Strategic Planning

How to Improve Distribution Channel Performance

improve distribution channel performanceDistribution channels have become the least glamorous strategy in the B2B marketing portfolio. Who writes about building channels, nurturing partners and how to improve distribution channel performance?

I feel grizzled just tackling this subject. Social media, search marketing and new media are the topics with heat even in the B2B crowd (a small group compared to consumer marketers, I might add). Frankly, there’s been nothing new or exciting to say about distribution strategy for many years.

Many marketers in established companies don’t give much thought to distribution strategy. Maybe it’s because they think of distribution as the movement of a physical product from one place to another.

Or maybe it’s because distribution is a strategy that’s only discussed in the executive suite, and marketers often don’t have a seat at that table. Maybe it’s just because it’s rare to find new case studies and stories about innovative channel design and management.

A key marketing strategy

But distribution strategy (one of the “4 Ps”, BTW) is perhaps the most important weapon in your arsenal. Great distribution strategy and execution can dramatically boost your top line. A poorly-performing channel can do the opposite.

For many B2B service firms (including SaaS companies like us who don’t physically distribute a product), “channels” are somewhat intangible and take creativity to apply. For example, you can create a private-label version of your service and offer it to large partners to offer to their customers. Or you can create a packaged offering where you join forces with other companies to offer a larger suite of services.

We’ll write more about creating channels for service companies in our next post. Today I’m focusing on improving an existing channel using H-P’s PC division as an example.

H-P versus Dell

While H-P used to own the #1 spot in the PC market, Dell took over the top spot in 2003. Dell’s direct distribution model became the envy of all PC manufacturers and made them a darling on Wall Street (and a case study for all MBA students). Christopher Lawton’s post for the Wall Street Journal provides great detail about H-P’s fall and strategy to regain the top spot.

It started in 2005 when H-P CEO Mark Hurd hired Todd Bradley to run its PC business. Bradley quickly found out that H-P was concentrating resources where Dell was strong: in direct sales over the internet and phone.

More importantly, in focusing in head-to-head competition with Dell, H-P was neglecting its retail stores. Bradley found a slew of problems:

  • Late and incomplete deliveries
  • Strained partner relations
  • No marketing focus (the printer division handled PC marketing)

H-P’s research also showed that 58% of PC buyers had no preference whether they bought a PC in a store or online.

Let the plum tree wither for the peach

So instead of fighting a losing battle online, Bradley shifted H-P’s focus to a battle it could win: in the retail distribution channel.

Bradley immediately began repairing relations with retailers, freshened designs to appeal to retail buyers, formed the PC’s own marketing group, upped his retail outlet marketing budget, and designed new campaigns targeted to the retail buyers.

Some of his campaigns such as “The Computer is Personal Again” with rapper Jay-Z and fashion designer Vera Wang alarmed H-P employees, who felt Bradley was too focused on consumer PCs, ignoring corporate business.

He shrugged off the criticism. “I wasn’t holding an election.”

The results? H-P’s retail outlet strategy vaulted it back to the undisputed world lead in personal computer sales.

When you’re losing marketing share, shifting the battle to one you can win might work for you. (It’s one of the 36 Stratagems of ancient China: Let the plum tree wither in place of the peach.)

Six ways to improve distribution channel performance

If you need to improve your channel performance like H-P, here are six things you can do to improve your top line.

1. Make it a priority. Devote resources to channel management – preferably at least one dedicated manager whose sole responsibility is to manage those relationships and build the marketing programs to drive revenue through the channel.

2. Develop measurements and track performance. Know who your best sales performers are at each point in the channel. By tracking orders, volume and total revenue at each point, you can identify and improve underperforming partners and keep your top performers happy.

3. Communicate! Build relationships at each step of your channel. If you’re not talking with your partners, how can you identify problems and solve them? And how will you know whether your programs are working and how to make them better?

4. Drive revenue through the channel. Take ownership of the marketing campaigns that will drive revenue at all levels through the channel. Your partners have to focus on building their own customer base, not marketing just your product (remember that you’re not the only solution they offer).

5. Avoid pricing conflicts. Establish a pricing strategy and stick to it. If channel conflict arises because of price, attempt to resolve it ASAP.

6. Address conflicts swiftly. Since distrust and channel conflict is common, it’s important to address problems quickly to find a solution.

After writing this, it’s even clearer to me why there’s no buzz about channels. Building and managing traditional channels isn’t glamorous and requires a lot of elbow grease. But even though channels have little sizzle in the marketing mix, they’re a big piece of the steak.

Distribution channels – not sexy, but smart.



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