B2B

Business Market Management, 3rd edition

 BOOKS
• James C. Anderson (2009).
Business Market management:
Understanding, Creating and
Delivering Value, 3rd edition.
Prentice Hall.
• Ten Deadly Marketing Sins:
Signs and Solutions. John Wiley
& Sons.
• Philip Kotler (2003). Marketing
insights from A to Z: 80
concepts every manager needs
to know. John Wiley & Sons,
Inc.

Business Market Management, 3rd edition

Chapter 9

Sustaining Reseller Partnerships

Business Market Management, 3rd edition

 SECTION IV
DELIVERING VALUE

Business Market Management,

Chapter 9-4
3rd edition
CHAPTER 9: SUSTAINING RESELLER
PARTNERSHIPS
Overview

I. Aligning Mutual Self-Interests and

Complementary Resources
II. Strengthening Partnerships in a Stable
Marketplace
III. Responding Adaptively to Incremental
Marketplace Changes
IV. Transforming Channels in the Face of Disruptive
Forces
V. Summary Business Market Management,
Chapter 9-5
3rd edition
 OVERVIEW
• Reseller partnership: mutual recognition and
understanding that the success of each firm
depends on the other firm

• Sustaining reseller partnerships: continuing the

process of aligning mutual self-interests with
complementary resources of partner firms in
stable marketplaces

Business Market Management,

Chapter 9-6
3rd edition
Sustaining Reseller Partnerships
Strengthening Partnerships in Stable Marketplaces

Fulfilling Supplier
Commitments Enhancing Ensuring that
Interfirm Value is Delivered
Fulfilling Reseller Coordination
Commitments

Responding Adaptively to Incremental Changes Delivering

Superior Value
to Targeted
Creating Market
Adjusting Commitments Adaptive Segments and
Channels Customer Firms

Transforming Channels in the Face of Disruptive Forces

Establishing Integrated Multi-Channels

Skillfully Handling Relationship Transfers

Terminating Existing Partnerships

Business Market Management,

Chapter 9-7
3rd edition
 I. ALIGNING MUTUAL
SELF-INTERESTS AND
COMPLEMENTARY RESOURCES

Business Market Management,

Chapter 9-8
3rd edition
 MUTUAL SELF-INTERESTS AND
COMPLEMENTARY RESOURCES

• Business Marketing Channels

• Shared goals
• Distinct individual goals

• Supplier firm and reseller firm

• Sharing complementary resources and
capabilities increases the likelihood that both
achieve their respective goals

Business Market Management,

Chapter 9-9
3rd edition
MUTUAL SELF-INTERESTS AND
COMPLEMENTARY
RESOURCES

Alignment:
• Goal congruence exists among partner firms’ self-
interests
The degree to which complementary resources and
capabilities enable partner firms to capitalize on
marketplace opportunities

Business Market Management,

Chapter 9-10
3rd edition
 ALIGNMENT DIFFICULTIES
• Law of Legitimate • Law of Perpetual
Cross-Purposes: Change: evolving
supplier firms and marketplaces may
reseller firms rely upon
different profit models dramatically and
that are sometimes at unexpectedly alter
odds the goals and
• Supplier: resources of
economies of scale channel partners
• Resellers:
economies of
scope

Chapter 9-11 Business Market Management,

3rd edition
 THREAT OF OPPORTUNISM
Opportunism: “self-interest seeking with guile”
1. Careful selection of honest and trustworthy partner
firms

2. Provision of incentives designed to thwart

counterproductive behaviors

3. Diligent monitoring of partner firms’ activities

4. Socialization of partner firm managers to the norms

and values associated with the pursuit of shared
goals
Business Market Management,
Chapter 9-12
3rd edition
 ENSURING ALIGNMENT
1. Understanding channel partners’ business
models

2. Joint annual planning and periodic surveys

3. Continuously monitor the amount of conflict

within their marketing channels

4. Identify and pay attention to changes in the

marketplace that stand to misalign
the mutual self-interests of partner firms
Business Market Management,
Chapter 9-13
3rd edition
 CAUSES OF CHANNEL CONFLICT
• Differences in goals
• Misunderstanding in relation to the
allocation of partnership responsibilities
• Differences in perceptions of the
marketplace
Conflict often masks misalignment and the
tendency of both supplier and reseller to avoid or
“gloss over” conflicts.
However, addressing disputes early and decisively is in
the best interests of both parties.

