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© 2014 Blue Canyon Partners, Inc.
Managing complex channel
relationships while creating
value for end customers
SAMA 50th ...
12. Managing complex channel
relationships while creating value
for end customers
David G. Hartman, Principal, Blue Canyon...
David G. Hartman
Principal
Blue Canyon Partners
• More than 15 years experience working with major B2B
corporations to dev...
Denise Hampton
Director, Channel Strategy, Programs and Marketing
Zebra Technologies
• Responsible for channel program str...
William Moore
Senior Vice President, Sales Development & Channel Management
SKF
• More than 30 years of experience selling...
Session Goals
• Managing market change
• Understanding the customer chain
• Identifying winning approaches
Themes
• Trends and Environmental Factors
• Working with Channel Partners
• Cost to serve
Polling Question #1
During the economic recession, what happened in your
industry?
a) Channels contracted
b) Channel partn...
Polling Question #2
Do you consider your channel partner to also be a
competitor?
a) Yes
b) No
c) Not currently, but it is...
Polling Question #3
How well do you and your channel partners divide
responsibilities to make serving strategic customers
...
References
• The Imperative for Active Channel Management, Bruce Karr
and Atlee Valentine Pope, ©2014, Blue Canyon Partner...
David G. Hartman (moderator)
dgh@bluecanyonpartners.com
Denise Hampton
dhampton@zebra.com
William Moore
William.c.moore@sk...
12. Managing Complex
Channel Relationships
While Creating Value for
End Customers
Executive Summary
12. Managing Complex Channel Relationships While Creating
Value for End Customers
Executive Summary
2 ©2014 Blue Canyon Pa...
12. Managing Complex Channel Relationships While Creating
Value for End Customers
Executive Summary
3 ©2014 Blue Canyon Pa...
12. Managing Complex Channel Relationships While Creating
Value for End Customers
Executive Summary
4 ©2014 Blue Canyon Pa...
12. Managing Complex Channel Relationships While Creating
Value for End Customers
Executive Summary
5 ©2014 Blue Canyon Pa...
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Managing Complex Channel Relationships While Creating Value for End Customers

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Blue Canyon Partners Principal, David Hartman, in May moderated a concurrent session at the Strategic Account Management Association's 50th Annual Conference on managing complex channel relationships. The session was held twice over a two-day period. More than 50 strategic account managers, business executives, and corporate leaders attended the session and participated in lively discussions around channel consolidation; new, emerging channels (supported and unsupported); channel competition; and channel succession. This presentation includes a four-page executive summary of the session.

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Managing Complex Channel Relationships While Creating Value for End Customers

  1. 1. © 2014 Blue Canyon Partners, Inc. Managing complex channel relationships while creating value for end customers SAMA 50th Annual Conference May 20 & 21, 2014
  2. 2. 12. Managing complex channel relationships while creating value for end customers David G. Hartman, Principal, Blue Canyon Partners Denise Hampton, Director, Zebra Technologies William Moore, Senior Vice President, SKF Presenters: ©2014 SAMA Annual Conference
  3. 3. David G. Hartman Principal Blue Canyon Partners • More than 15 years experience working with major B2B corporations to develop growth strategies and strengthen B2B customer relationships • Serves as Director of Blue Canyon’s China Practice and CEO of Blue Canyon & China Associates in Beijing • Ph.D. in economics from Harvard; B.A. and M.A. degrees from Northwestern University in mathematics and economics
  4. 4. Denise Hampton Director, Channel Strategy, Programs and Marketing Zebra Technologies • Responsible for channel program strategy and governance, channel marketing and channel development • Accomplished marketing and sales strategist who has held a variety of positions in marketing, sales operations and channel strategy during her 18 year career • BS degree in Speech Communications from the University of Wisconsin and an MBA from the Lake Forest Graduate School of Management
