BUSINESS ON THE WORLD WIDE WEB:

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March 30, 2000 -- Sales channels and the Web


Transcript of the live chat session that took place Thursday, March 30, 2000. These sessions are normally scheduled for 12 noon-1 PM US Eastern Daylight Time (GMT -4) every Thursday.

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Since the chat itself happens at a rapid pace, it's often difficult to note interesting facts in particular URLs as they appear on-line. Here's a place to take a more leisurely look. I've rearranged some of the pieces to try to capture the various threads of discussion (which sometimes get lost in the rush of live chat).

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Threads (reconstructed after the fact):


Today's participants


Introductions

Richard Seltzer -- We'll be starting in about 10 minutes. Today's topic is Sales Channels and the Web. Our guests will be Bob Thompson and Jay Owen.

Richard Seltzer -- Welcome all -- looks like we have a terrific turnout. Please introduce yourselves and let us know your interests. That will help us get off to a quick start.

Jay Owen -- Jay Owen - former channels manager at Compaq and Digital. Interest in role of distribution and ways to use the web to help sales partners be more effective

Mark Gaydos -- Mark Gaydos - I am with Comergent. We enable partners to participate in a company's e-commerce. Curious as to what people see the roles of distributors in the future.

Bob@CottageMicro.Com -- Hello all - I'm an independent consultant in the Dallas/Fort Worth Texas area. I'm in the process of transitioning my services to the Internet and am interested in new ways to market and deliver my products.

Laura -- Hello, I'd like to at least introduce myself. I'm in marketing at GotMarketing.com

Richard Seltzer -- Laura -- Can you tell us something about GotMarketing? What's your involvement with channels?

Laura -- Sorry for the duplicate message, I was trying to change the refresh rate to follow along better. ... GotMarketing is a new dotcom set up to automate tactical marketing functions. channels for us would be Internet affiliates 


The channels challenge

Richard Seltzer -- Jay -- For starters, can you tell us about your involvement in channels over the Web. What are the most pressing issues? Is it a matter of trying to maintain good relations with indirect sales channels while at the same time interacting directly with customers over the Internet? If so, what are some of the ways companies are managing this potential conflict?

Jay Owen -- most of the people I work with today are smaller companies and want to figure out how to use the web to "manage" the partner relationship. ie. up to date sales tools, ordering and sales leads. Great start. However many resellers are guarded about sharing customer info

Mark Gaydos -- I will throw out a question to Bob. What do you see as the role of distributors in the long run?

Jay Owen -- Mark asked about the future role of distribution. I've had a few conversations on this subject. If you look at dist. margin you see it declining dramatically from the buy/sell perspective. dist. are going to learn how to deliver product at nominal cost as a necessary evil. The really successful ones are going to learn how to package info and services meaningfully for their customers. 


Solutions from Comergent

Richard Seltzer -- Mark -- Do you have standard solutions? Or do you do custom consulting? Can you give some examples of how this works? As for distributors, that would probably vary from the value added resellers to the companies that are little more than warehouses. What end of that spectrum is of most interest to you?

Mark Gaydos -- We offer application solutions that run on top of messaging software. The best example is Cisco who uses are software to faciliate the selling of their technology products in conjunction with distributors.

Mark Gaydos -- Reseller goes to Cisco site. Can get products configured with our technology. They click on a button to get P&A from distributors. When they are ready to buy, they click on a button and the shopping cart is transferred to the distributor's ecommerce system.

Richard Seltzer -- Mark -- The Cisco example is very interesting. Do you have any customers outside the realm of computers and networking? This sounds like it would work best in the case of complex sales where the channel does add value. Would that be the case in the automotive industry? What other industries?

Mark Gaydos -- Actually we have several accounts we can not announce at this point outside of high tech. The key is allowing the mfg to provide their value (product knowledge) while allowing partners to provide their value (many possibilities) all on the internet in a collaborative partner marketplace.

Richard Seltzer -- Mark -- with your solution (or custom versions of it) does the manufacturer try to build relationships with end user customers by providing extensive product-related information, access to experts for answers to specific questions, and opportunities to interact (chat/forum) with other knowledgeable customers?

Richard Seltzer -- Mark -- sounds like a good approach. Do you include chat/forum in your solution? do you recommend scheduled chat programs with experts? Do you include instant messaging as a way to link the manufacturer to the distributors or to key customers?


Web-based opportunities?

Richard Seltzer -- Jay -- In the past, if you sold through channels meant that you basically abandoned the customer relationship. Often you didn't 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. It feels like it is possible to both sell directly over the Web and encourage your customers to go through channels for value added support and services and special offers. Do you know of any companies that are operating that way and doing it well?

Jay Owen -- Mark mentioned Cisco and I think they are working with channels well. Their practices are "channel friendly" so the technology isn't viewed as intrusive.

Richard Seltzer -- Jay -- Given that Cisco does it well, who does it poorly? What are the most common mistakes and missed opportunities?

