Channel 1.0: Foundational Capabilities for Optimizing B-to-B-to-C Performance

Aug 09, 2009 3:53pm
Posted by: Frank Capek

As I mentioned in my previous post (Optimizing B-to-B-to-C Performance: From Channel 1.0 to Channel 2.0), the foundational, Channel 1.0, capabilities required to optimize B-to-B-to-C performance include carefully selecting, cultivating, collaborating with, and deliberately managing the lifecycle and performance of channel relationships.   Unfortunately, many companies struggle with issues or symptoms of issues that result from not having these foundational capabilities in place.  These Channel 1.0 capability gaps often show up in the form of the following issues and symptoms:

Common Channel 1.0 Issues / Symptoms

  • Not proactively identifying and selecting the right channel partners. This results from either inadequate attention to profiling the ideal partner (the “Ideal Partner Profile”) or a superficial search that doesn’t acquire the best partners (the ”Warm Body Syndrome”).  The business impact is that there are a significant number of under-performing channel partners and / or channel partners where the support costs outweigh the benefits derived from working with them.
  • Focus on “selling to” rather than “selling through” the channel. Often the channel is considered the “customer” rather than the ultimate consumer.  This limits the business’ ability to anticipate changing consumer needs and priorities.  As a result, the business misses opportunities to innovate services that help partners win by selling more of their products.
  • Listening to what the channel asks for rather than what the channel needs. Changes in consumer expectations and alternatives are having a significant impact on what it takes for channel partners to be successful.  Most of what channel partners ask for is a reflection of the past rather than a proactive view on how their needs are changing.  Responding to what the channel is asking for misses opportunities to “lead the channel” to a better solution.
  • Channel partners undermining the quality of the brand. Very often channel relationships are formed without putting the principles, education, support, and controls in place to manage the quality and the consistency of the experience that channel partners create for consumers.  In many cases, this problem occurs when the traditional agreement with channel partners is no longer relevant in the current business situation.
  • Being locked into a legacy experience model that can't change. Because the B-to-B-to-C system has a lot of moving pieces, the system often becomes difficult to change as market conditions, consumer expectations, and competitive forces shift.  The experience that consumers have ends up being driven by a loosely coupled network of independent service providers that may not be able or willing to deliver the experience that keeps the system competitive.
  • Not effectively supporting channel partners across the lifecycle of the relationship. Most businesses do a good job of initiating channel relationships, but miss opportunities to actively measure and manage the evolution and productivity of these relationships.  As a result, there may be a large number of relatively unproductive channel partner relationships.

When we encounter companies with these issues, we start by assessing and identifying specific gaps using our Channel 1.0 Capability Model.  Generally issues with channel performance can be traced to a set of specific capabilities that must be addressed.  The following Channel 1.0 Capability Model represents a comprehensive best practices perspective.  Some of these capabilities are more or less important based on the fundamental nature of the channel relationships.  For example, these things show up very differently with tightly, coupled franchise and captive agent models versus loosely coupled retail and distributor relationships.

Channel 1.0 Capability Model

Capability Elements
Lifecycle Management
  • Ideal Channel Partner Personae
  • Channel Partner Attraction  / Brand Management
  • Identification and Targeting Channel Partners
  • Recruitment
  • Registration and Approval
  • Assignment of Entitlements
  • Agreements and Contracts
  • Partner Assessments
  • Partner Database
  • Partner Retirement and Continuity Planning
Training and Readiness
  • Orientation and On-boarding
  • First 90 day Training
  • Mentor Assignments and Coaching
  • Refresher and Reinforcement Training
  • New Product and Process Training
  • Partner Alerts and Newsletters
Collaborative Marketing
  • Supplier Brand Management
  • Marketing Communications to Partners
  • Integration of Partners into Multi-channel Campaigns
  • Collateral Catalog and Fulfillment
  • Auto Presentation Generator
  • Joint Marketing Planning and Execution
  • Joint Business Development Programs
  • Event Management
Collaborative Selling
  • Shared Visibility to Sales Process
  • Team Selling with Partners
  • Partner Sales Forecasting
  • Compensation and Commissions
  • Activity Management
  • Contact Management
  • Product, Pricing, Quote administration
Collaborative Servicing
  • Experience Specification and Management
  • Partner Portals
  • Contact and Case Management
  • Multi-channel Partner Services
  • Partner Self-Service Tools
  • Partner Value-added Business Services
Performance Management
  • Partner Performance Profiles
  • Partner Performance Tracking and Reporting
  • Early Warning Systems for Changes in Partner Behavior
  • Performance Improvement Interventions
  • Performance Issue Escalation
  • Partner Termination

In the course of addressing specific capability gaps, we’ve learned that most effective approach to optimizing the performance of B-to-B-to-C relationships is to work Consumer Back.  In other words, to look past what your business customers are asking for to find innovative ways help them be more successful with their customers. In fact, we’ve found that many organizations that consider themselves pure business-to-business (B-to-B) providers would benefit from adopting a B-to-B-to-C "Consumer-Back" Approach... such as the following:

