Stealing the candy
articles/2006/06/28/3049-stealing-the assets/files/oldimages/3313-mbeauchampsml.gif Ed Holden Jun 28, 2006 Channel Talk
Mark Beauchamp, Citizen Systems Europe (pictured right), asks why manufacturers seem hell-bent on sidelining resellers. -
- Weve all been there at least once before: the big deal that weve worked hard to bring to fruition but which needs an extra level of support, plus product modification by our vendor, with some new software or drivers thrown in for good measure. The deal that we had virtually sewn up until the vendor decided to cut us out of the loop by going direct, maybe giving us a concessionary payment or commission, but essentially taking control of ongoing customer contact to ensure that they reap the benefits of repeat business.
- Bypass the reseller at your own risk
- The trend, especially among large manufacturers, to bypass the reseller network has grown significantly in recent years and is perhaps understandable at a time when operating margins, profits and shareholder values are all under intense pressure. This is, however, an extremely short-sighted strategy as it effectively undermines the hard work that manufacturers and resellers alike have over the years put into building mutually beneficial relationships; perhaps as importantly, it leaves the reseller network as a whole in a weakened position and, in the long term, adversely affects the level of local and national service and support delivered to the end user, upon whom we all depend for our livelihood.
- The reasons given for going direct are many and varied but often include statements to the effect that the reseller channel does not have the specialised skills or resources to support major contracts or long term projects, or that in a highly competitive market there is insufficient margin to justify two supplier partners being involved. In many instances, these arguments are disingenuous and largely ignore the fact that most deals tend to be modest in naturetens or hundreds of units rather than thousandsor require a degree of system integration that the vendor is often poorly suited to provide.
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- Resellers are key to success
- Although I cannot speak for other manufacturers, at Citizen we believe that our reseller partners are the key to our success in Europe. Indeed, our experience proves that many of these partners have far greater knowledge of their markets and individual customers than we could ever achieve without a massive long term investment in staff and overheads. Instead, our approach is to operate a lean and efficient organisation that concentrates its skills and resources on effective long term product development, supply and technical support, leaving our channel partners to act as the crucial interface with customers, be they OEMs or end users.
- As a result, we can work far more effectively with each reseller and, as we do not have the overhead of a direct sales network, but do have the backing of a global manufacturing organisation, are able to ensure that operating margins for our partners are protected. In addition, this ensures that each of our resellers customers receives a far higher standard of service, especially where sales are more complex, requiring product customisation or integration with other system components.
- Realistic expectations help to establish a working relationship
- Ultimately, the relationship between vendor and reseller has to be judged on the value it delivers to each party, in terms of sales, profitability or even prestige. The crucial factor throughout is for both party to be realistic about what the other expects and to understand that the relationship is likely to be either one-dimensional, where the reseller focuses simply on moving standard products, or multi-dimensional, with the two parties working closely together to develop customer-specific solutions and cooperating in areas such as sales promotion, marketing and training.
- From a vendors perspective, this also requires that we accept that many of our channel partners will sometimes choose to source bar code and label printers from our competitors, because either they feel them to be more suitable for a specific project or because they have been requested by a particular customer. In each case, it is up to us as the supplier to address the issue by finding ways of improving still further our product offering, our level of support or the focus of our promotional activities.
- So, the word on the street is vendors beware! Mirroring the strategy of a number of major IT supplies by opening direct online sales operations may be fine as a method of improving short-term margins for off-the-shelf products, but as method of creating long-term market share, customer loyalty and consistent profits it is fraught with potential dangers. Indeed, in an environment where the key to survival is increasingly towards product specialisation and a focus on rapidly developing niche markets or applications, the elimination of the very people who have the market knowledge and contacts and the ability to add real customer value is at best counter-intuitive and at worst potentially suicidal. It is a lesson that, at Citizen, we have been quick to learn.
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- Mark Beauchamp is European marketing manager, Citizen Systems Europe. The company is a worldwide supplier of thermal printing products.
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