Some of the best ideas in business arise during difficult economic conditions -- Google, the iPod, Campbell's condensed soup and McDonald's assembly line "Speedee Service System," for example1. Remarking on this phenomenon, Jeff Bezos of Amazon observed that, "constraints drive innovation."
With this concept of innovation in mind, we've worked with several clients to brainstorm novel cost-saving and revenue-producing channel ideas. In this article, I provide a random list (innovation, after all, is a fairly random process) of creative channel concepts. While I think some of these ideas might help your company, my goal is spurring more creative thinking, not mere copying.
- Change your contract terms. Probably buried within the fine print of your distribution contracts are specific terms that cost you hundreds of thousands or even millions of dollars, without much corresponding payoff. Payment terms that exceed the industry average? Too liberal with your returned goods policy? Freight FOB your dock? Freight not linked to gasoline costs? Rebates based on "dollar one" purchases vs. incremental sales? Volume discounts that simply shift purchases from period to period, but don't affect market share?
- Surf the Web 2.0 wave. B2B companies are way behind their consumer goods counterparts in using emerging, relatively low-cost, next-generation Internet technologies to reach partners and customers. Blogs, RSS feeds, social media (e.g. LinkedIn, Facebook, SAVO), wiki's, mash-ups, etc. can bring you closer to partners and customers at a lower cost than your annual trade show budget.2
- Shorten the chain. Some routes-to-market are notoriously long and inefficient. Vendor to buying group to distributor to contractor to customer, with some sort of consultant or designer mixed in for good measure. Can you eliminate one of these steps? Maybe just for a subset of products? Even if your answer is "no", can you reduce the number of hands that touch any given function? Heck, flip the cards and sell direct, maybe via telesales or the web. You can still use the channel, but more as an agent or service provider.
- Franchise the channel. I don't mean legally franchise your partners, but require exclusivity and/or formidable technical certifications to create a channel that strongly reflects your brand message and business philosophy. Wander through a BMW or John Deere franchisee for ideas. Obviously, this strategy will only work for vendors with powerful brands and/or a specialty channel. If this doesn't fit your company, consider idea number 5 below.
- Create a store within a store. Maybe you've walked into a department store and seen the Chanel perfume counter or into a Best Buy store and seen a Hewlett-Packard kiosk. If you can't "franchise" your partner, maybe you can carve out a specialty arrangement within the partner's overall business. Require at least one person focused solely to your line. Maybe pay a third of their salary. Consider the kiosk concept or dedicated shelf space/signage if you sell at retail.
- License or extend the brand. Although not uncommon (especially in B2C) licensing or extending a brand represents a novel revenue possibility for most companies. Brand extensions offer vendors an additional advantage –more clout in the channel due to a broader product mix. Clearly messing around with your brand name entails risks, so exercise due diligence.
- Move the dog in with the cat. Channel conflict usually increases as the economy sours. Your direct salespeople might target smaller accounts traditionally served by partners. Your broad-line distributors might cut prices further to steal customers from your specialty resellers. Rather than play referee, become a marriage broker – help these channels forge partner-to-partner networks, contracts, etc. to close business jointly that they might lose separately.
Whether you want to pursue these ideas or generate your own, don't be scared off by potential objections from the channel or inside your company. Desperate times are a useful tool for building consensus. Have fun!
1. The McDonalds brothers introduced the "Speedee Service System," the world's first cook-to-forecast process, in 1948, thereby establishing the principles of the modern fast-food restaurant.
2. RSS feeds are a type of streaming news service. Wiki's are collaboratively managed and edited web pages. Mash-Ups are ad hoc combinations of data, such as a database of stores from one company plotted on a population map supplied by another company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.