Even in these days of Internet disintermediation, it is unusual for manufacturers to sell directly to end customers. Instead, products are sold through a complex web of distributors, wholesalers, and retailers, with value-added retailers (VARs) and original equipment manufacturers (OEMs) thrown into the mix. To manage all of these sales channels, companies use channel management software. We wrote this buyer’s guide to help buyers untangle this market’s web of solutions and conduct a proper system comparison.
Here’s what we’ll cover:
- What Is Channel Management Software?
- What Type of Buyer Are You?
- The CM Vendor Landscape
- Market Trends You Should Understand
- Benefits & Potential Issues
What is Channel Management Software?
Channel management is not what you use to program your Tivo. Channel management, also known as partner relationship management, tracks goods and services from the seller to the ultimate consumer. These programs are valuable for automating sales and marketing processes through indirect company channels. One might think of channel management as sales force automation (SFA) for OEM and VAR channels.
Channel management functions include partner recruiting, partner life cycle management, compensation planning, channel marketing, channel sales management, activity tracking, pipeline forecasting, territory management, account management, leads management, product configuration, and order management. Most systems will include partner tools that give visibility from the partners into the system. More advanced systems will also track cooperative advertising dollars and compliance.
In keeping with classic supply chain design, the supplier firm (the upstream partner) and the customer firm (the downstream partner) should have systems that interact. This integration allows orders, inventory, and other information to be passed securely between the partners as necessary.
What Type of CM Buyer Are You?
- Manufacturer buyer. These buyers work with firms that make goods to sell. These buyers need partner management, collateral distribution, and order management.
- Distributor buyer. These buyers work for distributors and very large retailers. They need order management, price customization, and shipping prioritization.
- Wholesale and retail channel buyers. These buyers work for whole seller and regional retailer firms or retailer cooperatives. These buyers need strong integration with accounting to track dealer accounts, collateral distribution, and marketing co-op tracking.
- OEM/VAR channel buyers. These buyers work for firms that sell to OEMs and VARs. These buyers are seeking product branding, collateral customization, special order processing, and accounting integration.
The CM Vendor Landscape
|This type of buyer...||Should evaluate these systems|
|Manufacturer buyer||SAP, Oracle, GoldMine, Microsoft Dynamics CRM, Salesforce|
|Distributor buyer||SAP, Oracle, GoldMine, SugarCRM|
|Wholesale and retail channel buyer||GoldMine, Salesforce, Microsoft Dynamics CRM, Sage ACT!, InfusionSoft|
|OEM/VAR channel buyer||SugarCRM, Microsoft Dynamics CRM, Salesforce|
Market Trends You Should Understand
- Consolidation with CRM. Most channel management functions are being integrated into CRM and SFM systems or are included within the CRM applications from enterprise suite vendors. Stand alone channel management systems are increasingly rare, although CRM and SFM systems could be used for stand alone channel management if desired.
- Software as a service. As with CRM in general, there is a strong move toward the software as a service (SaaS) model. A cloud-based model allows all partners to access appropriate information as long as they have access to a web browser and the Internet.
- Web integration. Even premises-based providers offer web access to partners. This way downstream partners can check their accounts, check order status, place orders, and track co-op account funds.
- Mobile operations. Most channel management systems can be accessed by mobile devices and can provide email alerts as well as text message alerts.
- Automatic ordering. If both partners have compatible systems, one advantage is automatic order placement, or vendor-management inventory. For example, as a retail store sells a particular model of television set, it’s inventory system tracks the quantity on hand. When that quantity falls below a certain threshold, the inventory system will automatically place an order with the supplier by interfacing to the supplier’s channel management system.
Benefits & Potential Issues
- Increased Customer Satisfaction. There actually may be several sets of customers satisfied throughout the chain. Ultimately, it is the final consumer that matters to most to the manufacturer, but it is rare that the consumer is the manufacturer’s customer. Channel management gives each step in the channel increased visibility into the whole process.
- Recall management. Should a product need to be recalled, CM gets the word to downstream partners quickly. Fast, decisive action can limit damage and minimize bad publicity.
- Better inventory analysis and reporting. CM allows inventory levels to be maintained at optimum levels. Orders can be triggered manually or automatically, but in either case CM can measure downstream partners’ inventory trends and let the supplier more accurately project required inventory levels and manufacturing requirements.
- Better account management. CM systems consolidate partner information, giving reps insight to increase sales and customer satisfaction at the same time. For example, when a VAR calls in an order, the rep can check to see if the customer is close to price breaks or order levels to trip co-op advertising budgets.
There are dangers in this level of integration. Problems can propagate through the system. The Wall Street Journal reported that Amazon recently listed the book The Making of a Fly by Peter Lawrence for $23,698,655.93, plus $3.99 for shipping. Used copies were available for $35.54. The problem? Amazon has two channel partners that provide pricing information and in this case, the computer algorithms used by the two partners were competing against each other and raising the price in a loop.