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CHANNEL CLINIC

A reseller or service integrator (SI) cannot compete unless they add value.

Becoming part of the box mover/commodity mentality is the opposite of this, so resellers need to get closer to a supplier who is serious about helping with real expertise and work towards a long-term profitable relationship.

This is not just an off-the-cuff opinion - over many years as a successful distributor we made it our business to find out what the IT channel wants and has problems with, and more importantly, have discovered some of the common traps to avoid.

One of the biggest pitfalls in our experience was the widespread practice in the IT industry for manufacturers to slowly but surely take control of relationships directly with customers; usually just the large, "special" clients but sometimes a whole sector of smaller but geographically or corporate politically important customers.

This angers and frustrates resellers, as they lose potential new clients by being cut out of the loop, and existing clients often don't even realise why they aren't being specified.

It can happen in several ways, but the most usual scenario is when a customer responds to a coupon on an advertisement and the sales lead (when included) is given out to the channel randomly, politically, or through distributors to their choice of reseller for any number of reasons.

Unless that customer specified his regular reseller, he is bypassed. Sometimes the distributor has a cut-price direct sales division, so the reseller has to compete with that reduced margin price or lose the sale.

Surprisingly often, when the lead is considered important or too large, the manufacturer will visit and negotiate directly with the customer.

Another trick that irritates the channel is direct sales from the manufacturer's Web site. Right now one of the major uininterruptible power system (UPS) suppliers sends anyone that views its Web site directly to a cut-price, (no service) superstore. Customers immediately expect a discount price point, and often buy direct or online from that store.

Yet another shortsighted method of the direct sales type manufacturer is what is called "strategic alliances", with other major IT manufacturers, for example a big brand server, being allied with a peripheral supplier.

In practice, what this means is the reseller can miss out in two more ways; on margin and on customer relationships. The big brand server not only recommends the allied peripheral when they sell their servers, they sell it as well as part of bundles and special customer deals, at a special bargain price. The value added reseller (VAR) or SI usually can't match this price, that is, if they find out about the deal at all. Worse, they can lose an existing client who would normally buy from them but is forced to use the server manufacturer as a supplier because they are part of the package or "approved specified supplier" within the deal.

I know of at least two instances recently where large resellers have lost the entire business of a client who was sent elsewhere, just for the UPS. It's not the client's fault - they see the brand, call 1800 and bang, end up with a reseller or distributor who they think is the best choice because it has been recommended.

At Chloride Hytek we believe that it is a reseller's job to build a relationship with its clients. To accomplish this we give them extra margin, and invest the rest in building brand awareness.

If the customer wants a cheap box and zero service they can go to a mass merchandiser corner store or computer superstore whenever they need to buy on price. But I have talked to frontline sales people in those stores who say that up to half of their in-store traffic consists of window-shoppers, who go elsewhere to buy.

The smart reseller will want to build customer loyalty and reliance on the value they add. And to help with that, they should work with suppliers who don't put coupons on the bottom of ads, direct links on their Web site or future business will eventually be enticed away from them.

Jacques Tesson is the director of Chloride Hytek. Reach him at jacques@vitalenergy.com.au


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