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Exclusive channel network


During the course of conversations with several distributors, one point that was reiterated was the need to build an exclusive channel network—a set of channel partners in different regions who would be faithful only to one particular disty. This, according to the disties 360 Magazine spoke to, would resolve the issue of low margins while ensuring the disty of a much more aggressive and dedicated channel. Even the partner stands to benefit from additional; support and greater margins.

But while this may seem to be the ideal solution to a nagging problem it is easier said than done. Customers demand an array of option each time they are out shopping. If a partner doesn’t house the particular brand demanded by a customer then he is bound to lose that business. However, channel partners that do not directly deal with end customers stand to benefit from entering into exclusive relationships with a disty. And here we explore those mutual benefits.

Today, disties are dedicatedly exploring the possibility of cultivating exclusive relationships. Says Yogesh Dutta, Country Manager, Aditya Infotech, “In an exclusive relationship, the partner puts his heart and soul into the work. And this is what a disty looks at in any channel relationship.” even V. K. Bhandari, managing director, Supertron Electronics, feels that it is definitely more beneficial to have a few exclusive partners in place. Says Bhandari, “There are certain advantages in developing an exclusive channel network. Firstly, exclusive partners are more loyal to the brand. Generally, these set of partners desist from selling other competing brands. And in cases where they do, the focus on the brand in question is much higher. This is so because they get special discounts. The additional revenue they can generate by being loyal to a particular brand is one of the biggest attractions of being an exclusive partner.”

Also, it is easier to exercise control over the market operating price (MoP) because this is defined by the channel partner. MoP is influenced by the competition. But a channel partner has more control over the same if he is the exclusive dealer for the product in a particular market. Rashi for instance, is the exclusive distributor for Sony products in India. They, in turn, have several premium partners to push the brand. However, despite charging a premium they haven’t faced any major challenges on the price front. They have been able to maintain their premium pricing solely because they are the exclusive partners for the brand. An exclusive partnership also enables the disty to ensure minimum discrepancies in the operating price.

The visibility that a disties’ products would enjoy in an exclusive relationship is likely to be more, as the partner will not feel compelled to make a sell by pushing a competing product if the customer awareness of another brand is lower. Also, in an exclusive relationship the disty can leverage the relationship its partners enjoy with the customer to break into accounts where the partner is selling a complementary product. 

An exclusive partnership also can be leveraged by a disty to source specific data about consumer choices and their preferences. This information can then be used by the disty to gain a deeper understanding of likely future customer behavior and analyze market trends. Even manufacturers can benefit from this information, as product and strategy planning is based on market intelligence thus derived.

BENEFITS CHANNEL PARTNER 
For the channel partner the value proposition can lie in forming a core business around the set of products pushed by their disty partner. Exclusive channel partners also have priority access to product support, training, certification and exclusive sales and marketing resources. This can then help them in acquiring new customers and at the same time increase the satisfaction levels of the existing set of customers.

Additionally, disties would be more comfortable involving these partners in strategic account planning. Adds Bhandari, “We give good margins to premier partners. When you are a premium partner you get a hefty margin and a chunk of benefits, which can then be shared with those further down the chain.”

An exclusive performance-based program level is offered to partners who are committed to selling and promoting the products from a particular disty. Premium Partners conduct joint business plans with the distributor and can receive performance-based margins in addition to the benefits of an authorized Partner. Says Dutta, a disty is more comfortable discussing joint market strategies with a premier partner.

Other benefits include access to the latest product and roadmap information, advanced training opportunities as well as a higher level of direct technical support. The idea is to help exclusive partners become more knowledgeable about products, as well as evaluate new opportunities for business.

CHALLENGES
Profitability is the key concern for most partners. Distributors tackle this challenge by ensuring that operational guidelines are strictly adhered too. For instance, according to Dutta, Aditya Infotech has established a minimum market-operating price, which its premium partners have to take into consideration before finalizing a deal. This ensures a minimum level of profitability for the partners. Disties also need to ensure that partners do not overstock, as this could then force them to cut prices to clear the same. Disties can play a proactive role here by desisting from dumping products on its exclusive partners.

Certain parameters need to be met before conferring the exclusive partner status on a reseller. According to Dutta, if the partner is interested in wholesaling then he should be considered for the role of a premium partner. But if the partner is focused on retailing then it would be difficult for him to stick to one brand. He will have to consider market dynamics.

Also, disties should take a partner’s strengths into consideration. A particular partner maybe strong in the keyboard and mouse space but the equation might change in the case of monitors. A disty can then consider this particular dealer as an exclusive partner for its inputs peripherals while the monitor distribution business can be assigned to another partner. Dutta says that it is not practical to pressure one partner to sell all the products in the disties portfolio.

According to Bhandari, it is also important for the disty to have strong brands in its portfolio to attract exclusive partners.

Exclusive relationships also help the disty to create a certain level of monopoly in key market segments. Such a relationship can also be used to create entry barriers for competitors. Additionally, it provides the disty more avenues and opportunities to tap the market.

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