Does channel conflict concern you? It should. Thanks to the innovations of our digital age, manufacturers have more choices than ever when it comes to distributing their products. But with choice often comes confusion that can even lead to over-saturation of a particular market or the souring of relationships between manufacturers and retailers.
The Problem
Not long ago, retail followed a fairly straight path in which a manufacturer worked with resellers and outlets to sell their products. Today, this same path is winding at best. Due to e-commerce, manufacturers don’t need to solely rely on retailers and distributors to get their products in the hands of consumers. Yet, these channels are still essential and profitable. So what do you do?
Channel conflict is the term used for competing interests within your marketing and distribution channels. This could mean that your bricks and mortar and online channels are competing with each other or even with you if you sell directly to consumers online. The biggest risk posed by channel conflict is to your relationships with these businesses. You want to maintain strong relationships, but it’s hard to do so if you’re going head-to-head with your own distribution chain.
What You Can Do
Let’s not focus on the negative–so what can you do? And how can you maintain strong relationships that are fruitful for both you and your resellers?
The solution is something we like to call channel harmonizing. Instead of risking confusion, competition and miscommunication, you need to strategically manage each relationship. Your business can’t afford to undercut your largest retail outlets by selling direct to consumer. Does this mean you shouldn’t sell directly to consumers? Not necessarily, but perhaps.
One main area to consider is how you price products as well as where and when to run promotions. Consumers are savvy and they now have all the technology they need to find the best price right in their pockets. This means that if you are selling the same product at different prices across online and brick-and-mortar outlets, someone is going to lose out. You need to coordinate your pricing and promotion, but it’s hard to keep track of so many moving parts. This is where your data comes in to answer questions about when and where to run a promotion.
There is no one-size-fits-all solution to channel conflict, which is why you need hard data to make the best decisions. With data, you can see sales numbers, growth and ROI for a specific outlet. Is it worth the risk to the relationship to sell D2C? Crunching the numbers will reveal this answer.
At Ironbridge Software, we can help you make sense of your own data and make the decisions that will nurture relationships. For instance, if you have a relationship with a retailer such as Target, you want to nurture and grow that area. Target likely has more marketing strength to distribute your product than you do, but you may still participate in D2C for certain products. You’ll want to tweak your prices to find a sweet spot between maximum ROI and maximum consumer interest. The best way to fine-tune these numbers is to look at your data!
Are you ready to dig into your own data and strengthen your distribution channels? Contact Ironbridge today to learn more about our suite of products.
Written by Kim Kelly Consulting