  5. 5. William Moore Senior Vice President, Sales Development & Channel Management SKF • More than 30 years of experience selling industrial products to and through Industrial Distributors, Specialty Resellers and Representative Agencies as well as directly to consumers and OEMs • Currently responsible for managing SKF’s sales and development of indirect selling channels as well as leading SKF’s U.S. campaign to engage with major end users and distributors in a TCO environment • Presents SKF’s value selling experience to MBA students at the London School of Business
  6. 6. Session Goals • Managing market change • Understanding the customer chain • Identifying winning approaches
  7. 7. Themes • Trends and Environmental Factors • Working with Channel Partners • Cost to serve
  8. 8. Polling Question #1 During the economic recession, what happened in your industry? a) Channels contracted b) Channel partners expanded goods and services c) Channels consolidated d) All of the above e) None of the above
  9. 9. Polling Question #2 Do you consider your channel partner to also be a competitor? a) Yes b) No c) Not currently, but it is likely d) I am not sure
  10. 10. Polling Question #3 How well do you and your channel partners divide responsibilities to make serving strategic customers cost-effective? a) Very well; we are highly efficient b) Not ideal, but too costly to change c) Not sure; difficult to determine d) Unknown as to what the channel is doing
  11. 11. References • The Imperative for Active Channel Management, Bruce Karr and Atlee Valentine Pope, ©2014, Blue Canyon Partners, Inc. • Supplier Driven and Channel Driven Business Models, Atlee Valentine Pope and George F. Brown, Jr., ©2006, Blue Canyon Partners, Inc. • Sales Models in Business Markets with Complex Customer Chains, Atlee Valentine Pope and George F. Brown, Jr., Summer 2008, Sbusiness
  12. 12. David G. Hartman (moderator) dgh@bluecanyonpartners.com Denise Hampton dhampton@zebra.com William Moore William.c.moore@skf.com @bluecanyonptrs
  13. 13. 12. Managing Complex Channel Relationships While Creating Value for End Customers Executive Summary
  14. 14. 12. Managing Complex Channel Relationships While Creating Value for End Customers Executive Summary 2 ©2014 Blue Canyon Partners, Inc. All rights reserved. This year’s Strategic Account Management Association’s Annual Conference, held May 19 to May 22 in Orlando, Florida, included a concurrent session on managing complex channel relationships. The session was held twice over a two-day period. More than 50 strategic account managers, business executives, and corporate leaders attended the session and participated in lively discussions around channel consolidation; new, emerging channels (supported and unsupported); channel competition; and channel succession. The session was moderated by David G. Hartman, principal of Blue Canyon Partners, a B2B growth strategy consulting firm. Joining David were two individuals with nearly 50 years of combined experience in channel design, strategy, and development—Denise Hampton, director of Americas channel strategy, programs and marketing for Zebra Technologies, a global leader in the design and manufacture of thermal printers, radio frequency identification products and real-time locating systems, and William Moore, senior vice president of sales development and channel management for SKF, a leading worldwide manufacturer and supplier of ball and roller bearings, linear motion products, precision bearings, spindles and seals. Denise and Bill shared their real-world experience, leading practices and insights around trends, how their companies are working with channel partners while adapting to and managing change, and what challenges and opportunities they are seeing around a number of areas, such as new, emerging channels and cost-to-serve. Interactive polling was used to gauge what members of the audience were experiencing, and aided in the discussions around these topics. Growth and Change When asked what scenarios have emerged in their channels during and since the economic recession, more than 90 percent of those who participated in the polling shared that major challenges have emerged in their channels. While some shared that channels contracted (19%), others indicated that there has been consolidation in the channel (24%). While those moves have helped channels survive, there are challenges as well. For example, a number of channel partners took on competitive product lines, including low-cost Chinese products, sometimes private labeled by