Loyalty, Dogs And Money

I've walked out of interviews with CEOs and been blown away by their vision. More often, though, I've left their office suite wondering how they got there.

Through it all my approach has always been to look at things from the solution provider's angle. I've said it before: The channel doesn't exist because vendors want to be nice. It's there because it's efficient.

And that is the fundamental rub that I do not believe will ever be completely settled.

There will always be people inside every large vendor organization that don't, can't or refuse to understand how channels truly work and how a dollar of investment in channel sales can return much more than a dollar invested in direct sales.

Why is that? I hate to say it, but it's all about control.

Everyone wants to control the account or they feel vulnerable. That's true to some degree, if you don't have good programs and a willingness to listen to your sales channels.

The trouble is that every vendor is made up of hundreds of individuals, not all of whom believe in or understand channels, and oftentimes they do things that have an adverse effect on channel sales profitability. They then use the impact of their own actions to argue that channel sales are less profitable.

Here is a not-so-hypothetical example: A vendor closes in on the end of a quarter and needs to make its number. The CFO is tracking how things are going and determines it's not going to happen unless an incentive is put in place. Lo and behold, the vendor offers a special program to the channel that offers some sort of back-end or front-end rebate. Something we all know never really happens. Sure enough, the desired effect happens and the company ships lots of product.

Then the same brilliant CFO dog that came up with the problem runs the numbers three weeks later to prepare for the earnings announcement. Trouble is, the CFO forgot about the vendor-initiated special price, which now, of course, resulted in a per-unit sale through the channel that is less profitable than direct.

So the debate begins inside the organization about how the channel is less profitable for the company. And then, because the channel was stuffed to the gills, the next quarter's sales fall off and the inflated market-share gain caused by the stuffing corrects itself but looks like a market-share loss. Then, of course, the channel is accused of not being loyal and selling the competitor's product.

But hey, look on the bright side. None of us would have it any other way.

Contact Bob at: [email protected]