Business Market Management,

Chapter 9-14
3rd edition
 ENSURING ALIGNMENT
• different scenarios:
• Strengthening partnerships in a stable
marketplace
• Responding adaptively to incremental
marketplace changes
• Transforming channels in the face of
disruptive forces

Business Market Management,

Chapter 9-15
3rd edition
 II. STRENGTHENING
PARTNERSHIPS IN A
STABLE MARKETPLACE

Business Market Management,

Chapter 9-16
3rd edition
 STRENGTHENING PARTNERSHIPS
IN A STABLE MARKETPLACE

•Commitment: captures the

perceived continuity or growth in the
relationship between two firms
• Desire to develop stable relations
• Willingness to make short-term
sacrifices to maintain the relationship
• Confidence in the stability of the
relationship
Business Market Management,
Chapter 9-17
3rd edition
 FULFILLING SUPPLIER
COMMITMENTS TO DELIVER VALUE

• Supplier Training: • Reseller Courses:

• Product • Customer
knowledge applications
• Changing
• Selling skills customer needs
• Technical • Operational
competence procedures

Business Market Management,

Chapter 9-18
3rd edition
 FULFILLING SUPPLIER
COMMITMENTS TO DELIVER VALUE
• Train and Coach Partner firms
• Certification programs
• Series of technical courses
• Demonstrate competence
(examinations)
• Skills training
• Courses on focused topics
• Coaching
• Improvement and reinforcement of
desired skills, behaviors, and
performance
• Strategic Coaching
• Skills Coaching
Chapter 9-19
Business Market Management,
3rd edition
 PROVIDE RESPONSIVE SALES
AND MARKETING PROGRAMS
• Product-Market Sales Analysis (PMSA)
• Analyzes the distributor’s product line
by:
• Geographic region
• Market segment
• Customer firm
• Strategy includes:
• How to customize offerings for local
customers
• How to cross-sell the full line of products
• Distributors given the option for analyzing
the data and generating marketing
development strategies
Business Market Management,
Chapter 9-20
3rd edition
 BACK-UP RESELLERS WITH
PRICING SUPPORT
• To keep resellers focused on delivering
value, leading supplier firms promise
pricing support
• Finding cost reduction in customer
plants
• Large-order price discounts
• Initial-use discounts
• Defeaturing pricing

Business Market Management,

Chapter 9-21
3rd edition
 FURNISH OPERATIONAL AND
TECHNICAL SUPPORT
• Supplier firms can reduce the cost-to-serve
customers by maintaining and providing
operational and technical support in the form
of:
• Inventory control
• Logistics
• Customer service systems
• Eliminating redundancies enables
reseller partners to offering a
broader array of services at far
lower costs

Business Market Management,

Chapter 9-22
3rd edition
 FULFILLING RESELLER COMMITMENTS
TO DELIVER VALUE
• Reseller firms can boost their own reseller equity
and enhance supplier firm’s brand equity by:
• Providing consistently superior service to customer
firms

• Innovating in the local marketplace

• Enhancing the supplier’s brand equity

• Offer new product ideas
• Participate in quality improvement efforts

Business Market Management,

Chapter 9-23
3rd edition
 STRENGTHENING INTERFIRM
COORDINATION
• Coordination: Customer and supplier
firms synchronize their activities, resources,
and capabilities to accomplish a collective
set of tasks
• Periodic joint annual planning
• Clarifying roles and responsibilities
through written agreements
• Improving communication through bridging
• Synchronizing effort with Partner relationship management
(PRM)

Business Market Management,

Chapter 9-24
3rd edition
 PARTICIPATE IN PERIODIC JOINT
ANNUAL PLANNING
• Supplier and Reseller firms
participate in planning process
• Both more likely to view plan as theirs
and work hard to implement it
• What do we know?
• What do we want to accomplish?
• How will we do it?
• Reseller Marketing Plan
• Situational analysis (SWOT)
• Mutual objectives
• Basic requirements
• Implementation and control

Business Market Management,

Chapter 9-25
3rd edition
 WRITTEN AGREEMENTS
• Equitable sales agreements
• Sharpen expectations and
direct the actions of both firms
• Policy manuals
• Detailed descriptions of tasks
each member should perform
• Policy statements
• Detailed statement of changes and
modifications in a specific policy

