We Are So Alike,
Then Why Are We So Different?
(Selling Services Through the Channel)
By Jim Payne, President, S-Market Strategies

This article is the second in a series exclusive to SSPA News that will concentrate on the strategies and tactics needed to be successful in selling services through channels. The articles will feature brief excerpts from a book on channel marketing by Jim Payne that is scheduled to be available in the fourth quarter of 2006.

Strategic Flaws

One of the primary flaws that I have observed in companies trying to develop effective channel strategies is the assumption that the channel has the same logic and motivations as a manufacturer itself. The assumption is that “we are all in the same business” so we must think alike when it comes to selling our products and services. Then why are these companies finding that the channel has not been as effective at selling their products and services as they had imagined?

Quite simply, manufacturers are not the same as the channel and in many cases have not taken the time to understand the real needs of the channel. The channel has different environments, business models, expectations and motivations. They may be in the same family, but they had different parents and grew up in different circles.

To understand the differences, consider the business culture that you may observe in relationships with customers when you travel to various regions of the country or the world. Although they all are in the same business, they have different business styles and expectations based on their environment.

NYC vs. Texas Culture

When I meet with a client in New York City, the atmosphere is intense, straightforward and to the point. The objectives and key points of the discussion are often centered on how to define the potential results of the engagement. At the end of the day, we may have a business dinner or cocktails, but it is generally at a high-end restaurant and the discussion is primarily an extension of the day’s meetings.

On the other hand, a business meeting in Texas is likely to have a more relaxed atmosphere. The dress code tends to be more casual and the meeting takes on a friendlier tone with a greater emphasis on the relationship that creates trust in the motivations and ethics. At the end of the day, which generally does not extend much past regular working hours, the business entertainment will generally be at an establishment that reflects their local food and culture. The tone of the evening discussion is more about building relationships than the specific details of the business opportunity at hand.

Although both regions may be in the same business, understanding the differences in professional style and culture is critical to your relationship and the ultimate success of the business opportunity. Taking the time to learn the client’s needs, expectations and environment can put you in their court rather than be an outsider trying to push your way in.

Manufacturer vs. Channel, What’s the Difference?

When it comes to selling products and services through the channel, manufacturers need to find out what makes the channel tick and put themselves in their shoes. The typical difference could be summed up as follows at a very high level with many underlying details that support the basic needs of both parties.

• Manufacturers need to sell their products and services at a minimum volume to recoup their investment in the cost of goods/services and allows them to achieve a desired profit.
• The channel needs to sell someone’s products and maybe services to satisfy their customers’ needs and produce a desired profit.

So, let’s examine the needs and see if we can discover some fundamental differences between the manufacturer and the channel.

First and foremost, the manufacturer needs to sell “their” products or services or a solution that includes their products and services to make a profit. This fundamental business structure directs their business model and the decisions that they make in building their strategies.

On the channel side, they could sell a particular brand of products or services or the competitors’ products and services with similar features and performance. It all depends on what product or service produces the most profits and customer satisfaction with the least effort. In many cases, the end-user does not specify the brand or they can be influenced by the channel to change brands. The channel is often looked at as a trusted adviser to assist the end user in deciding what product or service is the best value to satisfy their needs.

Manufacturers by nature have significant risk in the cost to design, develop and manufacturing their products that the channel does not have to incur. Even in the services segment, the services provider has invested in the people and infrastructure to support their ability to offer the needed level to the channel and their customers.

In the channel, they certainly have less long-term risk than the manufacturer, but the competition in the channel is often much greater than most manufacturers realize. A typical manufacturer may have a handful of competitors biding for their customers’ money that they have to deal with. In many markets, the channel could have hundreds or even thousands of potential competitors if their target covers a large region or nation. Consequently, the channel has the challenge of building a business that differentiates them from a very large and very competitive base. They could use price, value add, services or brand equity, but their competitors will go to school on them and leapfrog them if they are not proactive in continually improving on what they have to offer.

Understanding these differences and building strategies that enhance the channel model can significantly improve sales effectiveness. Taking it one step farther and offering improvements that help the channel be more successful can further increase brand equity and loyalty with the channel.

..........................................................................................

About the Author

Jim Payne is the President of S-Market Strategies of Rochester, New York. With more than 25 years experience in all aspect of services management and marketing, he has found that selling services through the channel can be a highly profitable way to touch a larger marketplace. His innovative strategies, programs and tactics have provided increased market penetration, growth, revenue and profits for businesses such as consumer, IT, healthcare, entertainment, graphics and government for both direct and channel sales.

For more information, to sign up of the S-Market Strategies newsletter or to be notified when Jim’s new channel marketing book is available contact Jim Payne at jimpayne@smarketstrategies.com or visit smarketstrategies.com