Channel conflict occurs when channel partners find themselves competing against one another or a retailer’s internal sales department.
As a retailer, your channel partners are an extension of your sales arm. While it is common to see channel partners whose loyalty belong to a single vendor, most channel partners offer products and services from multiple vendors – this is often contingent on factors such as business model and targeted markets.
Channel partners can choose to go about the business of attracting customers by working closely with their retailers’ sales departments. Sometimes, channel partners get caught up in situations that force them to compete against vendors’ direct sales teams for customers. As a result, an affected direct sales team can opt to undercut the channel partner on pricing or other enticing offers to win the deal.
Channel conflict in marketing arises when a retailer or their channel partners fail to adhere to the deal registration practices or business terms. It is typical for partners to register a sales lead through a retailer’s deal registration program. In theory, this gives the partner security and exclusivity in the partnership for a specified period. Historically, business owners are known to bypass channel partners on opportunities. The common practice has been to give their direct sales team access to registered leads or work with more favored channel partners.
Channel conflicts may also occur within different segments of corporate departments, such as in the sales channel. Here is a good example: the direct contact component of the sales department may be forced to compete against other sales channels, such as with telephone, mail, and online campaigns.
Impact of Channel Conflict
When channel conflict happens, the results can be ugly for both business owners and their channel partners.
Channel partners have to deal with not only the failure of the potential deal but also the loss of the resources they put into the sales cycle.
The sales process may require a channel partner to invest ample amounts of resources, including monetary resources and manpower, into achieving a productive partnership. Hence, if bypassed by a vendor or business owner, the costs to a partner can be substantial and painful.
On the other hand, retailers can earn an undesirable reputation amongst channel partners when channel conflicts arise and go unsettled. Channel conflicts can fan the flames of distrust in partners and can hamper retailer-partner relationships. Some channel partners may even decide to stop working with their retailers as a result of unresolvable disagreements. The loss of a channel partner can expose you to the risk of losing coverage in specific market segments, and this is bad for business.
How to Avoid Channel Conflicts with Effective Partnership Management
Even for the most channel-oriented companies, channel conflicts still occur. Channel conflict can occur because of poor communication, pricing, or even deals hijacked by the direct sales team. In light of this fact, a conscious implementation of preventive strategies is the only way to successfully avoid channel conflicts.
To maintain impressive sales numbers from channel sales, it’s important to keep your products and services top of mind with your channel partners. Depending on the industry, your channel partner may be marketing several other products. Now, the important question to ask is, “what can you do to make your channel partners prioritize you?”
In industries where the competition is high, partners rely on loyalty and trust. The most trusted partners attract the most business deals. Channel managers usually represent their organization within channel relationships. If poorly managed, a channel manager’s decisions in the middle of channel conflicts can have dreadful consequences.
Strategies to Prevent Channel Conflicts
Outlined below are strategies that you can use to prevent channel conflicts:
Prioritize Communication
Your partners must have clear, fluid, and consistent communications from important departments to ensure that the product/service message is uniform.
Also, do well to alert your partners and provide them with bulletins about any new product before its introduction.
Train Your Channel Partners
It is advisable to train your partners regularly. The benefit of doing this is that they will be well-educated on the market positioning of your products.
Track Performance
Evaluating your success is crucial for maintaining impressive levels of business performance. You will get vital information when you measure the performance of your business. This information can help retailers make better decisions, and this can be instrumental in preventing channel conflicts.
Give your Channel Partners Access to a Partner Portal
Giving your partners access to a partner portal is a smart move that will help ensure effective collaboration on sales products and strategies between you and your partners.
Create a Thorough and Sophisticated Registration Process
Your deal registration process can make or mar your partner relationships. Its rules can either promote or dent your reputation with the channel. A deal registration process that is well-structured can be the beginning of a successful partner relationship.
Some of the best practices for creating your deal registration process are as follows:
Incentives for registration
Providing competitive pricing and added support is a common strategy in most deal registration programs.It is an effective way of getting partners motivated to register partner deals. Joint sales efforts, such as collaboration and communication, will live in your PRM.
Fairness
It is necessary to get channel partners to believe that your rules are fair. In a situation where two or more partners are up against each other for the same customer, deal registration can go to whoever is furthest along.
Transparency
Deal visibility should be a vital part of your deal registration process. Update opportunities promptly reps can utilize the information at their disposal to close deals. Sales leadership will also benefit by using this data to understand the channel sales cycle better.
Conclusion
If you are looking to avoid channel conflicts in your business, it is advisable to implement the tips discussed in this article. You are also required to incorporate a channel partner management system that allows you to educate your partners and provide support where and when necessary.
A channel partner program can significantly reduce the cost of administration and mitigate the causes of channel conflicts.
