Pricing Paranoia Hits
The only segment of the market making significant investments in IT products right now is the SMB arena. But instead of helping SMB solution provider partners with pricing policies that assist them in breaking into new accounts, vendors are cutting off their oxygen supply.
It is a case of what I call "preferred pricing paranoia." Remember that paranoia is defined as a chronic psychosis characterized by well-rationalized delusions of persecution or grandeur. What is happening is that some major vendors have constructed channel pricing programs that grant pricing or marketing advantages to a few big partners,all in the name of the well-rationalized delusion that these select sweet-deal partners will sell a much greater volume of products in a single swoop.
These select partners,which sell solely on price and are about as solutions-oriented as carnival barkers,then proceed to discount the products to the bone. Ultimately, they may dump the products at or below cost into the hands of a gray-market supplier or an online auction house like eBay. The end result is a commodity product that offers zero profit margin for solution providers focused on the SMB market.
It's amazing how prevalent preferred pricing paranoia is right now among big-name vendors including Cisco Systems, Sun Microsystems, IBM and Hewlett-Packard. Meanwhile, Microsoft's targeted marketing campaigns with direct marketers CDW Computer Centers and PC Connection are putting SMB solution providers at a disadvantage.
If vendors really want to break into new accounts, they should eliminate preferred pricing tactics and provide a level pricing playing field for the multitude of solution providers breaking into new accounts. If these major vendors do not make changes and make them fast, SMB solution providers will find alternatives such as white-box PCs and Linux. The choice is clear: Vendors can either get treatment for their preferred pricing paranoia or get tossed out of lucrative SMB accounts by solution providers.
What's your perspective on pricing? Let me know at (781) 839-1221 or via e-mail at [email protected].