K2-B Ontdek de formule van ondernemen

How to turn a good relationship into a profitable partnership?

By Reijer van Baar, partner at K2-B Commercial Services K2-B 2009© - www.k2-b.nl

Guidance for building and maintaining partnerships

relation

not or limited depending cooperation

partnership

fully depending cooperation

Partnership is more than a relation

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Content

•  End-user buying behavior •  Channel distribution •  4 P’s of marketing •  4 C’s of channel •  Partner management •  The use of power tools •  Profile of the perfect partner •  Last thought…

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End-user buying behavior

•  End-users have needs and wants and they buy image, service, efficiency and availability

•  The process end-users go through is: –  Needs and wants identification –  Information gathering –  Decision-making –  Supplier selection –  Ordering and fulfillment

•  Different groups of end-users need different products (or in other words: a different mix of image, service, efficiency and availability)

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Channel distribution

A distribution channel is a coalition of dissimilar firms that have been banded together for mutual benefit. Each channel member is dependent on the other channel members. By cooperation they can more effectively sense, serve and satisfy the target market. (Philip Kotler: Principles of Marketing, Third Edition 1986)

A good working relationship between a partner and vendor closes the cap between the needs of the end-user and the individual offers from the vendor or from the partner.

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Why build a channel?

•  End-user reasons

•  Economic reasons

•  Management reasons

•  Strategic reasons

•  Better knowledge of end-user (experience) •  Ability to meet the end-user requirements •  Preferred by customers (independent,

assortment, bundling, flexibility) •  Better access to specific end-user groups •  Lower cost-to-market base (chain of outlets,

develop required skills, combined products and pre-sales activities)

•  Support costs

•  Manpower and capabilities to manage a sales force which will provide adequate market coverage

•  Long term developments and goals

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What to select a partner for?

Market/organizational oriented

•  Efficiency: the partner is (highly) efficient in his business execution and is recognized for that; most probably this partner is efficient in the way he handles vendor’s products and services as well

•  Effectiveness: the partner is very effective in the way he runs his business; most probably this partner is very effective in the way he handles vendor’s products as well

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What to select a partner for?

Market/organizational oriented (continued)

•  Quality: the partner is recognized for the quality of the services/ products he provides; this partner might have the ability also to deliver ‘quality’ around the vendor’s products and services

•  Adaptability: the partner has a strong ability to adopt and to integrate vendor’s products/services into his own product portfolio and/or has the ability to easily align with vendor’s processes and procedures

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What to select a partner for?

People/management oriented

•  Flexibility: the way the partner reacts to changes in products, markets etc. Important element here is how this partner’s organization is structured (possibilities to change)

•  Committed and result oriented: the way the partner looks at the business and the commitment he is willing to give to vendor’s products/services

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What to select a partner for?

People/management oriented (continued)

•  Creative and innovative: the way the partner deals with opportunities and the way he develops products/services/his organization/people etc. Is he leading or does he follow market developments and new techniques?

•  Challenging: the partner constantly looks for new challenges and opportunities to grow his business and to improve the service/ relationship with his customer

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Agent vs. reseller

Difference between being agent and reseller (both can be recognized as partners)

Agent

Reseller

•  Only sells, doesn’t take title •  Acts in his own name for the account of the

vendor •  Sells at the price determined by the vendor •  Risks of transaction in his own commission •  Order ‘accepted’ makes the vendor

responsible

•  Buys and sells (takes title) •  Acts in his own name for his own account •  Determines final price

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4 P’s of marketing

•  Product •  Price •  Promotion •  Place

The 4 P’s are the basis of the company’s success and drivers into the market place.

The P to add is the P from People; people are the company’s core asset. In case of channels the P could also be the P from Partners; good partners are main asset to the company as well (although already partly covered in Place).

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4 P’s of marketing

The relation between the 4 basic P’s could be written down as follows:

To meet end-user needs we must develop a product to satisfy them, charge the right price, get the products to the right place (making sure that the product is available when needed) and we must make the existence and benefits of the product known through promotion.

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4 C’s of channels

•  Customer service •  Coverage •  Cost efficiency •  Control

The 4 C’s determine the success of a channel. Only if there is a sound mix of these 4 elements channels are successful. Each product or service asks for a different recipe but all ingredients are to be included.

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4 C’s of channels

Explanation of the 4 C’s

•  Customer service: from a vendor’s perspective there must be maximum focus to service the partner and the end-user. This ensures the partner to be backed up by the vendor and the end-user to be able to fully rely on the partner in the offering of the vendor’s products.

