Once tempted to bypass their channel partners and sell directly to customers online, manufacturers of many stripes are instead using the Internet to communicate better with their partners.
The current emphasis on integration of existing channels represents a dramatic turnabout from three years ago, when there was tremendous excitement about the possibility of creating new channels using Internet marketplaces. Those online marketplaces are now virtually extinct.
The office products division of Toshiba Canada is among those b-to-b marketers using online tools to track and manage their sales channels. The company has created the online equivalent of a giant filing cabinet, from which some 85 dealers across Canada can pull down marketing materials, pricing sheets, repair manuals and other sales collateral. Such information used to be distributed via snail mail or faxes. Phone inquiries from outside sales reps were not only a nuisance but also a drain on resources, said Mark McCullough, the division’s VP-marketing.
"Our goal was to put the onus of getting the information on the customer instead of having them call someone at Toshiba," McCullough said. What’s more, the dealer’s administrative staff now enters orders directly into Toshiba’s back-end systems over the Web, using channel management software from ChannelWave Software. The result is lower costs and faster delivery of products because systems are updated frequently.
According to experts, close coordination between product makers and outside sellers, enabled by online systems, can help to bring products to market more quickly because there are fewer delays in distributing messaging and marketing collateral to partners. It can also help build partner loyalty, although this benefit is harder to measure.
"If I can use the Internet to give the distributor more information about the product, services and maintenance schedules, and can let them manage their accounts online, 24 by 7, perhaps that distributor will be more loyal to me than they would be to a manufacturer using traditional sales methods," said Meta Group analyst Gene Alvarez.
Connecting with PRM
The software used to connect product makers to their partners—alternately called partner relationship management (PRM), channel relationship management or demand management software—can be used to automate all kinds of interactions. These include online training, collaborative negotiation and sourcing, contract management and order management. In this way, each party can focus on what it does best: The manufacturer can handle transactions on behalf of a distributor, and the distributor can help itself to support materials without burdening the manufacturer.
Sales of PRM software will grow at a compound annual rate of more than 15% and will exceed $550 million by 2006, predicted Meta Group.
PRM vendors come at the problem from different angles: Siebel, SAP, Oracle and PeopleSoft draw on their experience with internal accounting, order processing and customer relationship management systems, while younger firms such as ChannelWave, Comergent, Click Commerce, Blue Martini, Haht Commerce and Pivotal Software build on their b-to-b and b-to-c e-commerce backgrounds . Prices range from $250,000 to more than $1 million.
Gartner Group predicted that within two years the PRM category will consolidate to three or fewer vendors. The trend echoes the CRM integration push a few years ago. The difference is that beyond simply automating routine interactions between companies, PRM can also give manufacturers new insight into what customers need and how they are using products.
Channel champions
Among the industries leading the PRM charge are consumer electronics and appliances, automotive and information technology, said Meta Group’s Alvarez. Other industries that have embraced channel management technologies include chemicals, telecommunications, financial services and heavy machinery.
Centra Software of Lexington, Mass., relies almost exclusively on channel partners to sell its own collaboration software. Partners in Europe and Asia, in particular, are known to keep information about customers close to their chests, said Steven McNally, Centra’s business systems architect. Using PRM software from Pivotal, Centra collects user feedback directly from customers and, in turn, shares the insight with its channel partners.
"By sharing more with them, it encourages them to share more with us," McNally said. "It builds trust."
The Pivotal platform also helps Centra create a shared online workspace for partners, which range from co-developers and resellers to aftermarket support organizations. During the beta phase of a version upgrade, Centra can collect feedback about bugs and localization issues in what McNally calls an issue-management database. The interactions are more structured than e-mail and spreadsheets, which is how reports were exchanged previously. This helps coordinate work despite time differences.
"There is less back and forth for clarity," McNally said. "Our partners in Japan can log in, see what happened during our workday on the East Coast and look at our rationale for why we made a certain change to the product."
Phase 2 of the company’s PRM plan is to exchange leads with partners. For example, prospective customers who visit Centra’s public Web site will be automatically referred to regional resellers, McNally said.
Centra has no plans to process orders on behalf of partners because McNally believes customers don’t want to buy something as complex as enterprise software online. "It’s not a routine purchase like furniture," he said. "More work goes into the procurement, and the sales cycle is longer."
Sometimes even furniture isn’t easy to buy online. That’s why Haworth, a manufacturer of custom-made office furniture, watched from the sidelines a few years ago when buying furniture online was all the rage. The Holland, Mich., company didn’t want to upset its dealerships. In addition, Haworth’s focus on custom furniture requires a live, personal touch, said Jeff English, the company’s director of e-commerce.
"Our customer is outfitting a five-story building. They won’t purchase all that online," English said.
Instead, Haworth focused on processing orders electronically for dealers. It started with the old, proprietary EDI systems and last fall began to use PRM software from Comergent to process transactions over the Internet.
"Now a dealer can work with our design staff over the Web, and the dealer can push an order file to us using their own Ariba system or whatever they have," English said. "This simplifies the dealer effort and helps us control the purchase process."
The Comergent software now handles roughly a quarter of Haworth’s commercial business. But, English noted, Haworth’s state and federal government clients currently don’t have systems that can hook into Comergent. And an even bigger hurdle may be to get all of the company’s commercial customers to adopt new business processes that are suited to electronic interaction.
How do you measure loyalty?
Haworth and other early adopters of PRM software say that new efficiencies are making their investments cost-effective, but they admit that the returns are difficult to tally. "The ROI is challenging, because how do you measure loyalty?" English said. "How do you know new revenue was driven by this practice vs. something else?"
The next step for Haworth will be to offer guided selling and reward opportunities over its channel portal. For instance, if a customer has been purchasing only wood furniture, Haworth can push content to the reseller’s Web site that promotes wood instead of stainless steel.
Indeed, many PRM users say the software can help reduce the administrative burden of managing content on resellers’ Web sites by letting channel partners effectively rip catalog and price content from the source manufacturer.
