One of the main components of effective lead management is clearly setting the boundaries for all sales channels. This is accomplished by requiring internal as well as your partners’ sales personnel to register new leads and provide updated information about their progress in converting these opportunities. In this way, dealers can protect their “turf,” eliminating the possibility that another dealer will try to sell the same product to the same customer. Such a scenario can cause big problems: channel friction, not to mention lost profits.
To illustrate how channel partner competition can occur, and what the ramifications might be, let’s imagine that your company manufactures office printers and you sell almost exclusively through indirect sales channels. You’ve recruited two dealers to sell your products in Town X. Both dealers sell other brands in addition to yours.
An Example of Sales Channel Partner Competition
Dealer 1 pays a visit to a large corporate office in Town X and sets up a sale of 30 ABC printers. Before the contract is signed, however, Dealer 2 calls the same corporate office, offering the same product. The office manager tells Dealer 2 that he has already committed to another distributor. At this point, Dealer 2 knows that the office manager is definitely in the market for ABC printers and he asks about the price offered by Dealer 1. Dealer 2 then proposes a lower price and closes the sale.
The corporate office manager is happy because he just saved his company a large amount of money. Dealer 2 is happy because he earned a nice commission and may have a steady customer. But you’re not happy, are you? Your company’s product just sold at a lower price, decreasing profits on that particular sale – and possibly “lowering the bar” for future sales. And Dealer 1 is absolutely livid because he cultivated a relationship with a potential major customer for months, only to lose out on the sale to one of your other dealers.
See our Channel Conflict Whitepaper: Reducing Channel Conflict - Understanding Industry Best Practices
Dealer 1 may decide to focus on the other brands he sells, rather than yours, fearing a repeat of the above situation. Or he may not be motivated to give his best effort, feeling that your sales procedures are hopelessly disorganized.
Now imagine that this type of scenario happens frequently, throughout all of your sales channels, affecting dozens, maybe hundreds of dealers. It’s not only costing you potential profit but possibly the services of good salespeople. This is a classic case of channel conflict.
The Solution: PRM Software
You figure that there has to be a better way – and there is. Virtually all of the potential problems involving lead traffic can be avoided by using partner relationship management (PRM) software. These systems enable companies to monitor and manage leads so that channel partners are not competing with each other. PRM software systems are generally easy to install and use on both the manufacturer and partner side. Basically, PRM software directs all the essential sales information into a central cloud-based platform that management and dealers can access. Managing leads is a major capability of the system.
PRM Systems Avoid Channel Competition
PRM software enables manufacturers to avoid channel partner competition by:
- Clearly defining sales territories and accounts across all channels, enabling sales personnel understand which accounts and territories belong to them.
- Requiring lead registration, a system that allows channel partners to register and protect new sales opportunities.
- Providing the tools for management of the entire sales process, including the authorization, approval or redirection of leads that are registered by competing partners.
Lead registration and monitoring are critical elements for reducing conflict in the indirect sales channel.