By N. Ramasubramani
Is 'Channel Loyalty' really an oxymoron?
Channel partners form an integral part of the marketing ecosystem of many product categories. But all too often the channel partner manages the brand experience for the customer and becomes the face of the brand to the customer - which means building lasting relationships with the channel partner assumes a critical importance, according to channel loyalty expert Nag Rumasubramani at Direxions Marketing in India.
Customer marketing teams across the globe are trying out a number of initiatives to further channel loyalty. And yet there is a good deal of scepticism on whether it is possible to build loyalty in the channel partner.
The case for building channel loyalty Apart from the fact that the channel partner is a key element in managing the brand experience and therefore building customer loyalty, there are other factors which build a compelling case for fostering loyalty among channel partners. Firstly, in several product categories, the customer does not have a strong preference or is not competent to make a brand choice.
In such cases, the channel partner becomes a key influencer.Take for example the lubricant you buy for your car, do you know the brand of lubricant? The decision is most probably influenced by the mechanic or the oil dealer.
There is a whole category of products called 'low involvement' products where the customer is not likely to have a brand choice. In these cases, the channel partner plays a key role in the brand choice.
Secondly, most of the channel partners deal with multiple brands for any given category of products in order to offer the customer a wide choice. In such a scenario, how do you ensure that the channel partner pushes your brand in preference to others in the same category? These and several other arguments point to the need to build a strong loyalty in the channel partner.
The case against building channel loyalty There is a school of thought which holds that it is futile to attempt to build loyalty in the channel partner. The arguments put forward by this school runs predominantly thus: The channel partner's engagement with the brand is purely financial. That is unlike a customer who may buy a shampoo because it makes her hair glisten, the channel partner is merely stocking the shampoo because it provides him a means of living. And as far as he is concerned one shampoo is as good as another.
Given such an involvement, the argument goes, it is difficult to build any loyalty and that the channel partner will shift toward the brand giving him maximum returns at any point in time. There is another argument which suggests that given the finite amount of money that a channel partner can invest in any business, loyalty programmes are unlikely to yield significant results.
Factors to consider for channel loyalty Does this mean that it is not possible to build lasting loyalty in the channel partners? Are marketing managers forever locked in the 'short term incentive' loop?
The answers to these questions are influenced by a number of factors including the product category, customer involvement, consumption pattern and the channel partner's investments in the product. But the most clinching argument is the fact that there are several loyalty programmes successfully running in the market.
"I remember one that we had built for an IT major across Asia Pacific which had the channel salesmen singing its praises even after they had ceased to be members," said Rumasubramani. "We have several such cases from a wide variety of verticals ranging from building materials, lubricants, insurance and even consumer products. While that provides proof that the concept works, it is better to dig a little deeper to understand what makes it work."
Factors to consider in any channel loyalty decision making include the following:
- Plain vanilla rewards programmes do not make the cut. While rewards are an integral part of the loyalty initiatives, programme developers have to think beyond points to understand the psyche of the channel partner and design a loyalty programme that is built on the three pillars of rewards, recognition and relationship benefits.
- Often the recognition needs outweigh the others. Channel partners in every vertical are working hard round the clock to establish and nurture their businesses. And often they play a significant role in the field level success of a brand. Sadly many of them also feel that the principals do not recognise their contribution to the building of a brand. This recognition plays a critical role in building emotional loyalty which brings us to the next point.
- While the relationship with the brand may be financial, the channel partner invests considerably in the success of the brand. And that investment is not only financial. They are equally concerned with micro-level strategies for selling and marketing. And when the brand succeeds in the market, there is a distinct pride. It is this emotional component of relationship which we tend to forget when we design the loyalty initiatives.
- We also need to recognise that the channel partner is not a single monolithic entity. It consists of several people namely the owner, the store manager, the counter salesman and possibly the technical support person. It may not be possible to involve all of them in a single loyalty programme and it may not be necessary either. An analysis of the customer buying habits will often provide the key to which of these will form the target of the loyalty initiative. And the loyalty design will have to define what behavioural aspects of each of these target segments needs to be rewarded and when.
- Finally, the channel partner is aware that his way of running the business may not be optimal. But he does not have the resources to hire top notch consultants to advise him. And very often a successful loyalty programme needs to fulfil this need.
So we have seen channel loyalty programmes yield significant results not just in the softer aspects of emotional bonding with the channel partner but also in terms of increased sales.
Channel loyalty building is a difficult process. It is made more difficult by the fact that the channel partner is a demanding ally and is not content to accept whatever is dished out in the name of loyalty initiatives. But if you are willing to invest the time and energy to understand the pain points and aspirations of your channel partners and importantly who within the channel partner organisation is influencing the purchase decision, then it is possible to build an effective channel loyalty programme.
Ultimately the programme has to be built to answer the question of how the principal organisation can make the channel partner get the most out of his investment in the brand. If we can address all these factors, then there is every chance that the loyalty programme will be a success and there will be evidence of real loyalty from the channel partners over a period of time.