Business Market Management,

Chapter 9-26
3rd edition
 IMPROVE COMMUNICATIONS
THROUGH BRIDGING
• Communication:
formal and informal • Bridging: establishing
sharing of meaningful and sustaining
and timely communication
information between between partner firms
firms across functions and
management levels
• Occasional phone
calls
• Letters
• Ocassionally holidaying
together

Business Market Management,

Chapter 9-27
3rd edition
 SYNCHRONIZE EFFORTS WITH A
PARTNER RELATIONSHIP MANAGEMENT SYSTEM

• Partner Relationship Management (PRM):

business regimen that enhances the ability of
the supplier firm, reseller, and third-party
service provider to seamlessly integrate and
synchronize their:
• Operations
• Selling
• Marketing
• Servicing efforts
• Internet or Extranet Based Software

Business Market Management,

Chapter 9-28
3rd edition
ENSURING THAT VALUE IS DELIVERED
• Conduct Market Research
• Was Total customer experience (TCE)
promised to the customer firm provided?
• Customer Satisfaction Studies
• Customer Value Assessment Studies
• Get Equitable Return on Delivered Value
• Have they received an equitable return on
the value they delivered?

Business Market Management,

Chapter 9-29
3rd edition
 MARKET RESEARCH
How research findings are used:
1. Reseller and suppliers reexamine
what each contributes to the
delivery of TCE
2. Supplier adapts its channel offering
to better motivate and enable
resellers to service customers
3. Findings might point to a needed
improvement in supplier and reseller
coordination
Business Market Management,
Chapter 9-30
3rd edition
EQUITABLE RETURN ON DELIVERED VALUE
Evaluate channel financial performance to
determine:
• Have suppliers and its reseller firms realized the
financial returns expected?
• New ways to achieve their cost-to-serve goals

Business Market Management,

Chapter 9-31
3rd edition
 DIAGNOSTIC MEASURE AND PROFITABILITY ANALYSES

1. Calculate specific profitability and other

performance ratios for the firm’s channels

2. Compare each ratio to industry averages

3. Ratios are used to track performance over time,

to compare the relative performance of two
firms, and to make cross-industry comparisons
Note: Suppliers and resellers rely on
different sets of performance ratios
Business Market Management,
Chapter 9-32
3rd edition
 DIAGNOSTIC MEASURES
Performance Activity Reports. Trade associations and
consulting firms commonly compile and publish industry averages.
PARs
If firm’s ratio is close to the industry average, then it is doing
acceptably well on that dimension.

Expense-to-Revenue Ratios. Suppliers evaluate: 1) customer

E/R Ratios communication, 2) paperwork flows, 3) physical distribution, and
4) financial risk assumptions

Annual
Turns X X Average
Inventory Gross Margin
earns Turnover

GMROI
Average
Gross Margin ÷ Average
Inventory

Average Average
GMROR
Gross Margin ÷ Accounts
Receivables
Business Market Management,
Chapter 9-33
3rd edition
STRATEGIC COST MANAGEMENT (SCM)
4-STEP APPROACH
1. Divide the organization’s cost into
• Activity costs (order processing; selling costs)
• Non-activity costs (advertising, trade shows)
2. Subdivide and classify these costs as:
• Channel-related or
• Specific reseller-related costs
3. Trace each cost back to individual
channels or resellers
4. Estimate revenues channels or resellers
generate and then construct direct
costing income statements
These analyses enable managers to examine
the profitability of channels or resellers.
Business Market Management,
Chapter 9-34
3rd edition
 PROFITABLE ANALYSES
Strategic Cost Management:
SCM Recasts the direct costing income
statement around distribution-related
activities

Contribution
Margin
Sales – Variables Costs

Net Contribution _ Controllable Marketing

Margin Fixed Costs
Marketing
Contribution

Business Market Management,

Chapter 9-35
3rd edition
III. RESPONDING ADAPTIVELY
TO INCREMENTAL
MARKETPLACE CHANGES

Business Market Management,

Chapter 9-36
3rd edition
 ADJUSTING COMMITMENTS
• Establish a Reseller Advisory Council
• Reformulate channel partners’ “Gives & Gets”
• Make responsive adjustments to the Joint
Annual Plan
• Seek influence among channel partner firms
• Establish a process and procedures for conflict
resolution

