Channel conflict between a manufacturer and their channel partners, or between channel partners themselves, can be a major source of frustration for all parties. While the complete elimination of channel conflict may not be a viable goal, some action to mitigate the worst of the impact is certainly required. Clear differentiation between channel partners and a clear focus on each partners unique value proposition for customers may be the key.
According to Kaplan and Norton “Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation.” Clearly any company that is going through a transformational strategy must also transform its value proposition in order to communicate this new relevance to customers.
A useful tool for conceptualising the value proposition for your company is something called the “Value Proposition Canvas” (see image below). On the right hand side is a chosen market segment, with the typical customer needs (jobs) in that segment along with gains they are seeking and pains they wish to void. On the left hand side are the company’s product and services, interpreted in the form of the gain creators and pain relievers which they can bring to that specific segment. The tool can be used to evaluate multiple market segments to understand how the company’s solutions might be most effective as Gain Creators or Pain Relievers for each particular niche.
Value and channel conflict
Once the leadership team have identified a strong “fit” between both sides, they have the basis of a strong value proposition for the company.
It is critical that the transformational strategy is re-interpreted into the language of a new value proposition so that both staff and customers can understand and communicate it in terms of how it provides gains and solves pains for the customer.
According to the National Federation of Independent Business (NFIB), over the lifetime of a business only 39% are profitable, another 30% of businesses achieving break even, the other 30% lose money and 1% cannot say. Clearly, making a poor strategic choice for the direction of the business transformation will have disastrous consequences.
In order for the executive team to make the best choice for the company they need to formally evaluate their strategic options, and determine which of these is the best “strategic fit” for the company going forward.
The Ansoff Matrix (also known as the Product/Market Expansion Grid) developed all the way back in 1957 still provides business leaders with a quick and simple way to think about the risks of growth. This tool allows the VAR leadership team to compare options from the perspective of Current versus New Products, and Current versus New Markets. The matrix is a useful way to analyse strategic options in terms of their risk profile.
Managing channel conflict strategy
The Matrix shows four strategies a VAR can use to grow. It also helps you analyze the risks associated with each one. The idea is that, each time you move into a new quadrant (horizontally …read more
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