companies and their sales channels was often adversarial. Companies were reluctant to "give" their distributors and reps their margin, and the channels often distrusted the manufacturers, always expecting to be cut out of the loop. On the one hand, the Web adds to that distrust, by making it far easier to sell direct and eliminate the channel.

But the Web also makes it possible to deal with customers and partners in flexible and creative ways, setting up new processes and making changes quickly based on feedback.

The Web makes it far easier and less expensive to communicate and to provide detailed information and to personalize it for particular visitors or classes of visitors, to connect people who have questions with experts who have answers and to allow knowledgeable customers to interact with one another -- all of which can help build relationships with customers.

The main challenge seems to be deciding what your goal is.

Should companies be looking for ways to sell directly? Or should they steer clear of that to avoid alienating the channel?

Should companies be trying to come up with creative ways to better know and build relationships with customers? Or once again, would that risk alienating the channel?

So many people have stakes in the old ways of doing things, is it possible to consider this question from the point of view of what would work best now for all parties?

What should be the role of the distributor?

Who should own the customer relationship?

Can resellers overcome their reluctance to share customer information with manufacturers?

Can a manufacturer share the information it gains from end users with its channels in ways that speed the sales cycle?

My personal bias is to see the Web not as a way to reduce selling costs, but rather as an opportunity to build relationships with customers. I'd be inclined to set up operations that were people-intensive rather than automated, encouraging more, not less dialogue with end users and bringing partners/channels into that dialogue whenever appropriate.

In the past, if you sold through channels, that meant that you abandoned the customer relationship. Often you didnt even know who the customer was, except by roundabout tricks, like warrantee registration. It feels like the Internet makes it possible to both sell through channels and build relationships with the end user customers.

Bob Zwick asked, "Do companies really want to build a relationship with end users or do they want to outsouce "hand holding" to the channels?"

Jay Owen replied, "I think what companies need and what they think they want are different. They really need to understand their end users and have an informed relationship and the channel needs to provide individualized service appropriate to the offering.

My own take is that in the past the handholding has been outsourced to channels/brokers. But that entails enormous risks. Your reseller is also (often) your competitor's reseller, and the customer's loyalty tends to be with the reseller, not with you. I believe that the Web opens opportunities for companies, in all industries, to once again build direct relationships with end users, which can become an important and enduring asset.

Mark Gaydos countered that partners provide true value. They enable people to differentiate their solution offerings. The key with the Internet is to allow everyone to provide "their" distinctive value, instead of trying to cut them out. Direct interaction is not going to take over. Otherwise, you will find yourself in huge netmarketplace competing only on price.

But I contend that the manufacturer making direct contact with customers does not necessarily cut partners out and can in fact add value for partners. Imagine setting up an environment where a customer is automatically recognized as "belonging" to a particular reseller whenever he connects to your site. Hence the look and feel of the pages and the information presented directly relates to that reseller's offerings/services/pricing.

Everything helps promote the partner's business, but you are getting great info about what the customers are really interested in; and the customer is getting used to going to your site as the source of great information and answers.

Neal Lightfeldt objected that distributors and reps will resist any attempts to gain access to customer information. It is really the main asset they hold in their relationship with suppliers.

I contend that you need to provide value to your resellers through your Web site. That can be by way of customer referrals, by way of providing good and fast answers to questions that it would be difficult or time-consuming for the reseller to answer. Don't cut the channel out. But clearly focus on building direct relationships with customers as your number one goal. If you don't, your competitor will, and your former customers will be asking "your" resellers for that competitors' products instead of yours.

But Mark Gaydos contended that most companies don't want a relationship with the customer. They developed parnterships because they couldn't handle one-to-one issues. This still remains true on the Internet.

As Bob Zwick put it, the channel is actually an extension of the company and the one-on-one is transfered to them. That's why there are cerifications and quotas required to maintain channel status. Large companies have to concentrate their resources on producing high quality products. Smaller companies would benefit fron close relationships only until their sales greww too large to justify the expense of one-on-one.

But I believe that one-to-one relationships with customers are where the future lies. I believe that quick, effective, inexpensive Internet-based communication, and taking full advantage of partners and knowledgeable customers as your allies in this endeavor makes such relationship building possible today. 


This site is Published by B&R Samizdat Express, 33 Gould St., West Roxbury, MA 02132. (617) 469-2269. seltzer@samizdat.com


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