Channel
Conflicts Are Great!
By Steve Stallman, Chief Brander, Stallman Marketing
Well, not
the actual conflict, but if you are not creating situations
where you need to address channel conflicts, you are probably
not tapping into a ready source of sales and profits. Many companies
are scared off by possible channel conflicts. Many other companies
are reaping substantially higher profits by selling in multiple
channels, even if they risk conflicts.
This does not mean that you should not worry about conflicts.
To the contrary, you must, and you must manage them properly.
Channel conflicts are usually a reality, but if you can devise
a system to manage them, the results are almost always worth
it.
Consider this: your company has already invested countless hours
developing your technology and software. Opening up a new
channel using your existing products (or services), or modifying
it slightly, will not only yield you more sales; these sales
should be your company's most profitable. Yes, it always
comes back to ROI (return on investment). What better reason
would you want?
Most companies are concerned about cannibalization of sales,
and they should be! Once again, I'm not saying this is easy,
but done right, it will result in not only incremental sales,
but increased sales in the existing channel. Your goal is to
build a synergistic effect, where your brand becomes more recognized
as the leading choice. Many companies have done this and so
can you. Assuming there are alternative channels available,
wouldn't it be better if you entered this channel before a competitor
beats you to the punch?
Once you set up the new channel, you must set up criteria to
track your plan to ensure compliance within the channels. This
is usually easy to set up; just be sure to follow through with
your measurements so that you can prove to yourself and your
investors that you are accomplishing your goals.
I'll share a recent example outside the software industry that
I think we can learn from. Last month DirecTV spoke about their
channel dilemma at a Los Angeles Direct Marketing Association
meeting. Here was a company that was growing strong by selling
their products through retailers, such as Best Buy. They wanted
to expand their sales and looked at alternatives. They realized
that they could use their existing product, without any development
expense, to increase revenue and jump their ROI.
They decided that they could utilize a wide variety of direct
marketing techniques to gain incremental sales. However, management
feared they would cannibalize their current retail channel.
The direct sales team convinced them to try several direct marketing
activities and showed them how they planned on measuring it.
Through tracking and research, they proved that not only did
they not cannibalize the retailer's sales; it actually increased
the retailers' sales. Why? Using other marketing vehicles increases
their brand's awareness. So two things happened. First was that
they become the brand of choice once someone went into the retailer.
Secondly, some people who became aware of DirecTV through direct
response ads did not want to buy direct. They preferred to buy
from their local retailer, so this drove them to seek out this
option. DirecTV is now one of Southern California's leading
users of direct marketing and their sales are rising quickly
from this new channel.
There is no magic answer on how to avoid conflicts. I always
recommend taking a fresh look at the current situation. What
are your strengths? What are your advantages over the competition?
Then look at what other companies are doing, not just competitors
or other software companies, but look outside the industry for
completely different models. Usually the best model is not one
that is currently being used, but a proven one that you adapt
to your specific situation.
I urge all companies to embrace the possibility of conflicts
as it opens the door for perhaps your best ROI.
Want to learn more? Be sure to attend the April 19th SCSC IMPACT
event "Channel Marketing - Leverage Partners for Success".
This is a joint event with WITI, Women In Technology International.
Panelists include IBM and 8e6 Technologies. This will be an
interactive session, allowing time to ask the experts your questions.
Register
online
© Stallman Marketing, 2005
Steve Stallman is the principle of Stallman Marketing, the
chair of IMPACT, the marketing SIG of SCSC and the President
of the Los Angeles Direct Marketing Association. He helps companies
maximize their ROI on their brand. For more information visit
www.BrandingForProfits.com
. 818-772-1963
