Companies often talk about forming ‘partnerships’ with resellers but these generally result in a one-sided relationship with another business that only one party actually ends up getting the benefit.
‘As it stands, the reseller partnership model works, so why change it?’ This statement echoes throughout the channel. Yet there is room to improve the way that resellers and vendors work together.
Under the simple supplier-and-customer model, neither party has any shared investment or risk other than rates. This offers the vendor less work and less hassle as it is easier to manage churn than adjust the model of business.
Surely it would be better for all parties concerned if vendors made the effort to help their resellers move forward and grow?
Here, the only loyalty resellers feel is linked to price. This is often short-lived as pricing is in constant flux. Any increase in margin will often not last long, and rarely has a resounding effect on the business as a whole. If the margins disappear, so do the resellers.
On the whole, this channel model is dictated by vendors themselves. While many resellers would surely like to work with a vendor on improving their own market share and sales, most vendors just pass their product on for a profit.
Although price is important, vendors get more out of their channel relationships if they give something back. By understanding the reseller’s situation, vendors can improve profitability both for themselves and their resellers.
A vendor should know about issues that affect its resellers, including lead generation, routes to market, profitability and bad debt. Vendors may be more likely to have the resources and knowledge needed.
For example, vendors have an opportunity to share sales and marketing and new business leads with their resellers as a result of their more extensive market reach. This can help resellers without marketing resources maximise their market share, providing a boost to the vendor’s sales.
With insight into the finance of a reseller, vendors should understand the cost and profit margins on each product and be able to more easily anticipate when costs may go up or down.
The one-way channel model may be the foundation of many vertical markets but that doesn’t make it the best model available.
It can guarantee profits but doesn’t maximise them or even attempt to provide stability for the channel. Considering how long the larger vendors have been in the channel, it is surprising that there has not been a bigger shift to a more intelligent way of doing business.
Most vendors have encountered learning curves during the history of their businesses, and can use the lessons to improve reseller business stability. By treating resellers more like partners than another link in the chain, vendors can give resellers a reason other than price for staying with them.
Dave Breith is chief executive officer at O-bit Telecom
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