There are many unique challenges which can face an indirect sales ecosystem, but perhaps none can be as pernicious -or harmful to long run optimization- than channel conflict. Channel conflict is any situation where there is a conflict of interest between a vendor and their sales channels which, in effect, causes components of the sales ecosystem to fight against each other rather than working together.
Channel conflict is inherently wasteful, plus it has a tendency to snowball when left uncorrected. Sales ecosystems have withered and died due to unchecked channel conflict. Below we list the most common causes of channel conflict in indirect sales ecosystems.
1. Mixing direct and indirect sales
Simply put, any vendor which is attempting to sell direct to the public and to sell via partners is creating a situation where channel conflict is inevitable. Many partners will outright refuse to work with vendors who sell direct, for this exact reason. Examples of companies successfully mixing direct and indirect sales are very few and far between. Generally, a company must choose one or the other.
2. Giving partners too much pricing control
It might be tempting to give partners leeway in pricing, but too much leeway will create problems – particularly if there are multiple partners serving the same market. The partners may be increasingly tempted to undercut each other, or potentially even start selling at a loss if they believe they can make up the difference through value-added upsales. This can easily turn into a situation where destructive conflict decreases the value partners see from carrying your products\services.
It’s important to always keep tabs on your partners’ pricing, and have firm rules in place covering when and how discounts can be applied.
3. Too many partners serving too few customers
This tends to happen when a vendor has poor geographic or demographic targeting when signing up sales partners. If the customer base is too small to support the number of partners, two things may happen: either they lose interest in pushing your products, or they start competing directly with each other. The latter can quickly create a lot of bad blood, and conflict that spills over into creating genuine channel management problems. A channel manager will start getting an earful, if the partners think they’re being forced into competing with each other!
4. Strategic or marketing mis-alignment
This form of conflict comes from situations where the vendor and one or more partners have different visions for the product, or the proper market for it. If Parter A is pitching your product as an all-purpose mainstream solution, while Partner B is trying to pitch it as an exclusive up-market product, this is going to cause a lot of tension and conflict. It could also confuse buyers, or even damage your brand perception. That said, this is one of the less-destructive forms of channel conflict, and could be managed with clever marketing – or even turned to your advantage. We’ll dig into this topic a bit more in the next blog, where we talk about fixing existing channel conflict issues.
5. Resistance to change
It’s easy for partners to get set in their ways, and be resistant to new initiatives, new product rollouts, or other changes you’re implementing. In worst cases, this can lead to situations where some of your partners enthusiastically embrace the changes, while others insist on sticking to the old ways – confusing buyers and harming your brand. One good example of this would be fast food franchises where individual stores cling to old signs\logos for years (or decades) after corporate introduces a new look. It might even become difficult for customers to tell legitimate outlets from knockoffs!
Generally, what you need is better communication. “Sell” your partners on the changes, and your partners will have no problem selling customers on them!
Managing Channels Requires Superior Oversight And Communication!
To prevent conflict in your sales channel, you need the ability to keep tabs on all your partners and their actions, while having open lines of communication at all times. LogicBay makes this possible! Our winning combination of expertise and custom software implementations gives you the tools necessary to oversee and optimize every aspect of your ecosystem.
Contact LogicBay for a full demonstration of our methodology in action!
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