How Well Does the Channel Communicate?

Communication is critical to developing strong relationships. Be it at the local level, to salespeople, from manufacturer "corporate" to distributor "corporate" and more, sharing direction, information, expectations and performance is important to achieving success.  In fact, this is why most companies take on some type of planning process (albeit with the marketing groups representing about 40% of the industry it has devolved to more target account planning).

A recent study by Channelinsights, highlights how the lack of information available to channel sales executives results in loss of revenue and opportunity. The survey, which solicited responses from 112 senior channel sales and marketing executives — all members of the Baptie Channel Focus Community.
While the research focused on the tech industry which has a history of sharing end-user information with suppliers, the findings also have relevance for the electrical industry.  Conversations with electrical manufacturers is that there are more and more focused on vertical markets rather than broad types of electrical distributor customers.  This means that they want to know where (or what type of project) the product is installed.  The more information, the more opportunity to replicate the sale in other venues.

“In any industry, information and insight are keys to success, but when it comes to channel sales, information is at a premium. Without quick, accurate sales data, companies experience lost revenues, overpayments and ineffective incentive programs,” said Mark Geene, CEO of Channelinsight. “Today’s survey results validate the need for greater visibility into channel sales and demonstrate that companies need new tools to help them attain this information.”


The Channelinsight survey also found that while companies know their partners (87 percent can always or usually segment their channel revenue by partner type), they rarely have insight into market segments (54 percent of respondents said they cannot identify partner market segments).

But the key is that conversations start with information ... about each company's direction / vision as well as needs and expectations, the local marketplace (afterall, the economic influences in Houston, TX may be different than national dynamics), major initiatives, resources and action plans.  Follow-up is critical.  Unfortunately the quality of communication is inconsistent within a company let alone within the channel.

So what type of communication do you expect from your manufacturers / distributors? What are the attributes of a good communicator? And whom are some of the industries best, and worst, communicators (companies only - don't want to make this personal)?

Loyalty & Commitment ... What are They?

I recently posted this on TED Magazine's LinkedIn site and, it seems, it's gotten buried, so I thought we'd re-start the discussion here.

We're working on a project with a manufacturer and during our discussions the topic of "loyalty" and "commitment" came up in the context of distributor programs / rebates.  Essentially, in determining "support" to provide rebate, how to define a "loyal / committed distributor and how to reward them.

In conversations with some distributors, some felt manufacturers should consider loyalty / commitment as something other than sales volume, or sole line relationship, to the manufacturer, but they couldn't define what the "something other" should be (and be something easy to measure and that wasn't too subjective (and hence left to a salesperson to decide!)

In speaking with distributors, they want a manufacturer to be "loyal" to them and to reward them for their "commitment". Manufacturers want the same thing. But most often both parties are doing business with competitors (distributors representing multiple lines, manufacturers selling to multiple distributors in a marketplace covering a comparable customer base - since many manufacturers have barely selective or saturation distribution policies.) Both want to increase their sales and profits.

So, what should be the definition of loyalty? Commitment? Are they the same? How to define, and measure? Or just tie to sales and share the profits (rebate!)?

A Hesitant Marketplace?

Last week was a tough one for the stock market as it dropped for another week with one day dropping 280 points on a quartet of bad news ... low new hiring (only 54,000 new non-farm jobs), the ISM manufacturing purchasing managers' index fell to 53.5 in May from 60.4 in April, the U.S. auto industry suffered its first significant setback in more than 18 months (a 3.7% year over year decline), and the continued decline in home prices (not to mention that it doesn't seem as if any new homes are being built and sold!).  Coincidentally I was also speaking with some distribution management personnel, catching up on industry insights.  One topic seemed to sum up much of the industry's sentiment.

Some want blood from a turnip

Essentially the comment was that everyone seems resource constrained.  Few, if any, are doing any hiring unless it is opportunistic or to grow a niche / target area.  Business owners are concerned about the nascent "recovery", taxes, healthcare, government regulations, the banking system (and lack of credit), the deficit and more.  Employees are focused on keeping their jobs and being able to make their mortgage, given the dearth of available opportunities (jobs).