The B-to-B-to-C "Consumer-Back" Approach

  1. Understand how expectations and alternatives are changing for the end-consumer. In most cases the end-consumer has a rapidly advancing set of expectations being driven by the best experiences they have with other providers. In addition, these consumers frequently have an expanding array of options for meeting the same set of needs.
  2. Understand how these changes affect the nature of the relationship that exists between your business customer and the end-consumer. Very often the changes identified in Step 1 create tension in the relationship your business customer has with the end consumer.
  3. Understand how these changes affect what it takes for your business customer to be successful. This includes changes in what it takes for your business customers to acquire consumers, serve and retain them, manage them profitably, etc… In a large portion of the situations we’ve seen, changes in end-consumer expectations lead to a fundamental shift in the dynamics of your channel customers’ operations. In some cases, these are shifts that your channel customers may have not fully recognized.
  4. Ensure that you have a solid “economic model” of your channel customers’ business. This should include understanding the basic processes and costs associated with acquiring, serving, retaining, and managing their relationships with consumers. This provides a foundation for focusing on the elements of the experience that have the highest impact on your channel customers’ business (very often not the “table stakes” requests they make of you). It also provides the foundation for knowing how to communicate with your business customers about the innovation you develop in a way that reinforces the business value to them.
  5. Brainstorm any and all opportunities to help make your channel customers be more successful meeting the changing needs of the end-consumer. Generally these opportunities have a direct impact on your channel customers’ effectiveness in acquiring, serving, retaining, and managing their relationships with consumers. We’ve found that it helps to surface the explicit or implicit “rules” that constrain your traditional relationship with the channel customer. Very often the greatest opportunities to innovate come from uncovering the opportunities and implications of breaking these rules.
  6. Analyze the impact that each of these potential innovations have on the economics of the channel customers’ business and prioritize them based on business value, complexity of implementation, and your credibility with customers on delivering that innovation.
  7. Present these innovation opportunities in terms of their economic value to the channel customer. In some cases, there may be a considerable sales cycle to helping your channel customers get their head around these innovations… particularly if they have not been directly involved in the above process with you.

B-to-B-to-C Consumer Back Examples

One of our first experiences with this approach was about 15 years ago.  At the time, we were working with a leading tire manufacturer that sells replacement tires through independent dealers.  Our client had already spent a lot of time listening and responding to what these business customers asked for… typically improvements in ordering processes and turnaround times, payment terms, and advertising support.  These requests really represented “table stakes” improvements in the basic service levels that define the traditional relationship the tire manufacturer had with these dealers.  Responding to these requests generally involved investments that were difficult to justify; they just added to the manufacturers’ cost to serve without driving additional revenue growth.  They clearly needed to do something different.

Over the course of 2-3 months, we studied the factors that influenced consumers’ experiences associated with their tires and observed how consumers shopped for and decided about replacement tires.  This was done in 5 different European markets.  It turns out that there several innovative ways the tire manufacturer could help their dealers be more successful with the consumer.  For example:

  • In the Scandinavian countries, consumers generally have two sets of tires for summer and winter. In addition, these consumers typically did not have room to store the tires in the off season. If the tire manufacturer helped the dealers set up and run a tire storage service, the dealer would be able to get the consumer back into the store on a semi-annual basis. This would generate stickiness for the dealer and also provide an opportunity to inspect the condition of the tires and make more optimal recommendations about when they needed to be replaced. This created a clear economic benefit for both the dealer and the manufacturer.
  • In the German market, time was more of an issue. In this situation, we determined that the opportunity for the tire manufacturer was to help their dealers provide mobile mounting services that would replace the tires while the car was parked at the customers’ home or workplace.

In each of the markets there were things the manufacturer could do to optimize or improve the relationship between their customer and their customers’ customer.  (See Most Efforts to Improve Customer Experiences are Misdirected!).  Like most of the situations we’ve seen since that time, these innovations are the kinds of things that business customers would never ask for.

After that experience, we started to (semi-jokingly) tell our other clients that they needed to stop listening to their “channel” customers so much.  We’ve observed that these channel customers typically ask for things that drive up your costs rather than increase your revenues.  Of course they need to pay attention to what customers are asking for (or at least look in their general direction when they’re talking)… but the trick is to look past what they’re asking for to find more innovative ways to help them be more successful with the end-consumer.

Since that time, we’ve worked with very many companies to create similar opportunities, for example:

  • Several financial broker-dealers that now provide innovative services to help their independent financial adviser customers be more successful acquiring, serving, and managing relationships with individual investors.
  • A leading food processor that now provides innovative and collaborative concept development, meal design, kitchen layout, and education services to their restaurant customers… all aimed at helping their restaurant customers stay ahead of changes in consumer expectations for dining experiences.
  • An automotive financial services company that provides dealer financing, pre-paid maintenance, extended warrantee services, etc…  Beyond these basic products, this company’s entire positioning is now focused on collaborating with automotive dealers to improve the profitability and performance of their customers’ finance and insurance function. In addition, the company is now getting paid based on increases in their customers’ profitability not just the sale of their basic products.
  • A leading small group health insurance company that has significantly improved their performance by focusing on how they can help independent agents provide value-added services and advice to small businesses on the management of health benefits costs and employee wellness/productivity.

In this post, I've dealth with the foundational capabilities associated with the Channel 1.0 model.  In an upcoming post, I’ll share some of what we’ve been learning as we've helped companies build on these foundational capabilities in order to move to an inherently more agile, collaborative, and open, "next generation" Channel 2.0 model

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  1. Pingback: Are you “selling to” rather than “selling through” the channel? « Channel Execution Management

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