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FEATURE ARTICLE Subject: July 2001 ECMgt.com:
Business Models and Value Webs |
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Leveraging the power of the Internet while fostering channel partner relationships. By Michael Johnson Distributing products used to be cut and dried. Manufacturers turned out the product, and then established networks of resellers, VARS and dealers sold that product to consumers, and took a cut of the total profit. Enter the Internet, and the lure of selling directly to the end user in order to pocket all the profit. Dell Computer Corp. doesn't use indirect channels, and doesn't have to share the profits with its sales channel partners, so why should we, right? This is the kind of dangerous thinking that cost major retail manufacturers like Levi Strauss, Reebok and Starbucks millions in direct-via-Web infrastructure costs and channel partner alienation. Within weeks of launching their online entities, these manufacturers scrapped the operations in response to channel conflict with distribution partners. These companies' distributors aren't alone in viewing direct Internet sales as an encroachment on their space and the problem is not unique to the retail space. In a recent study by Reality Research & Consulting, 57 percent of the resellers surveyed said that they would stop recommending a product if the manufacturer started selling it directly to end-users. Fourteen percent said they would drop a brand completely if this happened. It wasn't long before a similar pattern developed among the B2B manufacturers. This has left many channel-dependent companies perplexed as to how to leverage the Web while collaborating with their channel partners. Gartner counsels that Web sites, strong business processes and information exchanges must be combined with channel partner networks&emdash;to match customer desires to value chain competencies. ECM quells the conflict Joining "channel conflict" as a current eBusiness buzzword is "enterprise channel management" or ECM, which many experts say is the cure for channel conflict. ECM technical solutions address Internet infrastructure, forming new electronic bonds between manufacturers and channel partners. According to META Group, by 2003, half of Global 2000 companies will deploy a comprehensive channel alignment strategy to improve the effectiveness of marketing and enhance customer and partner relations by leveraging brand equity, by creating a collaborative online sales effort and by improving the efficiency and quality of the user experience. Manufacturers who want to have e-commerce on their website without being seen by their channel partners as encroaching on their space need to adopt a channel management infrastructure with these characteristics:
Rather than instituting a direct-via-Web model, an infrastructure solution that links the "Click to buy" button to an appropriate channel partner gives both manufacturer and channel partner the ability to leverage the Internet. A storefront with an appearance similar to the manufacturer's site is set up for the channel partner, so the buying experience is seamless and the customer never knows he/she has left the original site.
Because the same system serves the manufacturer and the channel partners, both parties have access to customer data that enables efficient promotions, cross- and up- selling, and support. Integrated architecture also allows existing Sales Force Automation and Customer Relations Management systems within each company to be used with expanded capability software in an integrated solution package.
The link between the manufacturer's and channel partner's Web sites allows the partner to benefit from the manufacturer's brand equity, and becomes an additional source of leads, which ultimately benefits both parties. The manufacturer can offer the end user an immediate opportunity to buy, and still leverage the relationship with its channel partner.
The channel-management infrastructure should keep track of sales performance information such as lead-to-sale conversion rates, initial response time, and revenue generated per channel partner.
If the enterprise is global, the channel management system must accommodate overseas channel partners and sales lead sources by supporting multiple languages and foreign currencies.
The system should incorporate extensive business rules to determine which partner is best aligned to close the sale. It should determine customer needs, record those needs and pass the information along to the most appropriate partner. This improves the quality and timeliness of the leads and allows for better lead conversion rates and customer service. The Internet is an incredibly powerful tool for marketing, sales, service and supply that can also disrupt existing ways of doing business. Some of the largest online merchants have already stumbled over the problem of channel conflict. Those who don't want to repeat history are looking to Internet infrastructure solutions to grow their eBusinesses without destroying traditional channels, which continue to play a major distribution role now and in the future. Michael Johnson is Chief Executive Officer and Chairman of the Board of InfoNow Corporation, a provider of channel commerce solutions based in Denver, CO.
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