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Customer First, Channel Second

To paraphrase a popular phrase, "It's the customer, stupid!" That should be the goal of every business, no matter where they are in the distribution chain.

There are several ways to deal with channel conflict:

  • Ignore it. Start selling to consumers, and distribution or retail partners be damned. This option will not endear you to your channel partners, so don't even think about it. The most common way to avoid this "solution" is for manufacturers to establish web sites that simply provide information about their products or services, and help consumers to create a shopping list to bring to the retailer. But this model is of little help to the retailer if the consumer doesn't know where to acquire the product or service.
  • Enter the referral model. This model points the consumer from the manufacturer's or distributor's site to local retailers in the consumer's area, through the use of a locator application on the manufacturer's web site. This solution assists in brand building for the manufacturer. It also gives the consumer the option of product support and acquisition from a local entity. This option works well for retailers, but the manufacturer has no idea whether all the work he has done to sell the consumer has paid off as a sale at the retailer. There are no guarantees that a sale or even a contact will be made.
  • Then there's the sales model, offering small accessories to the product. A good example of this model is an automobile manufacturer's web site that sells logo-emblazoned clothing, coffee cups, hats, key rings, etc. matching their vehicle, which helps to spread the brand.
  • Finally, there's the true collaborative model (the "share the customer" model). In this model of channel cooperation, the manufacturer or distributor creates co-branded web sites with its retailers. The customer goes to the manufacturer's web site, shops for a product, finds it, adds it to the shopping cart, and then selects a retailer in the area. The retailer gets the order and ships it or arranges for pickup by the customer in his or her local area. This model also supplies the much-needed services of pre-delivery inspections, installation, and post-sales support.

The collaborative model is a good channel-conflict solution because it's an efficient way of using the existing distribution chain for order fulfillment. It also gives the manufacturer a record of an actual sale. Finally, both retailer and manufacturer or distributor have the contact information of the customer, to be used for future promotional marketing. In this model, all partners in the channel win.

The collaborative model requires creation of an integrated marketing and sales strategy with a common online infrastructure that integrates the entire distribution channel in a single unified system. Such a system would give your web site's visitors access to real-time product information, including pricing and availability through your retailers, and ensure that your products are properly configured and installed. The collaborative model allows your company to support the eCommerce initiative of your resellers, while still maintaining influence over the sales experience.

The bottom line is that collaboration allows manufacturers to know their customer and stay in contact with her for marketing purposes, while at the same time having control over their brand and what it stands for.

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