Tuesday, December 02, 2003
STRATEGY: Channel-Only Models Such As Acer's Fail to Eliminate Conflict
According to CRN, Acer has discovered that only a fanatical devotion to the channel can work and is advising its competitors on the gospel of channels. (Acer Launches New Channel Business Model: Acer executives say competitors are making big mistake with direct initiatives) Is the great Satan Dell listening? Will they and other direct selling evil doers see the folly of their ways and wake up to the truth of channels?
Channel conflict is real, but cannot be addressed by CRN's one-sided, pro-channel propaganda. How long have they been advising vendors that the channel was the only way to compete and resolve conflict? Contempt for large retailers (bastards who unfairly use their purchasing clout to discount prices) is only slightly lower than it is for those direct selling whores. And don't get me started on distributors and channels that only fulfill products.
All sarcasm aside, the truth is that conflict between direct and indirect channels and between volume retailers and specialists will always exist. For most vendors, the issues are 1) how to balance the benefits of sales volume with the costs of coverage and 2) how to obtain the highest productivity out of the channels selected.
Unmanaged, conflict can destroy even the best channels. Lora Heiny identifies the risk Acer faces in balancing its channel incentives. Unfortunately, by the time an executive like Acer's CEO, Schmidleithner, takes to the air to assure his channels about conflict it is too late. They already have it. Channel partners response to such pronouncements is contempt. "How dumb do they think we are?" Only results, not press releases will counter the inevitable decline.
Channel strategy is not about making an even playing field. It is about positioning your resources effectively on an uneven field. It is about unequally rewarding the channels that deliver the best results in spite of uneven market conditions. Each channel has to differentiate and deliver on a core value proposition. Consider my unofficial slogans for each of these channels:
Dell: "Our great products at rock bottom prices"
IKEA: "Make a trip and get a bargain on our products"
CDW: "Everyone's hot products at low prices"
Walmart: "Our prices on the products you need make the trip worthwhile"
Fry's: "Drop in today to see our huge product displays"
VAR/SI: "Customized solutions and advice for a price."
When a channel fails on its proposition to the user, it also fails in its promise of coverage to the vendor. As one retailer quipped: "If your VAR gives you bad service, come to retail: we will give you bad service at a low price." Aggravated by competitors (e.g. Dell), new channels (e.g. the internet) and the technology life cycle (e.g. WAN), conflict is the result of the vendors own actions (or inaction) in response to market conditions. Like stress in your personal life, conflict is the markets' way of motivating you to make change.
Scott Karren, The Channel Pro
According to CRN, Acer has discovered that only a fanatical devotion to the channel can work and is advising its competitors on the gospel of channels. (Acer Launches New Channel Business Model: Acer executives say competitors are making big mistake with direct initiatives) Is the great Satan Dell listening? Will they and other direct selling evil doers see the folly of their ways and wake up to the truth of channels?
Channel conflict is real, but cannot be addressed by CRN's one-sided, pro-channel propaganda. How long have they been advising vendors that the channel was the only way to compete and resolve conflict? Contempt for large retailers (bastards who unfairly use their purchasing clout to discount prices) is only slightly lower than it is for those direct selling whores. And don't get me started on distributors and channels that only fulfill products.
All sarcasm aside, the truth is that conflict between direct and indirect channels and between volume retailers and specialists will always exist. For most vendors, the issues are 1) how to balance the benefits of sales volume with the costs of coverage and 2) how to obtain the highest productivity out of the channels selected.
Unmanaged, conflict can destroy even the best channels. Lora Heiny identifies the risk Acer faces in balancing its channel incentives. Unfortunately, by the time an executive like Acer's CEO, Schmidleithner, takes to the air to assure his channels about conflict it is too late. They already have it. Channel partners response to such pronouncements is contempt. "How dumb do they think we are?" Only results, not press releases will counter the inevitable decline.
Channel strategy is not about making an even playing field. It is about positioning your resources effectively on an uneven field. It is about unequally rewarding the channels that deliver the best results in spite of uneven market conditions. Each channel has to differentiate and deliver on a core value proposition. Consider my unofficial slogans for each of these channels:
Dell: "Our great products at rock bottom prices"
IKEA: "Make a trip and get a bargain on our products"
CDW: "Everyone's hot products at low prices"
Walmart: "Our prices on the products you need make the trip worthwhile"
Fry's: "Drop in today to see our huge product displays"
VAR/SI: "Customized solutions and advice for a price."
When a channel fails on its proposition to the user, it also fails in its promise of coverage to the vendor. As one retailer quipped: "If your VAR gives you bad service, come to retail: we will give you bad service at a low price." Aggravated by competitors (e.g. Dell), new channels (e.g. the internet) and the technology life cycle (e.g. WAN), conflict is the result of the vendors own actions (or inaction) in response to market conditions. Like stress in your personal life, conflict is the markets' way of motivating you to make change.
Scott Karren, The Channel Pro
