“Status quo--you know, that is Latin for ‘the mess we're in.'”
-- President Ronald Reagan, 1981
What is needed to achieve better results from marketing through the sales channel?
That was the question we asked ourselves on behalf of a number of clients. Several brainstorming sessions later, we had come up with clever ideas, but realized they were simply variations of the same old tactics. In analyzing the issues surrounding channel marketing, we saw that there were a number of obstacles that keep pushing us back to the status quo.
How do all of us develop channel marketing practices that would put some life back into the by-the-numbers effort characteristic of so many campaigns? We strove to reinvigorate ourselves, our channel partners, and—most of all—end users.
We found that with a few basic yet important changes sales channel marketing not only became fresh again, but also gave us predictable sales growth and improved return on investment. And it all boiled down to one word—guarantee.
Channel Marketing Problems
The biggest obstacle with channel marketing is that the dealer, retailer, or independent agent does not implement the marketing program in the way it was envisioned by the marketer. This happens because channel partners are independent businesses with objectives that don't always match the marketer's.
For example, sometimes co-op dollars and/or market development funds are spent by the channel partner on advertising older product lines or used products that offer higher margins, rather than on pushing new products. This is a classic case of incompatible interests.
A second example is the use of in-store promotions. Too many times great in-store promotional efforts are run late, haphazardly, or not at all by the retailer and a significant investment in that campaign becomes wasted effort.
Marketers are hesitant to make changes to long-standing programs because those differences might upset or anger channel partners. Rather than responding nimbly to alterations in the competitive landscape, marketers maintain the status quo.
This appears easier than tackling what is perceived by many as an intractable problem—persuading the channel to do what we want it to do. Changing the channel is doable, but it takes time. It doesn't happen overnight and it can breed resentment.
Marketers fear pushing key members of a channel into the hands of the competition. Better to continue what is tried and true, even if it produces lackluster results.
Marketers also have a deep-seated perception that all that can be done, given time and resources is being done. Why take on a major headache and attempt to change the unchangeable? We are doing everything possible, aren't we?
With the obstacles clearly identified, we began using three concepts that could overcome the barriers in interesting ways.
The first concept we call the “Opt-Out Co-Op Campaign.” This is a corporate administered marketing campaign that can include billboards, print and electronic advertising, and direct communications in the channel partner's local region. The program is partially funded by the local channel partner's co-op marketing dollars.
Corporate marketing handles everything from creative development to placement. In this way the marketer effectively controls all aspects of the promotion. Channel partners have the opportunity of opting out of the promotion if they do not want their co-op funds to be used for the campaign.
This approach guarantees that the right messages are placed at the right time in the right media. And we can gauge results—we know what was done and how much it cost. A drawback is that even with the opt-out clause some of the channel partners might feel the tactic is overbearing. Of the three concepts this one ranks in the middle in terms of cost. What happened? A recreational vehicle client ran an opt-out program. Approximately 10 percent of dealers opted out, leaving 90 percent in. The client saw a 50 percent increase in exposure over previous co-op programs. Sales doubled as a direct result of the opt-out campaign.
The second concept for reinvigorating channel marketing is termed “The Opt-In Incentive Program.” The goal here is to convince the partners of the value of allocating co-op dollars for a campaign based on incentives. The strength of this approach is that it offers a favorable ratio of cost to benefit. The drawback is that the marketer risks low participation. Of the three concepts, this is the lowest-cost option.
Results: A major home appliance manufacturer developed a television ad campaign with messages localized for each sales region. Channel partners were asked to contribute co-op marketing dollars to fund 50 percent of the local cost. The marketer produced the ads and made all the media buys. The incentive to opt into the program was the offer of several of the featured appliances free to each participating channel partner.
Sale of each free unit offered pure profit for the partner. Exposure in participating regions increased 10 times over previous campaigns. Costs to the marketer were only slightly higher than normal. Sales which were otherwise flat in this mature channel grew 5 percent.
The third concept is called “Guaranteed In-Store Promotions.” This solution guarantees that marketing materials and promotions are properly set up in the channel partner store at the right time by having a trained company representative go to the location and perform the required work.
The strength of this approach is the guarantee that the marketer's vision for the location actually happens—and on time. The drawback is cost. Of the three solutions, this is the most expensive. Although not a new concept, it falls under the heading of guaranteed and definitely has a place and a lesson to tell.
Results: Local bottlers of an international beverage company trained drivers to arrange displays. They were also trained to work directly with in-store personnel, making them aware of the details of a promotion and getting them behind it. Promotions were properly implemented at the local level more than 90 percent of the time. Promotional campaigns consistently met or exceeded sales projections. That did not occur prior to the guaranteed placement.
There Is That Word Again—Guarantee!
The key to reinvigorating the sales channel is for the marketer to guarantee delivery of message, through media of choice, at the time of choosing. It is precisely the lack of guarantee that has led to the fundamental problems associated with channel marketing.
Guaranteeing message, medium, and timing can cost more and may require external resources. And it may, quite frankly, ruffle some feathers, but few in the channel will likely fly the coop. At least that is what we've experienced.
On the other hand, advances in technology and communication make control of localized campaigns much easier than in the past. And with each implementation of opt-out, opt-in, and guaranteed in-store placement, the return on investment was significantly better than traditional methods. We've run these campaigns through a number of different channels from insurance to heavy equipment with consistent results. We are beginning to learn to predict the return on investment for each type of campaign. With confidence, we are moving clients into using a mix of these concepts depending on need and peculiarities of the channel.
Our advice is to work toward guarantees of message delivery. Ask yourself this question as a test, “Have I developed a means of guaranteeing that this brochure, ad, billboard, postcard, news release, in-store display—whatever—reaches the end user?”
If the answer is no, determine the cost/benefit ratio of the uncertainty factor. Be prepared to expand budgets slightly when ensuring guarantee. Don't worry too much about upsetting the channel because both channel partner and marketer are after the same result—increased revenue.
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