the channel itself. Bill commented that at SKF, which serves the industrial goods and MRO market, the economic recession resulted in significant downturn in demand. The market shrunk and competition intensified among direct competitors as well as SKF’s channel partners, which are all multi-brand distributors in the United States who sell SKF’s and every one of its competitor’s products. The market share wars intensified, which brought a number of pressures on SKF. Denise indicated that Zebra’s market share was not impacted due to Zebra’s strong brand. However, where Zebra did see a change was in end user buying behavior. Like many consumers today, Zebra’s end customers now do a lot of their own research, have easier access to information, and are more knowledgeable when it comes to being able to use Zebra’s products without the services of a system integrator. Hence, coming out of the recession, end users began using different channels, such as Internet B2C and B2B IT marketers, which were growing more quickly than traditional channels, to purchase Zebra products. Many of Zebra’s traditional channels were contracting or consolidating as a result of the economic recession. Rather than look to sell
  15. 15. 12. Managing Complex Channel Relationships While Creating Value for End Customers Executive Summary 3 ©2014 Blue Canyon Partners, Inc. All rights reserved. competing technologies, Zebra’s channel partners typically looked to get into businesses that were adjacent and/or complementary to Zebra’s products. Coming out of the economic recession, companies are seeing growth, but the landscape has changed. Businesses are accepting the new landscape, but looking at different channels, additional participants, and consolidation within their industry and among their channels, and learning how to adapt. The questions then become how do you thrive in this new environment and how do you manage the channel? New Versus Traditional Channels and Globalization A big issue at the front of participants’ minds was how customers are served by these new channels. While traditional value-adding channels were under stress during the recession, new channels were emerging. Bill gave the example of SKF seeing the emergence of Amazon Supply, a pieces and parts delivery agent, suddenly becoming more active, which concerned many of SKF’s channel partners. The discussion then turned to how do you manage these new channels and how do you manage relationships with your traditional channel partners. SKF sells products through a highly evolved channel. However, it also began to sell systems (products and services) through value-added resellers (VARs). The VAR channel gave SKF a direct business relationship with its customer, but opened the door to conflicts of interest with its traditional channel partners. SKF’s products also are sold through cataloguers and Internet resellers. SKF’s view is that Internet suppliers are an adequate logistics channel, but not ideal for communicating the value. As SKF expanded products, it gained greater visibility into new ways to go to market. All channels are going to continue, but legacy channels will continue to be pressured. Ways in which SKF is effectively managing its channels is through pricing, product offerings, collaborative value creation and communication. VARs are Zebra’s traditional route to market, which it leverages distributors to gain economies of scale. In terms of new channels, Zebra’s technology moved from being a point solution within an end user environment to one that is more connected to the IT enterprise, and as a result, the decision makers have changed. That has been challenging for the existing channel partners who do not have relationships with these buyers. As a result of these changes, Zebra has since aligned itself with the software developers that drive the applications with which printing connects. The end result is an ecosystem of channel partners that can coexist with each other. Zebra uses its channel pricing structure to mitigate channel conflict as much as possible. As customers expand around the globe, serving them in the same way becomes a major challenge, particularly when operating in a multi-country, multi-channel environment. Both the panelists and audience recognized the challenge, but there was no single solution. Recognizing the challenges early on is critical. SKF also looks at areas such as cost-to-serve and distributor compensation models.
