Print This ArticleMany organizations live in fear of the notion of sharing end customers. After all, a manufacturer might try to swoop in and sell directly, cutting out the distributor. And a distributor always can bring in new manufacturers to supply products. But if both parties learn which relationships are serviced best by which type of organization, the companies can leverage such collaboration into future success.
Many times, we’ve shared a story that emerged on a project several years ago when, during interviews, a manufacturer and its largest distributor each referred to the other as a “bloodsucking weasel.” Obviously, the relationship between these two organizations was strained, despite the fact that each was involved in a significant percentage of the business done by the other. One would have expected these organizations to establish a strong relationship because their destinies coincided, but how they characterized each other suggested that they had failed to do so.
Their multiple problems had compounded over time to generate a climate of distrust. As a result, the relationship had deteriorated to the point where it involved an ongoing competition for margin between the businesses. Rarely did they interact in a way that was positive or oriented toward shared successes.
One of their major problems involved “ownership of customers.” The distributor had an ongoing fear that the manufacturer would choose to go directly to end customers, cutting the distributor out of the chain. And the manufacturer feared that the distributor might someday bring on a competing brand, or even introduce its own private label, thereby cutting into the sales volume of the manufacturer’s brand. As a result, the companies could not even broach the topic of customer ownership without generating sparks. Both organizations had taken steps designed to protect their position with end customers, steps that the other viewed as threatening and anti-relationship.
While this example was an extreme one, issues around ownership of end customers often create a roadblock to good relationships between manufacturers and their most important distributors. In one high-technology industry, a company coined the phrase “Voicemail 666” to describe a call from an end customer that involved an integrator or distributor trying to capture the sales that were going directly from this firm to its enterprise accounts. The problem of competition for ownership of the end-customer relationship is quite common, and it requires attention to ensure it does not disrupt critical business relationships between manufacturers and distributors.
There is a framework that enables business partners to share ownership of end customers in a way that drives success, providing a basis for an answer of “We would” in response to the question, “Who would ever share customers?” The foundation for this framework builds upon an assessment of the services that create value for the end customers. When end customers are queried about the services that deliver value to them, they often describe them in two categories.
One view closely associates some services with specific products. The most significant example involves customization to the end user’s specifications. But other such services exist, including installing and commissioning the product, training the operators who will use the product or training the service technicians who will maintain it, troubleshooting by Web or 800-number support lines when problems arise, and others. Not all products carry the requirements for such services, but many do.
A manufacturer of electrical products had among its customers a number of original equipment manufacturers (OEMs), companies that made equipment that was used on factory floors around the world. Key electrical components were incorporated into that equipment, and this OEM relied on the electrical products manufacturer to collaborate with them on design, be responsive to the changes made from one generation to the next, help to address end-customer problems that involved power issues, and contribute in many other ways as a key ingredient supplier. This relationship was one in which the service contributions of the electrical products manufacturer were critical to its OEM customer.
Other services are more closely associated with the distributors or other channels through which the end customer makes purchases. The most significant example in this regard is often the ability to buy multiple products from multiple manufacturers through a single vendor and in a one-stop transaction. Other such services span a broad spectrum — instant availability through local inventory, fast delivery and other logistics capabilities, local support, credit, ease of returns and replacement. Again, not all end customers require and value such services, but many do.
