Question: Resolving conflict in the interests of end-customers and channel partners

We are a manufacturer and distributor of premium Hawaiian products. Although, we have one retail outlet ourselves, 90% plus of our products flow through various distribution channels.

One constant debate in our company is — who is the primary customer: the channel partner or the end customer.

Our data on changing end customer preferences is limited , and so it is easy for us to focus on meeting the needs of our channel partners.

But with increased competition, we think this strategy might hurt us in the long-term, primarily by effecting our reach and differentiation in the market.

6 Expert Insights

When confronting similar dilemmas in the past, I've found it helpful to substitute consumer for customer, because the consumer ultimately defines the relative perceived value of your offering. These days consumers are finding it easier and easier to research what they're getting for their money, so it is wise to address your value proposition very strategically, with the consumer in mind.

You have, I think, correctly identified your distribution channels as partners. They are like internal customers in that what you supply to them, e.g. products, information, must be of high quality in order for them to deliver on their end in an optimal manner. Relationships matter a great deal in helping these partnerships to be successful.

As far as data is concerned, most companies make the mistake of measuring what is convenient, rather than what is most strategically important. In this new era of 'big data' you have many options for being informed on changing end-customer preferences, and you'd be wise to take advantage!

If you are debating this issue as to the source that is your primary customer,  you may be trying to make a decision that will not serve the company well.  What happens if you look at this as if both are your primary customer?  What would that lead you to do that you might well overlook if you pick one over the other.

From what you've said both are and should be in your focus and concern.  the end user of your product is going to be the source of letting you know that the current products are still in demand and that the new ones you might introduce are satisfying new tastes or needs the user has.  One way that many get this input is the have a rep on-site at a distributor location.  Standing in the vicinity of their product(s) they encourage buyers to try it and get feedback as to what they like about it … what they don’t like and what they would like to have ‘tomorrow’.
The distribution channel also needs to viewed as your customer for you depend on them to provide the exposure and the information that encourages people to buy your company’s product.  Thus your concern with them would be in practical areas such as on-time deliveries, payment terms, returns, etc.  In addition, this distributor ‘customer’ also is in a position to provide their customer’s reaction to your product … why they like it, what would make it better and what they’d like to have going forward.

It will make for an interesting and valuable approach if you bring your ‘team’ together and replace the debate mentality with one that views both as your all important customer.

You only have ONE customer, the end-user. Where do your channel partners get the money they pay you? From the END USER! Focusing on ANY other person in the organization or supply chain and calling them customers will cause you to make many errors in research, design and spending.

Your channel partners are partners only if they work WITH you to add additional value to the END USER. Otherwise, they are middlemen (and women) who are just a tax to your end user.

There is not and never should be such a thing as an "internal customer." They are co-workers who should be working WITH you as teammates to add value to the END USER. This alignment of focus and language is critical to your long-term success. If you get busy focusing on "internal customers" or channel partners, your end users will find someone who is better focused on what they need.

There should be no conflict.   Your primary interest must be your end-use customer.   The role of your channel members is to support and execute that strategy.  Your tactics in accomplishing this mission must be designed accordingly. If the end user is not satisfied, your channel partners will perform poorly.

Are you  in a push or pull market?   The distributor typically is less equipped to respond to a push market leaving business development at the user level to the manufacturer/master distributor/importer.  Thus, your focus must continually be to develop/build end user demand.  The marketing challenge.

Regardless of the industry or product, distributors serve 3 roles:  local inventory to meet service expectations; assumption of credit risk; bi-directional communications.  If you are successful in your role, their loyalty, commitment and attention to your customer will continue to build.

Rick's comment is the key issue. End users are your 'reason of being', for your own reasons, you opted to delegate sales to your channel partner instead of doing it in house.

Without knowing the type of products you make and your sales spread, it is hard to give specific advice. For long term sake  you should get more client exposure and direct contact through advertising, product seminars, online warranty registration, etc. Your channel partner may not be happy but, if you are a substantial part of his income, he will not drop you. If he does - go to HIS competition.

I simplified matters for discussion sake yet it is doable.

All businesses exist because they own and/or control an asset that can be used in a product or service that provides customers with a competitive advantage. That is, the asset somehow makes the customer's life easier or less uncertain in some way. The busy part of the business involves putting in place processes that make that asset usable to the customer, and managing the risks inherent in the business. The business survives when all this done and an excess of value of produced, otherwise known as profit, allowing the company to pay for the cost of capital, return money to investors and reinvest in its future.

In your case, the benefit is for the final customer and your distributors/ distribution channels are part of the process of making the product available to the end user. I hope this clarifies the issue for you.