Chapter09 B2B

Business Market
Management Chapter 9
3rd edition
Sustaining Reseller
Partnerships
Section IV:
Delivering Value
Copyright © 2009 Pearson Education

Business Market Management, 3rd edition Chapter 9-2
Publishing as Prentice Hall
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
Overview
 Reseller partnership: mutual recognition
and understanding that the success of each
firm depends on the other firm
 Sustaining reseller partnerships:

continuing process of aligning mutual self-
interests with complementary resources of
partner firms in stable marketplaces
Sustaining Reseller Partnerships
Strengthening Partnerships in Stable Marketplaces
Fulfilling Supplier
Commitments Enhancing
Ensuring that
Interfirm
Fulfilling Reseller Value is Delivered
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

I. Aligning Mutual
Self-Interests and
Complementary Resources

Mutual Self-Interests and
 Business Marketing Channels
Shared goals
Distinct individual goals
 Supplier firm and reseller firm

Sharing complementary resources and
capabilities increases likelihood that both
achieve respective goals
Mutual Self-Interests and
 Alignment:
Goal congruence exists among partner firms’
self-interests
Degree to which complementary resources and
capabilities enable partner firms to capitalize on
marketplace opportunities

Alignment Difficulties
 Law of Legitimate  Law of Perpetual
Cross-Purposes: Change: evolving
supplier firms and marketplaces may
reseller firms rely upon dramatically and
different profit models unexpectedly alter the
that are sometimes at goals and resources of
odds channel partners
 Supplier: economies of
scale
 Resellers: economies
of scope
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
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

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.
Ensuring Alignment
 Different scenarios:
Strengthening partnerships in a stable
marketplace
Responding adaptively to incremental
marketplace changes
Transforming channels in the face of disruptive
forces
II. Strengthening
Partnerships in a Stable
Marketplace

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

Fulfilling Supplier Commitments to
Deliver Value
 Supplier Training:  Reseller Courses:
 Product knowledge  Customer applications
 Selling skills  Changing customer
 Technical competence needs
 Operational
procedures

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

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 option for analyzing the data and
generating marketing development strategies
Back Up Resellers with
Pricing Support
 To keep reseller focused on delivering
value, leading supplier firms promise
pricing support
Finding cost reduction in customer’s plants
Large-order price discounts
Initial-use discounts
Defeaturing pricing

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
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

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)
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

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

Improve Communications
Through Bridging
 Communication:  Bridging: establishing
formal and informal and sustaining
sharing of meaningful communication between
and timely information partner firms across
between firms functions and
management levels
 Occasional phone calls
 Letters
 Ocassionally holidaying
together
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 9-26
3rd edition
Ensuring that Value is Delivered
 Conduct Market Research
Was Total customer experience (TCE)
promised to 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?

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 needed improvement
in supplier and reseller coordination

Equitable Return on Delivered Value
 Evaluate channel financial performance to

determine:
Have supplier and its reseller firms realized
the financial returns expected?
New ways to achieve their cost-to-serve goals

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 relative performance of two firms, and to
make cross-industry comparisons
Note: Suppliers and reseller rely on
different sets of performance ratios
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.
Ratios Suppliers evaluate: 1) customer
E/R Ratios communication, 2) paperwork flows, 3) physical distribution, and
4) financial risk assumptions
Annual
X Average
Turns X Inventory
Turnover Gross Margin
earns
GMROI
Average
Gross Margin
÷ Average
Inventory
Average Average
GMROR
Gross Margin ÷ Accounts
Receivables
Strategic Cost Management (SCM):
4-Step Approach
1. Divide 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.
Profitable Analyses
Strategic Cost Management: Recasts the
SCM direct costing income statement around distribution-
related activities
Contribution
Margin
Sales – Variables Costs
Net
Marketing
Contribution _ Controllable Marketing
Margin Fixed Costs
Contribution

III. Responding Adaptively to
Incremental Marketplace
Changes

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

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)

Gives & Gets
 Gives: specific  Gets: specific gains a
investments and firm receives
resources a firm  Greater expertise
contributes  Enhanced capabilities
 Knowledge  Additional profits
 Personnel
 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.

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
Encouragement to pay for goods immediately
Payment
2/10/net 30 (2% reduction of invoice price paid within 10
Discount
days)
Extra payment designed to gain reseller participation in

Allowance
special programs (cooperative advertising, merchandising,
etc.)

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)
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

Seek Influence Among Channel
Partner Firms
 Six influence strategies for gaining and
using power:
Information exchange
Recommendations
Promises
Threats
Legalistic pleas
Requests

Seek Influence among Channels
Partner Firms
 How can the  Dependence-Balancing
weaker firm Operations:
ensure that its  Courses of action weaker
more powerful firms pursue to equalize the
partner will treat it importance of the partnership
1) Make greater investments in
fairly? partnership until resources
committed by both firms is
roughly equal
2) Seek out other partners
3) Change non-redeployable
assets into redeployable
assets
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

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.

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

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.
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

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
sub par service of another
• Channel members receive appropriate compensation for
sharing their superior service capabilities

IV. Transforming Channels
in the Face of Disruptive
Forces

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

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

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

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
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

V. Summary

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 principle 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
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior written permission of the
publisher. Printed in the United States of America.
Copyright © 2009 Pearson Education, Inc.



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Business Market

Copyright © 2009 Pearson Education

I. Aligning Mutual Self-Interests and Complementary

 Sustaining reseller partnerships:

Strengthening Partnerships in Stable Marketplaces

Responding Adaptively to Incremental Changes Delivering

Transforming Channels in the Face of Disruptive Forces

Establishing Integrated Multi-Channels

Skillfully Handling Relationship Transfers

Terminating Existing Partnerships

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

 Supplier firm and reseller firm

Copyright © 2009 Pearson Education

2. Provision of incentives designed to thwart

3. Diligent monitoring of partner firms’ activities

4. Socialization of partner firm managers to the norms and

2. Joint annual planning and periodic surveys

3. Continuously monitor the amount of conflict within

4. Identify and pay attention to changes in the

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

 Innovating in the local marketplace

 Enhancing the supplier’s brand equity

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

 Evaluate channel financial performance to

Copyright © 2009 Pearson Education

2. Compare each ratio to industry averages

3. Ratios are used to track performance over time, to

These analyses enable managers to examine the

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Extra payment designed to gain reseller participation in

Copyright © 2009 Pearson Education

 Reseller market plans provide a

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

2. Focus on meeting customers’ growing demands for

3. Objective is to improve the quality of service

Copyright © 2009 Pearson Education

 Auxiliary Support Systems

Copyright © 2009 Pearson Education

Typically a retired reseller manager or principal employed by the

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

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

 Consortium: resellers of complementary lines

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education

Copyright © 2009 Pearson Education