  16. 16. 12. Managing Complex Channel Relationships While Creating Value for End Customers Executive Summary 4 ©2014 Blue Canyon Partners, Inc. All rights reserved. Channel Partner or Competitor? When asked if they consider their channel partner to also be a competitor, nearly 70 percent of poll respondents chose yes. As customers put pressure on distributors to offer more and the distributors looked for ways to capture better margins, manufacturers began seeing the entry of low-cost products from foreign competitors, private-labeling, and competitors’ products being picked up by their channel partners. Both Bill and Denise agreed that these situations can be challenging, but offered options to effectively manage the relationship, such as: 1. Invest in marketing to the channel and its end customers. When these situations occur, suppliers are competing for the mindshare of both audiences. Staying in front of the end customer is important because they are ultimately requesting the product and distributors can become protective. 2. Create agreements with distributors as to what markets they can sell into. In some instances, you may find that distributors are selling products into a niche that you do not compete in, or that is too small. 3. Have an open dialogue with distributors on what is the best way to service the end customer. Don’t make the conversation all about price. Focus on where you are providing value. At SKF and Zebra, dedicated resources are aligned with key distributors to ensure open lines of communication and quick resolution of issues. 4. Have a strong value proposition. If the channel can’t communicate your value, it opens the door for lower cost competitors to take away market share. Whatever a supplier can do to solidify its position against competitors who are all about price, the better position it will be in. For example, if you operate in a market where there is high liability, does your distributor want its name associated with a high liability product? Does your distributor have the skills to do what your company does and can it provide the level of service that your company provides? Is your channel partner able to express that value and get paid for it? 5. Offer incentives, such as partner programs, functional rewards, discounted rebate programs, buyer rewards, cost-savings plans, etc. When situations do arise, having a good relationship with your channel partners, particularly at the executive level where they have broader oversight is critical. Bill commented, “In order to have a spirited discussion or an argument, if you have a good relationship you know you’ll get through it. If you don’t have a good relationship, all of a sudden that business discussion becomes a business gripe, and frankly we can’t afford that. We spend a lot of time building those relationships.” Working with Channels to Effectively Deliver Solutions to End Customers In some industries, the channel is viewed as a cost of doing business. In others, the channel provides value by combining products or delivering a combined solution that the manufacturer is incapable to do on its own. When participants were asked how well their business and their channel partners divided responsibilities to make serving strategic customers cost-effective, the majority responded, “Not ideal, but too costly to change.” SKF’s view is that going through distributors is good for the customer and good for the distributors. The distributors can bring either products, knowledge, or presence that SKF does not have, such as access to technologies or access to non-competing suppliers that SKF does not have a relationship with. The two can
  17. 17. 12. Managing Complex Channel Relationships While Creating Value for End Customers Executive Summary 5 ©2014 Blue Canyon Partners, Inc. All rights reserved. work in tandem to create a holistic presence to the end customer. Yet, at the same time distributors are trying to survive and are challenged to dedicate the time and mind share to their key suppliers and customers. But, if distributors embrace the extra value they can bring, then they have to aggressively pick premier partners, just as SKF has to pick premier distributors. From a cost to serve perspective, there are economic reasons to use channels for Zebra. However, the downside to being channel-centric, is the inability to have direct insight into understanding the end customer and having control over the brand decision. To help overcome this, Zebra introduced a Strategic Account Management organization where Zebra account managers have a direct presence (not transactional) with the end customer. Zebra associates with channel partners that have complementary relationships with end users to ensure that Zebra’s solution is promoted to the end customer. Whether they have reduced the cost to serve is unknown, but it engages the channel, ensures the relationship with the customer and solidifies Zebra as the preferred brand. Another observation shared by the audience was that as customers are getting larger, distributors are looking to manufacturers to play a bigger role in managing the relationships. Initially, they were hesitant to share that relationship, but ultimately saw the benefit once the manufacturer brought business to them. The final area discussed related to cost to serve tied into the conversation around new channels, such as Amazon Supply. Both Denise and Bill mentioned that Internet distributors are not viewed as true channel providers, because they cannot effectively communicate the value, and cannot provide the same level of service and support as a traditional channel. However, the cost to serve this channel is burdensome, because manufacturers have yet to solve how to segment the market on the support side. Rather, most manufacturers provide support to anyone regardless of how they purchase the product. Final Thoughts The sessions confirmed that there are a number of areas within a channel that are top of mind among manufacturers, distributors, and those who maintain these relationships. Channel relationships can be complex, particularly in a changing world. Unlocking value is ultimately the end goal, but the key is how one manages the relationship and creates value. The conversations showed that while there are a number of challenges and opportunities that have been addressed, there are others that still need answers. About Blue Canyon Partners, Inc. Blue Canyon Partners, Inc. is a business-to-business management consulting firm that helps clients with their growth strategies. The firm brings a proprietary, research-based methodology to help organizations solve their most pressing growth challenges such as commoditization, industry consolidation, price based competition, channel conflict, new business entry, acquisition strategies, and major customer pressures.

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