Business Market Management,

3rd edition

Chapter 9-37
 RESELLER ADVISORY COUNCIL
• Consultative forum composed of key managers from
supplier and 10-15 reseller firms
• Advisory group offers counsel to supplier
• Functions as a means of incremental channel
improvement
• Council improves:
• Market response
• New product and service marketing
• Channel management
(domestic & international)

Business Market Management,

Chapter 9-38
3rd edition
 GIVES & GETS
• Gives: specific • Gets: specific gains a
investments and firm receives
resources a firm • Greater expertise
contributes • Enhanced
• Knowledge capabilities
• Personnel • Additional profits
• Fixed assets
• Cash

Disconnects between partner firms can occur here;

what one channel member thinks it is giving can be
significantly different from what the other partner
perceives it is getting.

Chapter 9-39 Business Market Management, 3rd edition

TRADITIONAL RESELLER DISCOUNTS AND ALLOWANCES

❖Percentage reduction from a suggested resale price

Trade or
❖Historical industry discounts
Functional
❖Industry gross margin averages
Discount
❖Turns x earns ratios
Quantity or
❖Designed to motivate reseller to buy in large quantities and
Volume
store local inventory (box loads, truckloads, and rail carloads)
Discount

Payment ❖Encouragement to pay for goods immediately

Discount ❖2/10/net 30 (2% reduction of invoice price paid within 10 days)

Allowance ❖Extra payment designed to gain reseller participation in special

programs (cooperative advertising, merchandising, etc.)

Business Market Management,

Chapter 9-40
3rd edition
 ELIMINATING INEQUITIES
• Evaluate both partners’ “gives & gets”

• Functional Allowance
• Supplier pays reseller set percent off the reseller
buy price
• Fee-for-Service
• Supplier pays its reseller partners a prespecified
amount
• On Retainer
• Amount of technical service days/hours expected
from distributor partner for customer service (paid
whether service is provided or not)

Business Market Management,

Chapter 9-41
3rd edition
RESPONSIVE ADJUSTMENT TO JOINT ANNUAL PLAN

• Reseller market plans

provide a coordinated
course of action
• Must respond to incremental
market changes quickly
• Market conditions change
• Suppliers and resellers learn
through implementing the
initial plan
• Progressive suppliers and
resellers adjust existing plans
when necessary

Business Market Management,

Chapter 9-42
3rd edition
 SEEK INFLUENCE AMONG
CHANNEL PARTNER FIRMS
• Six influence strategies for gaining and
using power:
• Information exchange
• Recommendations
• Promises
• Threats
• Legalistic pleas
• Requests

Business Market Management,

Chapter 9-43
3rd edition
 SEEK INFLUENCE AMONG CHANNELS
PARTNER FIRMS
• How can • Dependence-Balancing
Operations:
the weaker • Courses of action weaker
firms pursue to equalize the
firm ensure importance of the
that its more partnership
1) Make greater investments in
powerful partnership until resources
committed by both firms is
partner will roughly equal
2) Seek out other partners
treat it 3) Change non-re-deployable

fairly? assets into re-deployable

assets

Business Market Management,

Chapter 9-44
3rd edition
 CREATING ADAPTIVE CHANNELS

• Adaptive Channels: Flexible and

responsive to changing
marketplace requirements
• Webs of capabilities embedded in an
extended enterprise
• Identify infrequent, yet critical customer
requirements that they cannot routinely
fulfill on their own

Business Market Management,

Chapter 9-45
3rd edition
 ADAPTIVE CHANNEL INITIATIVES
1. Design arrangements that ensure they are
routinely able to cope with unpredictable or
unusual demands for products or services.

2. Focus on meeting customers’ growing demands

for broader market offerings.

3. Objective is to improve the quality of service

throughout the distribution channel.

