The manufacturer/distributor model our readership has been engaged in for 40+ years can be characterized as a traditional channel partner model. That said, it has evolved over the years into a price-sensitive, demand aggregation model, where most interactions between the “partners” involve quoting the best price on a print piece that is being shopped around to several suppliers. This is the ultimate broker model, which in an industry with excess capacity is good for the broker but almost always bad for the supplier. Or as one former Moore Business Forms executive quipped, “The broker model works really well…for brokers.”
With the commoditization of print in general and the decline in the forms business, there is a lot of capacity out there chasing limited demand and profitability. Print manufacturers and distributors alike are searching for innovative ways to reinvent themselves and reinvigorate top-line revenue and bottom-line margins. Along with this self-examination comes a hard look at the existing channel, the relationship, and the many challenges it poses. This would be a good time to step back and take a few moments to understand each other’s business drivers- what keeps them awake at night?
Know thyself, know each other, know the customer
Just as it is important to understand what makes the end-user tick, the same lesson applies to channel partners. In all successful client-vendor relationships, this knowledge and sensitivity to business issues paves the way toward creating lasting value that can often trump mere pricing issues.
At the recent DMIA Print Manufacturer and Supplier Conference in Philadelphia, I shared the results of an informal survey of print manufacturers large and small. These were their top business issues:
What keeps print Manufacturers awake at night?
- Lack of control over forecast/sales;
- Lack of access to the end-users of their “products;”
- Electronic communications rapidly taking over print work in the corporation;
- New technologies accelerating the removal of ink/paper from the market in general;
- Looking for new sources of revenue to replace top line erosion;
- Too much open capacity;
- Lack of mindshare from distributors;
- customers and distributors removing value from the transaction;
- “I bought a digital press- now what?”
- Any new product line or equipment investment needs to guarantee workflow to the machine;
- Desire to migrate from a transactional sales mindset to consultative sales and, ultimately, enterprise sales.
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At the same conference, Graham McClean of Global Docugraphix noted the following major issues for distributors:
What keeps distributors awake at night?
- Margin struggles: margins of mature products is declining, and newer products have lower margins;
- Some senior reps are satisfied with the status quo, stunting company growth or contributing to a slight decline;
- I need to invest in technology infrastructure, but I may not want to;
- Is my technology platform the right one?
- Hard to justify hiring new, young, inexperienced reps and living with a few years of “learning the business;”
- Need to recapture some of the compensation plan without antagonizing the reps.
It is interesting to note that both parties have similar business challenges, the most obvious of which can be summed up with, “How do I spend my limited funds to improve my business?” In many cases, the answer lies in educating yourselves and each other. This can be done with “soft dollar” investments, as I’ll describe in a moment. |
Finally, where does the customer fit in the channel and value-creation scenario? Many manufacturers remain insulated from end-users by their channel relationship with the distributor. But if they knew the customer better, the manufacturer could design a more robust offering. And the customer everyone wants to know better are the direct marketers who are spending on direct mail, 1:1 marketing pieces and a plethora of database, mailing and fulfillment services to reach their intended audience with razor-sharp precision:
What keeps (direct marketing) customers awake at night?
- Budgets are slashed – everyone is doing more with less;
- Less knowledge of print and print technologies in their buying organization;
- Pressure from executives to show clear ROI on campaigns;
- “Do not call” and email legislation driving new b2b and b2c marketing models;
- Permission-based marketing a MUST;
- Employ multi-channel models or die;
- Increased noise and competition for consumer “wallet share”;
- Increased competition (between suppliers) for their marketing “spend.”
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Improving the Partnership with Education
Now that you understand each other and the customer a little better, how do you leverage what you know to improve the partnership and improve the business? In my interactions with hundreds of DMIA members, dozens of telephone interviews and after having visited nearly every member website, some lessons hold true:
1+1 = 3. As I noted earlier, manufacturers tend to be insulated from the customer because the distributor has the sales relationship with them. Some of the most successful channel strategies I have seen from your peers are those where the manufacturer teamed up with a distributor to leverage their combined knowledge and propose a unique and creative solution to a customer. This can be accomplished when both parties take the time to learn the others’ strengths and to leverage their combined subject matter expertise. The customer wins, and both channel partners win.
Your distributor holds the key to market research. Many distributors and their reps have developed very specific knowledge of certain vertical markets. They might specialize in insurance, healthcare, agencies, financial services, etc. Within all vertical markets lie specific applications and needs, even regulations that impose strict guidelines for how data is handled. Invest the time in learning about your distributor’s pockets of expertise and collaborate on how to build an offering around these customer needs. This can be accomplished with annual off-site brainstorming sessions or a “QBR” – the ubiquitous Quarterly Business Review.
Print manufacturers have enormous subject-matter expertise. After years of handling tricky data and an exhaustive array of “business forms,” manufacturers have developed knowledge that would greatly improve the customer’s experience and will solve real business issues. I often hear from manufacturers: “We know a better way to do this if only someone would listen.” Listen up, distributors! Give your manufacturer access to the top people in your organization who care about delivering a better customer experience. (Note: This is generally not within the Purchasing department.)
Understand the end-user’s buying process. In the last issue of this newsletter, we published our findings from the survey “What Print Buyers Really Think.” The survey respondents spent some time talking about their buying techniques and how vendors could improve the buying process. Pay attention to these changes in business procurement so that you implement new technologies wisely. In “Managing Channels for Results,” author Adam Fein noted:
“Manufacturers must understand their end-user’s current and future purchasing priorities in order to generate market share gains from new technologies. What’s more, e-business and channel investments will be squandered and unproductive without a clear understanding of what end-customers require from the buying process- beyond a first-rate product.”
If you do it well, productize it. In our last edition, A Guide for Players in a Mature Industry, we pointed out that “distributors need more help in selling applications.” I could not agree more. With a dizzying array of products and selling time at a premium, distributor reps do not have the bandwidth to invest in learning the intricacies of your offerings. You must spell it out in clear, simple-to-understand language and provide the sales tools (value proposition, data sheets, brochures, flyers, etc.) that allow them to easily see why you build a better mousetrap, what business problems it solves, and why customers want to buy it. One manufacturer who does this particularly well always includes customer testimonials and success stories, as well as a description of the vertical markets that their product is best suited for. With these tools, reps can quickly understand where to focus their selling efforts. The bonus of this approach is that once this sales collateral is written, much of the content can be used to populate and bolster your website.
Good Partnerships, Better Business
The path to improvement starts with knowing your partners and assessing their competencies and performance. Giving your partners access to your subject matter experts and decision-makers in your organization will allow you to work together to create value for the customer. And finally, establish in advance how you will work together to avoid disappointing customers. Customers expect a seamless interaction between channel partners when it comes to resolving problems, and true partners do this exceedingly well.
(Pat Veverica is a 20+ year veteran of sales and product marketing, and currently runs a business strategy firm called What’s Your Plan. She is based in Chicago. You may contact her at pat@whatsyourplan.biz)
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