While there are pockets, and market segments, that are strong, there are a comparable number of areas and segments that are weak.  This marketplace dichotomy, especially after the recent recession, makes business owners hesitant.  And hesitancy drives people to be risk adverse.

While no one had an answer, the consensus was that many business owners may wait till 2013 (elections and the "start" of the new healthcare initiative) to decide if they want to return to being a growth company ... preferring to settle and be a lifestyle company at this time.  While sales have stabilized, or grown for some (especially industrial or energy efficiency-oriented companies), profits have grown at a faster rate due to personnel and expense management.

With housing down, re-locations are difficult, forcing companies to limit searches to local candidates.  Housing also tends to drive light commercial; and larger companies need to continue to grow to justify larger commercial facilities.  Is the export market the economic salvation? (It's helped many industrially-oriented distributors and manufacturers.)


Meanwhile, at the same time we're seeing some of the nationals hiring in selected areas and sniffing / making acquisitions - looking to take share.  And sometimes these acquisitions create opportunities for strong independents in those marketplaces ... are you positioned to be opportunistic when someone creates business for you?!

With many waiting, is this creating opportunities for you to profitably take share? Are you hiring to prepare for future retirements (and new opportunities) or trying to just make it for the next couple of years (and if you are, will your company be as valuable to someone else if you don't have a succession plan and need an exit strategy?)

Are you hesitating or investing and taking advantage of opportunities?

End Run on Distribution?

Recently the big buzz at Lightfair was about a "New Technology" named LED. LED's have been around for a while...distribution has struggled to gain some traction. But there is an end-run brewing in the retail world. It is a little early to be talking about football, but there are some plans that retail has up their sleeves to sell a few LED's.

The trouble about watts and lumens...is Education

LED's have been around since computers gained popularity, in the form of an Off/On button. The problem was that the buying public never recognized the LED for what it could be, namely a source of very bright light that costs less to operate.

But the cost to buy a LED replacement bulb needed some marketing and push. The overriding problem was brought to the surface in a June 1 Wall Street Journal Magazine article entitled "Stores Stock New Bulbs for the Light Switch".

The article describes how Home Depot, along with the help from major LED manufacturers, propose to educate (force) the buying public on what to buy.

And interestingly, in the article, they mention the different "coding" systems some of the major lamp companies will use (which will probably add to consumer confusion) and the article references Home Depot as a major LED brand ... in the same breadth as Philips, GE and Sylvania!

The End run on Distribution

Recently I had to make a quick trip to Lowe's and the local Home Depot along with a side trip to a Wal-Mart (no, I didn't purchase any electrical material!).  In walking the aisles it became apparent that not only were the stores stocked with longtime Name Brand Lamp manufacturers, they were well stocked with less familiar brands (their own private label brands) that were at eye level.

This was true in all three stores that I visited. (and I wouldn't be surprised if the private label product came from the same factory as the branded products)

Coincidentally all these private labeled,  second tier products, were about $4-$8 per unit less than the brand name products.

A Home Depot regional person explained that they intend to market the brand name products as specials and offer coupons for their products. They want the store traffic. Eye level product selection counts for a lot in the retail world.

Somewhere in the past I recall that Philips released some figures that they had sold more lamps through the big box stores than through distribution.

And a couple of other thoughts:

• Did you know that WalMart has 41% market share of the CFL market? Think they are waiting for LEDs to drop in price to then entire the LED residential market bigtime?
• With the cost of LEDs as a replacement lamp currently being expensive and people potentially having the need to relamp their house, could Home Depot or Lowes run a promotion tied to home relamp financing (on the Home Depot / Lowes credit card?)
• Why is Sylvania so focused on selling Lowes special LED lamps and fixtures?

While most distributors have abandoned the home replacement market, could the Home Depot / Lowes also be taking leadership in the education of LEDs.  Could this expand into selling LEDs to contractors? To property management companies? To hospitals, hotels and retail?  Could the lamp replacement market slowly move from distribution to "retail"?

So what is your plan to counter this end run? Tell us what you think can be done. Or do you think LEDs are just a fad and you'll wait till they are the same price of an incandescent?