There’s a line in Hal Ketchum’s “Someplace Far Away” that is cautionary for sellers in today’s multichannel world: “Be careful what you’re dreamin’ cause it someday may come true.” If you were dreamin’ that a lot of people would want to sell your product (likely because a lot of people want to buy it!), and lo and behold a lot of people do….well, your dream may very well have come true. But along with the potential for sales, having a plethora of sales channel options creates the potential for conflict – channel conflict that is. And channel conflict can be absolutely destructive to your sales efforts and to your company.
Below are some quotes that we have heard from our clients and their channel partners over our 16 years helping companies accelerate sales growth:
Direct vs Retailer Conflict:“My customers can buy it cheaper from you directly online.”
Online channel conflict: “You’re all over Amazon.”
Direct vs Distributor conflict: “I have no interest in working with a supplier whose outside sales team competes with me.”
Or the dreaded Intra-company conflict:“Our inside sales team is competing with our outside sales team!”
If the sounds from your field sound at all like the quotes above, then you should be on red alert. Let’s examine some root causes of channel conflict, and how multichannel sellers can best manage it.
Causes of and Solutions For Channel Conflict:
In our experience, channel conflict generally stems from one of three areas: 1) greed, 2) lack of communication with channel partners and, 3) a lack of a rule based channel strategy.
Let’s explore greed first. An example of channel greed is keeping a big sale in house rather than giving it to a channel partner as required by your channel rules. Sure, there are a lot of ways to rationalize doing such a thing. Maybe it’s a tight quarter and you need the extra margin. Maybe a new sales leader is trying to prove his or her worth by bloating the in house sales pipeline. It can happen. Good lead distribution procedures can guard against greed in many cases. But when a sales manager sees it happening it must be dealt with immediately. Consider the Broken Windows Theory of policing in the context of allowing bad/greedy behavior go in your sales organization.
Paraphrasing the Broken Windows Theory, it states that visible signs of crime and anti-social behavior can create an environment that encourages further crime and disorder, including serious crimes. The same is true for bad behavior in your sales organization. If small instances of greed are not addressed you can be sure they will grow in frequency and size to the long term detriment of your business. Deal with it immediately.
Another source of channel conflict is simply poor communication with your channel. No one likes business surprises, and your channel partners are no different. As you enter a new channel, add channel partners or expand into a new region, your existing partners, regardless of channel, will have questions about how this impacts them. Proactive, open communication with your partners, highlighting both the opportunities, and potential risks to them (if any) will not only help ease discomfort from the channel, but also will allow for valuable feedback from them on your strategy. The Voice of the Channel (VoC) is a valuable tool for multichannel sellers, and a formalized VoC capture program should be instituted to ensure that it remains an integral input in your channel decisions.
Finally, good channel management is always rules based, both from a lead registration, strategy and compensation perspective. Creating and managing a lead registration system is a challenge for most growing companies, but the value in keeping the channel peace and be enormous. Rules for registration will help avoid conflict, and of course provide expansive insight into your pipeline. As part of your channel rules, each channel participant should understand what their “lane” is and where and to whom they can and cannot sell. A good rules system is detailed and includes discussion of scenarios governing the inevitable gray areas where channel sellers will cross paths (both vertically with other channels and horizontally within the same channel). Your rules system may also seek to remove financial incentives for channel conflicts. Strategies for doing this will vary by industry and company, but at the core, removing financial incentives means creating a broad based compensation structure that aligns the financial interests of potentially competitive channels/sales professionals. Your channel rules should be reviewed, revised as needed, and redistributed annually, on a per partner basis if possible.
It’s important to remember that your channel partners likely have capabilities that you do not, frequently around customer service. Understanding your channel partner capabilities and utilizing those for mutual benefit will deepen the partnership and lessen the likelihood of channel friction. Regardless, building a multi channel sales operation and the associated partner relationships is a long term investment that requires long term thinking. Let the vision of your business 5 years from now and beyond be your guide in dealing with channel conflict and your dreams may come true in the best possible way.