For many players attempting to cut costs and boost margins, the natural strategy is to collaborate with more channel partners.
However, if one is known to have a history of lowering prices, the collaboration may prove to be detrimental reports Christel Lee from Print World Asia.
Lately, the pressure to increase margins has been driving printers to seek the most cost-effective solutions. Customers are known to outrightly compare prices between suppliers face-to-face, yet there are catches to the lower prices that many deliberately turn a blind eye to.
One of the most commonly overlooked aspects is after sales service. It would be enticing to assume new machines need minimal servicing – balancing the rationale of shaving more dollars off the contract.
However, the truth bobs up when the machine stalls and the contract price (though low) does not include servicing should anything happen. Combine that with a few more rounds and you could just be better off paying for 'better goods' earlier.
Cheap value
The industry has seen major players changing or adding channel partners for obvious reasons. These recent trends of marketing alliances have proved the point: competition among channels is possible.
Stephen Dent, a pioneer in Partnering Intelligence theory, research and application, notes in his article on 'Avoiding Risks in Channel Partner Relationships': "This is more than understanding whether to choose a reseller, value-added reseller (VAR), system integrator, OEM partner, agent or sales influencer. Selecting the right partner is risk filled without first determining the needs to be achieved by the alliance.
"The best choice for a channel partner not only will have the competencies to meet your needs and expectations but also will have an ethereal fit (values, ethics) with your company. Needs could be factors such as geographic location, subject matter expertise (especially among system integrators), or expertise in understanding millennium-generation issues. You will also want to assess each potential channel partner on the following aspects:
• Has a high level of interest in working with your company
• Allows for a win/win orientation and collaboration
• Creates opportunities for new ideas; is future oriented
Subsequently, working with the wrong channel partners who strive to boost your global presence for the wrong reasons can have far-reaching ramifications. If your reputation (as a press manufacturer for quality equipment) precedes you, would it be worth seeing all this go up in smoke because you have a partner who is selling cheap? If you are a channel partner, your calibre gets questioned if the figures do not show in the books – which may result in losing the alliance altogether.
Partners with benefits
In Dent's article, he also highlights a pertinent point. "What's wrong with operating with channel partners on a deal-by-deal basis? Nothing. These partners may bring your company instant gratification in terms of revenue. But you miss greater opportunities for innovation and increased market share by not working with a strategic partner."
Mitchell Osak, Managing Director of Canadian-based Quanta Consulting Inc, in one article on channel partners highlighted a prominent existing challenge in channel partner relationships. Osak wrote: "In many cases, the Reseller's strategy, operational performance and culture are the cause of under-performance. Specifically, many Resellers are overly reliant on the revenue from a single or small number of another company's products, to the detriment of other firms' products.
"In other cases, the Reseller may be following a scatter-shot strategy of pushing every product without regard to what generates the most profit or best delivers on consumer needs. Finally, the Reseller's culture, personal relationships and operating model may favor some companies or individuals over others."
This will inevitably cause the subconscious branding of 'short-term' and 'long-term' solutions. Such labeling does not have a good beginning. Its first level of segregation is the geographical source, with countries notorious for questionable quality with their rock-bottom pricing. The expensive lesson will come later.