•  Coverage: availability is one of the essentials in the marketing of products. A channel should assure that end-users can have access to the vendor’s products. This implies that there needs to be coverage in configuration, performance and bundling of products (which are different to different end-user groups).

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4 C’s of channels

Explanation of the 4 C’s (continued)

•  Cost efficiency: one of the major reasons for building a channel is the efficiency in costs. If it appears that a vendor can outperform the partner at a lower cost level, the existence of the channel is in danger.

•  Control: the vendor needs to control the channel. Or in other words: the vendor is responsible for all the partner’s activities related to his products (although there is a dependency between all parties, the channel is meant to bring the vendor’s products to the market)

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Keyword in partnership = coach

talk to partners/communicate ↓

consult ↓

coach ↓

solve problems ↓

lifetime relationship

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Partner management

•  Understand the partner (vendor’s responsibility: understand expectations and provide it)

•  Plan and organize business (vendor’s responsibility: know what to expect and what not)

•  Build relationship •  Work together

Vendor’s biggest challenge: have the partner spend the majority of his time and effort on

vendor’s products

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Vendor’s mistakes

•  Vendor sells to the partner •  ‘Partner will develop the market for a technology’ •  Vendor determines how much of a product is sold through the

partner

Vendor doesn’t own the partner’s business! and

The partner’s business is business in its own right!

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Reasons for complaining

Inefficiency at the partner side; how to recognize it?

Insufficient market focus

Too many products (max 7-15 vendors)

Weak organization

•  Product skills •  Complex and expensive logistics •  Administrative support

•  Not enough economies of scale •  Insufficient skills at all levels •  Low productivity •  Insufficient service to customers •  Lack of ‘control’

•  Good understanding of different markets •  No specific target audience

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Reasons for complaining

Inefficiency at the partner side; how to recognize it? (continued)

High personnel cost •  Salaries and fringe benefits •  Overhead •  Low span of control

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The use of power tools

•  Referent power (PE)

•  Expert power (PE)

•  Rewarding (PI)

The ability to elicit compliance from others because they like the vendor, or because the like to identify with the vendor - appreciated by partners and effective in the long term

The ability to elicit compliance because of technical expertise, specific knowledge, or experience (either actual or reputed) - appreciated by partners and effective in the long term

PE = positive appreciated and long-term effective PI = positive appreciated but long-term ineffective

The ability to provide monetary or other rewards for compliance - appreciated by partners but loose effect in long term

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Profile of the perfect partner

•  Take the current 5 best partners and write down their 5 best characteristics (could be in products, finance, support and assistance, reputation or social interaction)

•  Take the current 5 worst partners and write down their 5 worst characteristics (idem)

•  Bring these elements together and define the top-5 required characteristics (doesn’t matter if taken from the best or worst list)

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Profile of the perfect partner

•  Build a matrix to get a clear view (see example)

Future partners at least need to meet these 5 characteristics

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Which partners to choose?

•  What is the potential of the partner? •  Over what period does vendor thinks the partner will achieve

results? •  Does the partner have a strategy (direction they follow into the

future and how it aligns with vendor’s)? •  Does the partner have preferred products that are (sometimes)

required in vendor’s end-user market? Is doing business with this partner a ‘must’ to keep up with markets?

•  Does the partner have preferred partners that can be of value to vendor and which can be accessed through the partner?

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Which partners to choose?

(continued)

Choose for •  Partners with large potential •  Strategic partners •  Partners with a large installed base

Always select partners systematically and economically

Always appoint from the head (rational) and from the heart (emotional)

In case of doubt – KEEP OUT!

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vendor partner end-user

vendor partner end-user Money is NEVER

at the partner’s

but ALWAYS

at end-user’s (vendor needs partners to get it)

Last thought…

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Over K2-B Commercial Services

Wij begeleiden bedrijven met het organiseren, inzichtelijk en meetbaar maken van haar commerciële activiteiten. Onder begeleiden verstaan we het inbrengen van expertise, focus en een ‘omgekeerde blik’ (van buiten naar binnen), waardoor de resultaten van deze activiteiten nu en in de toekomst beter voorspelbaar en bestuurbaar worden.

Binnen K2-B hanteren we een aantal principes bij de manier waarop wij onze samenwerking vormgeven:

* Presteren door inzicht * Sales en marketing is een gezamenlijk proces * Verandering ontstaat alleen door co-creatie

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