Difficulties in channel expansion and management

Time: The afternoon of March 27, 2003

Location: Shanghai Donghai Commercial Center

Moderator: Liu Lan, Editor-in-Chief of CEConline

Discussor: Liu Zhiyuan (Shanghai Crown Deputy General Manager of Cheng Electronics Co., Ltd.), Li Wei (Sales Department Manager of Shanghai Huicong Software Co., Ltd.), Wu Guoqing (Zhibang Technology Marketing Department Regional Manager), Dai Jian (President of Shanghai Alloy International Trade Co., Ltd.), Yang Yi (Channel of Dopod Communication Co., Ltd.) Department Manager), Xu Jingen (Chairman of Huzhou United Foreign Cooperation Co., Ltd.), Lu Chijian (Account Manager of Shanghai Qili Trading Co., Ltd.), Wen Lianjun (Manager of Domestic Business Department of Shanghai Yuanchuang Digital Technology Co., Ltd.), Xin Hai (Medige Technology Co., Ltd.) Co., Ltd. Marketing Manager), Xu Bin (Project Manager of Shanghai Zhongyou Information Technology Co., Ltd.), Cao Zice (Manager of Printer Marketing Department of Brother Machinery Equipment (Shanghai) Co., Ltd.), Li Fang (President of Shanghai Yuanzhuo Management Consulting Co., Ltd.), Xu Xiaojian (Marketing Director, Hamp Management Consulting (China) Co., Ltd.)

Hewlett-Packard Co. recently announced that in order to increase its market share in Asia, the company will try to sell more products directly to customers. Their main competitor, Dell, achieved significant success through direct sales. There is no doubt that HP has realized the advantages of direct selling.

Marketing guru Kotler pointed out in "Marketing Management": "Marketing channel decision is the most important decision faced by enterprise management. The channel selected by the company will directly affect all other marketing decisions." Can HP's transformation success? In China's business environment, what are the difficulties in channel management?

Channels and Profits

How much profit margin is left for the channels to achieve a win-win situation between manufacturers and channels is a topic of common concern for the participants.

The high profit at the beginning of the channel construction induced Cao Zice, who was engaged in the sales of "Brother" printers, to propose that "Brother", as an internationally renowned printer brand, has recently entered China with mid-to-high-end products, and regards HP as the most important competitor. As a new face in the domestic market, it is necessary to provide channels with sufficient profits to promote sales before, during and after sales. Through market data analysis, "Brothers" has formulated a profit and performance rebate that is twice that of HP to attract dealers to join. He believes that the channel is very interested in this because they are also very concerned about new profit growth while representing mature products. Making full use of the profit-seeking psychology of dealers is one of the important means of "Brothers" at the beginning of channel construction.

Yang Yi agrees with this statement: Dopod currently supports regional agents with generous profits. Since similar products have not yet appeared on the market, Dopod has more room for profit regulation without competitors. She also believes that high profits can prevent the occurrence of the phenomenon of cross-selling between channels.

Li Fang believes that whether the channel is profitable or not is related to the intensity of industry competition. If you are in a fully competitive industry, the average profits of manufacturers are almost the same. At this time, you must rely on technological progress to create profit space, or further subdivide customer groups and tap profit potential. Otherwise, blindly competing for profit quotas may stimulate sales in the short term, which will eventually erode the long-term interests of manufacturers.

High channel profit is not the only factor to ensure loyalty. Li Wei from the software industry pointed out that the company has provided 40% to 50% of high profits to agents, but channel loyalty is still not high. If it is high, it will still choose products from multiple suppliers for promotion. The resulting problems of rising costs and declining profit margins have caused great distress to the company. The lower the profit, the more serious the problem. Lu Chijian, who is engaged in the sales of LCD monitors, believes that the current competition for IT hardware products is fierce, and the profits are getting lower and lower. Sometimes selling a monitor can only make a profit of tens of yuan, which is not a matter of survival and development. Such channels are not motivated, let alone. on loyalty.

Li Fang's analysis believes that if the products provided by a manufacturer cannot be sold to a certain amount, it will be difficult for distribution or regional agents to survive, and if the channel itself cannot be profitable, it is absolutely impossible to be loyal, and it will inevitably increase the number of purchased products Wire. Therefore, manufacturers only promise to provide high profits, not the key to solving channel loyalty. Instead, it should analyze the pertinence and differences of its own products, and fully communicate with the channel to help it reach the target customer group and generate profits.

