Manufacturers' Inside Sales vs. Channel Partners: the good, the bad and the ugly

Manufacturers' inside sales versus Channel Partners; the good, the bad and the ugly

I received a call from a CIO this weekend while playing golf, the call started on the 11th hole and went to the 17^th hole. He has been working with a good channel partner but received a quote from the manufacturer inside sales group on a renewal purchase. First he was confused as to why they would have inside sales agents working with customer when they have channel partners and why would the cost be less than the channel partners cost. He was confused of whom to go with and asked me if this was a trend that I was seeing where manufacturers would be going with more inside sales and moving away from the channel partners, just using them for warranty work if needed.

I gave him an example that I had this past month, I gave a price to a customer which was 12% lower than an inside sales representative from a manufacturer of mine. The customer was talked into going direct with the manufacturer by the representative. One week later I received a call from the company needing help and I told them to call the company direct, they own the relationship. Here is an example of the good for the customer where they got what they wanted by going direct with the manufacture. The bad was what it did to our relationship with our customer and now the manufacturer who is taking more and more customer direct by using inside sales. The ugly for them was that they lost a relationship with the partner who is local and can help them.

Another was when a director of security for a local company thought they were getting a great deal from a manufacturer and would not even allow me to give them a quote. They had it in their mind that they knew everything and what was best for the company (it was the god complex some people have when they have a title). They come to find out later that the manufacturer did not give them the big discount compared to what the partner would have given them.  The partner would have saved them $19,000 dollars on a multi year renewal. A $500 dollar dinner, a round of golf or free shirts does not match up to $19,000 dollars in savings they could have saved.

So going back to the CIO's last question, I see the channel partnerships going away down the road.  Manufacturers need either to be a full channel or do inside and outside sales. Having this conflict is a problem for the customers and the partners, but right now it seems that they do not care. Any manufacturer who has a channel should never allow a customer to go direct; they can always pass special pricing to a partner.  

Let's face it, for companies to stay in business down the road they will need to remove the channel to make more money and control the discounts. Think how much Cisco would make if they did not have channel sales, everything was direct and they could sell product at only 10 to 20% off list and not more. I would love to own the stock if they did that.

Please tell us your views on inside sales versus partners and what you see.

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