Jay Owen -- Richard, I think there are some prominent computer cos. that are approaching the problem poorly. The most common mistake is the assumption they can "take business direct" and reduce their selling costs. They forget the the reseller probably has the best perspective on the customers' needs and place no value on that

Richard Seltzer -- Jay -- What's the logical approach? For instance, should a computer manufacturer sell only through channels? Or sell through channels and also sell directly on the Web (competing with its own channels)? Or use the approach that Mark mentioned where the Web-based buyer gets connected automatically with a reseller? What's the right way to deal with this?

Richard Seltzer -- Jay -- 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. Do you know of any companies that are following a strategy of that kind?

Jay Owen -- Richard, any vendor needs to approach the problem from the customer backwards. For example, tech support is best provided by the vendor. However, if you build the knowledge base right you can make it avail. to resellers and put them in the loop. Resellers provide great service when local support or customization is critical

Richard Seltzer -- Jay -- Customer support does seem to be an important element. While the manufacturer undoubtedly has the best information, I suspect that sometimes the reseller is expected to deliver service (as well as installation). Is that common today? Or am I just out of date? Also, is customer service considered a burden or a source of profit? Is your goal always to minimize customer service style interactions with customers?


Dealing with low-tech reps

Neal Lightfeldt -- Neal Lightfeldt - ebusiness manager at Barksdale, Inc. - manufacturer of switches and valves for industry. My concerns are include two issues: First, our independent rep organization is decidedly low tech. Getting them up to speed is a challenge. Second, the entire internal sales organization has a tremendous stake in the current rep network. As a result, attempts to effect change towards electronics transactions are generally met with resistance.

Mark Gaydos -- I think Neal's situation is extremely common. Wanting to take advantage of the internet but partners are usually not that technically sophisticated.

Richard Seltzer -- Neal -- Sounds like an opportunity. You could set your Web site up as the main resource for answers, information, contact with experts, reducing the burden on your independent reps, who apparently aren't prepared to answer such questions. You might also set up to run some mini-distance ed courses, intended both for your reps and for sophisticated customers. Don't think that electronic transactions are the holy grail. The aim of your Web activities should be building relationships and providing rich useful information.

Neal Lightfeldt -- Richard - I am going in that direction. We are redesigning our website to supply lots more info than it currently does, and we are developing an extranet focused on serving the rep organization - making inventory available, commission reports, training materials, etc. It is my hope to get everyone used to the idea of ebusiness as a channel enhancer, then move on to transactions from there, likely beginning with the rep organization before we tackle end user.

Richard Seltzer -- Neal -- I'd suggest not just focusing on static information, but also somehow adding your experts to the loop and making it possible/easy for knowledgeable users to interact with one another at your site (like an online users group).


Sales channels in financial services

daguetp -- Patrick Daguet, Country manager France , FGIC (GE Cap sub on financial guaranties - Insurance companies are faced with the challenges of distributors ( namely brokers) and their online sale strategy. though they just begun to go online, they cannot screw up what was the sources of their client knowledge for years - the brokers. They recognized the real value added by the brokers through their long time relationship with clients.

daguetp -- Small diversion on Finance - while you can easily sell or buy stocks online,you may continue to need an intermediary (or traditional channel) to conduct your structured deal or securitization) - the point is dual channels can coexist if one could bring value added to a certain type of client needs while the other medium (The Internet) could help complete other deals (more standardized ones) or maybe all that is too much simplistic?? 


Risk of alienating the channel

Bob@CottageMicro.Com -- Richard - my question is - Do companies really want to build a relationship with end users or do they want to outsouce "hand holding" to the channels?

Jay Owen -- Bob, 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. The channel needs to provide individualized service appropriate to the offering.

Richard Seltzer -- Bob and Patrick -- 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/Internet 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 -- Richard - This is what the partners are concerned about.

Richard Seltzer -- Bob and Patrick -- aside from the issue of loyalty and customer retention, remember too the value of feedback -- getting good and immediate information from your customers about what works and what doesn't and what else they'd like to see and how to keep them happy and coming back again and again. You can't depend on channels to forward such information to you. And even if they did (miraculously), the delay in the feedback loop could prove costly.

Mark Gaydos -- What could prove more costly is alienating your channel.

Jay Owen -- Mark, I think people at Hewlett Packard and Compaq would agree with your concern about alienating your channel.

Richard Seltzer -- Mark -- the challenge is to set up your Web-based activities in such a way that your building relationships with end users is helpful to your channels as well. I'm not saying that's easy -- just that that's what you need to focus on.

Mark Gaydos -- I think we sometimes forget, as everyone tries to "know their customers", that the 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. That is the point. Take direct interaction to its logical conclusion. You will find yourself in huge netmarketplace competing only on price.

Richard Seltzer -- Mark -- 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. This is taking it a step further from just connecting with that reseller at the time of the transaction. Then special events and access to experts etc. could be set up as "presented by" or "sponsored by" such and such partner. 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 -- I would agree with Mark regarding alienating your channel. Richard, you mentioned to Bob and Patrick that "I believe that the Web/Internet opens opportunities for companies, in all industries, to once again build direct relationships with end users, which can become an important and enduring asset." Distributors and reps are aware of this opportunity as well. Hence, they will resist any attempts to gain access to customer information. It is really the main asset they hold in their relationship with suppliers.