Channels and Brands

In the supply and demand environment of the buyer's market, brand awareness often affects the consumption tendency, so it is also one of the important factors affecting the choice of channels. How to get the approval of the channel? Low-maturity brands have their own approach.

The "Brother" printers designed for channel dealers are quite profitable, but they have been rejected by the channel because the brand is not well-known in China. "No matter how good the profit you give me, it doesn't matter, the customer always wants the HP brand", "Brother" once got such a clear answer from the dealer. Cao Zice believes that brand awareness is crucial to attracting new channels. The delivery of product image must precede technology and service. Therefore, "Brothers" constantly promotes the brand by sponsoring various commercial and social activities to achieve the purpose of building channels and increasing sales.

Turn anonymity into an advantage For small and medium-sized companies, there may not be enough ability to make a lot of investment in early brand promotion. Lu Chijian, who encountered this problem, was concerned about how to make unknown products arouse the interest of channel dealers. Liu Zhiyuan, who has a similar background, shared his experience and said that the opaque profit caused by the opaque image is often a unique advantage brought by low brand maturity. Selling laptops of emerging brands, the channel's profit is almost 10 times that of well-known brands. Although it is difficult to introduce new products to customers, the rich profit margins help manufacturers and channels to find win-win points. Guancheng has attracted many agents of foreign first-line brands by virtue of this advantage.

Li Fang concluded that popularity and reputation are usually matched with each other, and the vulnerabilities of well-known brands that can be attacked are very clear. He advises emerging products to capitalize on brand mystery, hide weaknesses, and show differentiation.

Using product features as a brand Yang Yi believes that for undifferentiated products, brand awareness has a very important influence on channel selection; however, for distinctive products with greater differences, the impact of brand is not obvious. Dopod's windows mobile phone combines the functions of a PDA and a mobile phone, and so far there is no similar competitor on the market. Therefore, in the process of channel construction and promotion, the novelty and uniqueness of the products offset the disadvantage of low brand awareness and become an important strategy to attract distributors from all over the world to join.

Li Fang agrees with this strategy. He pointed out that the current channel strategy of the entire IT industry has a tendency to be homogenized, which can easily lead to the unfortunate consequences of price wars. In order to highlight differences and attract channels, manufacturers should strive to strengthen innovation in service support, product quality, and performance optimization.

Channels and Channels

It is impossible to completely eliminate channel conflicts, but it is possible to reduce them to a tolerable range.

Too many channels can easily lead to price wars. Liu Zhiyuan's Guancheng company mainly adopts a flat channel strategy. There is no distribution. The most obvious drawback of flattening is the price war between channels. Xu Bin analyzed that there are many downstream channels, and customers have a lot of choice, so it is inevitable that equal channels will fight each other on price to compete for customers. In the end, the entire channel has no profit at all. And manufacturers are usually unable to coordinate the conflicts of interest between channels because they do not know the final user information.

In response to this problem, Guancheng's main measures at present are to implement customized products to order, and to strengthen the diversification and personalization of supply to different channels, so as to avoid channel wars as much as possible.

Choice of direct sales and distribution Direct sales channels can provide customers with a one-to-one service model, while reducing the cost of intermediate links. However, most of the participants said that since direct selling requires a lot of human and material resources, this method will not be considered for the time being.

Comparing the situation of "Brother" and "HP", Cao Zice said that HP has many printers, which are directly aimed at low-end users. Such products can be used to assist direct sales through media advertisements. The printers promoted by "Brother" in China are all mid-to-high-end models. The characteristics of the products determine that direct sales cannot be considered in terms of energy and customers. Therefore, only by relying on the dealer's grasp of customers for many years, the traditional distribution model is adopted.

Yang Yi introduced the situation of Dopod and said that the company has been considering the establishment of direct sales channels because most of the clerks of the agents do not have enough grasp of the functions of WINDOWS mobile phones, which has resulted in the shrinking of store sales to a certain extent. The main reason why it has not been carried out so far is that due to insufficient brand awareness, consumers are worried about the low acceptance of direct selling methods.

Xu Xiaojian finally said that the choice of direct sales or distribution channels should be determined by the characteristics of the product itself. Electronic products, automobiles, audio-visual products, books and other products can be sold directly, because customers are relatively targeted; but traditional commodities such as daily necessities, clothing, shoes and hats, food, etc., are still better in the distribution mode. Li Fang believes that it is impossible for HP to switch to a direct selling model, while Xu Xiaojian believes that direct selling is definitely the direction of electronic products, and HP's transformation will definitely be successful.

About the author: This article is organized by Celine Wei.