Business Market Management,

Chapter 9-46
3rd edition
 PROVIDE SUPPORT IN EXTRAORDINARY SITUATIONS

• Auxiliary Support Systems

• Distribution channel members cope with
• Unexpected or unusual demands for
products/services by sharing inventory and
support services
Information technology monitors the availability
of:
• offerings
• processes
• orders
• integrated logistics systems

Business Market Management,

Chapter 9-47
3rd edition
 RESOLVING RESELLER-SUPPLIER CONFLICT
Boundary-
Individuals who are in contact with the partner firm regularly;
Spanning
sensitive to inherent trouble spots
Personnel
Employee
Firms assign personnel for periods time to channel partner
Exchange
operations
Program
Trade
Both the supplier firm and channel partners can learn how the
Association
other operates and what problems they must routinely address
Membership

Typically a retired reseller manager or principal employed by the

Ombudsman
supplier who has credibility with both parties

Mediation A third party is brought in to help resolve a dispute by either

refocusing discussion on key issues or suggesting viable
solutions

Firms legally agree to have a third party settle the disagreement.

Arbitration
Decision is final and binding.

Business Market Management,

Chapter 9-48
3rd edition
 RESPONSIVELY BROADEN THE
MARKET OFFERING
• Companies outsource supply
management function
• Reseller Alliances
• Members agree to pool resources and
capabilities and broaden one another's
market offering
• Consortium: resellers of complementary
lines contribute equity and create a
separate corporation

Business Market Management,

Chapter 9-49
3rd edition
 SHARE CAPABILITIES WITH OTHER CHANNEL MEMBERS

• Companies tend to do an outstanding job with

some services and a mediocre job with others
• To overcome discrepancies,
suppliers and resellers adopt:

• Capabilities-Sharing Agreements
• Superior service of one channel member substitutes for the
subpar service of another
• Channel members receive appropriate compensation for
sharing their superior service capabilities

Business Market Management,

Chapter 9-50
3rd edition
 IV. TRANSFORMING
CHANNELS IN THE FACE
OF DISRUPTIVE FORCES

Business Market Management,

Chapter 9-51
3rd edition
TRANSFORMING CHANNELS IN THE
FACE OF DISRUPTIVE FORCES
• Major structural changes within the
marketplace
• Growth of the Internet and mobile
telephones
• Shift in power from supplier firm to
customer and reseller firm
• Commodization or technological
obsolescence of many products
• Growing importance of service as
the primary source of customer value
Business Market Management,
Chapter 9-52
3rd edition
CREATING INTEGRATED MULTI-CHANNELS

• Customer firms routinely search

and patronize multiple channels
• Whose customer is it?
• Both supplier and reseller
managers should integrate and
synchronize their efforts at serving
their mutual customers
• Channel Steward
• coordinates activities for mutual
benefit
Business Market Management,
Chapter 9-53
3rd edition
 INTEGRATED MULTI-CHANNELS
• Routine arrangements that address all
sales and fulfillment tasks
• Provide business market managers with
numerous alternative channel
configurations
• Able to quickly respond to changing
customer requirements

Business Market Management,

Chapter 9-54
3rd edition
HANDLING RELATIONSHIP TRANSFERS
• Delineate Relationship Transfer Criteria
• Economies of scale
• Key for both channel partners is to identify
the relevant sales breakpoint, at which
relationship transfers from one to the other
(to supplier if sales per time period is
above the breakpoint and to reseller if
below)
• Changes in customer TCE requirements
may also indicate the need to transfer
relationships
• Establish Equitable Compensation for
Relationship Transfers Business Market Management,
Chapter 9-55
3rd edition
 TERMINATING PARTNERSHIPS
• Suppliers, reseller, and third-party service
provider managers should enter into the
relationship with the sober realization that
arrangements are not likely to last forever
• Contract renewal clause
• Conditions under which partnership
termination are likely should be addressed in
the agreement
• Procedures for termination should be
delineated
• Termination should be civil
and courteous
Business Market Management,
Chapter 9-56
3rd edition
 V. SUMMARY

Business Market Management,

Chapter 9-57
3rd edition
 SUMMARY
• To sustain reseller partnerships, supplier and reseller managers
must continuously align their mutual self-interests and
complementary resources
• Strengthen partnerships in stable marketplaces
• Respond adaptively to incremental marketplace changes
• Transform channels in the face of disruptive forces

• The nature and extent of realignment efforts varies as a function

of marketplace conditions
• The principal managerial tasks are:
• Fulfilling commitment to one another
• Ensuring customer value is delivered
• Enhancing interfirm coordination

• When marketplace changes are disruptive, the channel steward

must act to transform the channel network
Business Market Management,
Chapter 9-58
3rd edition
 EXERCISES

Business Market Management, 3rd edition