Richard Seltzer -- Neal -- 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, etc. 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.

Jay Owen -- Neal, would your reps benefit from sales successes across your rep network? I'm assuming they have territory exclusives. Anything to help the rep shorten the sales cycle is obviously beneficial..

Mark Gaydos -- What you will find is that most companies don't want a relationship with the customer? They want to know the qualities of the customer so they can create products more effectively, but the whole reason they developed parnterships was because they couldn't handle one to one issues. This still remains true in the internet or not. I think it is important to keep in mind what mfgs truly want from the customers. Everyone wants to know the customer to the point where they can be more effective but they can't give the personal relationship which still remains valuable today, that customers wants.

Richard Seltzer -- Mark -- I would contend 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.

Jay Owen -- One last thought...short term motivation for partner programs is financial. If vendors can show partners how they will continue to make money in a 1-1 scenario, they will do it. That's why lead distribution programs are so prominent today.

Neal Lightfeldt -- Jay - yes, finding ways to help the reps succeed is key - finding ways to convince them that is goal - that is the difficulty. I think distrust is a major factor. I suspect that deep down inside, reps believe that no matter what you say, they think the main goal is to cut them out.

Jay Owen -- I agree Neal. I spend about 1/2 my time convincing people that there is real value for the margin vendors "give" to reps.

Bob@CottageMicro.Com -- Richard - I believe that 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 from close relationships only until their sales greww too large to justify the expense of one-on-one. 


Adding value to channels

Laura -- Interesting topic, alienating the physical goods channel. I wonder if it is possible to somehow compensate them for each direct customer interaction until direct interaction takes over. Or find a way for the direct information to add value to the channel. 'Hey channel,, you should stock 6 of these because customer interest is going that way." Amazon.com's recent agreement with a chain of convenience stores confirms there is a place for both sides of the world.

Jay Owen -- Laura, in a previous assignment I implemented a business predictor that was fairly reliable. We used it to encourage our distributors to stock product in advance of sales orders. I think it worked because it was technically good and the distributors knew we were committed to their success too.

Laura -- Jay, so were you able to develop sales forcasts because of your direct interation, and feed this to the channel?

Jay Owen -- Laura, we did develop forecasts and return them to the channel. They, in turn placed orders on us for delivery. I might add, these were not small orders to small accounts. They ran the spectrum. Our objectives for the channel were consistent. We didn't "want" to do 30+ transactions, we wanted to do 3

Richard Seltzer -- Laura -- yes, it is very important to work with rather than against physical stores. How you do that probably differs greatly from one industry to another. In some cases -- like sales of merchandise that's awkward to ship and where physical stores are available throughout the country -- the customer may normally pick up the item at the local store even when it's ordered/customized over the Web.

heather -- hi, heather gilmour, channel marketing manager @interpath communications. i'll stick my neck out. i think a successful strategy is one that focus on intercepting end user demand through appropriate partner relationships. and this success is predicated on building a foundation that aligns appropriate market segments with appropriate partner / channels to move appropriate products. i think a key step to success is developing a comprehensive understanding of what is "appropriate" for each stage of the process. matching product attributes to both the solution requirments of the end user and the firms / partners that "own" these customers. i think once this is hammered a channel / partner web strategy will follow

Jay Owen -- Heather, Laura and I had an earlier exchange that is consistent with your observation. The resellers accepted our forecasts and subsequently ordered because they knew they were going to get business from doing so. Neal, I guess they trusted us.


Wrapup

Richard Seltzer -- All -- time is passing fast. There are lots of folks connected right now and few have spoken up. Please jump in now. Also, is Bob Thompson out there somewhere?

Richard Seltzer -- All -- I believe that we have here a very rich topic and we have barely scratched the surface. I'd like to continue this topic next Thursday and probably the Thursday beyond that. Jay, will you be able to join us then? All -- is this what you'd like us to do? Also, Jay, do you have any inkling what became of Bob Thompson today and whether he might be able to join us next week?

Richard Seltzer -- All -- even if you have spoken up before, please post your email address and URL, so we can keep in touch. Don't count on the software to have captured it.

Richard Seltzer -- All -- if you have questions and comments that you were not able to post this time around, please send them to me by email at seltzer@samizdat.com I'll include them with the transcript of this session, which I should post in a few days. Check http://www.samizdat.com/chat.html

Jay Owen -- Richard, I'm available but don't know Bob's schedule. I'm sorry he's not here because he would add a rich perspective.

Richard Seltzer -- Thanks to all. Please join us again next Thursday, same time and place. 


Previous transcripts and schedule of upcoming chats -- www.samizdat.com/chat.html

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The full text of Richard Seltzer's books The Social Web, Take Charge of Your Web Site, Shop Online the Lazy Way, and The Way of the Web, plus more than a hundred related articles are available on CD ROM My Internet: a Personal View of Internet Business Opportunities.

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