A colleague contacted me the other day and asked if I had observed a shift in the market of B2B companies moving from indirect to direct sales.
The short answer to his question is yes.
Over a long period of time, we have seen this shift and it has been my experience that this is caused by four main factors:
- Pressure on prices and the compression of margins. This combination leaves very little margin for an independent sales rep or distributor to make money on the product, and almost no wiggle room for the manufacturer. The best alternative channels for the manufacturer in this case are a direct inside sales function or B2B e-commerce.
- The power of the Internet. By allowing for more direct searching and fulfillment of buyer requirements, the web has supplanted one of the core functions of channel partners — that of identifying and selling new business. I have seen this with B2B products across the spectrum, including the most sophisticated and largest of capital purchases. Even if a company keeps their channel structure, it is critical that they continue to build out content and optimize it for search, or they will lose opportunities to any competitor who does.
- Web meetings. Where location used to be important in the sales cycle of big ticket or more complex products, Webex, GoToMeeting, and other forms of collaboration, document sharing, etc., have all diminished the need for a “rep” or distributor locally. Not only do these services allow for collaboration among diverse stakeholders around the country or the world, they also save time and money, while compressing the sales cycle.
- Marketing automation. For many of our clients, the ability to engage their prospect and customer base with content and tools that is data-driven and behavior-based, allows them to have the same, if not better ongoing presence than that of their channel partners.
In the end it is not that different from B2C – customers are under pressure to get the best price, and they want to engage when and where they choose to. This dynamic is slowly changing the way B2B companies go to market. And while many companies are concerned with “alienating” their established channels, the fact is that even most reps and distributors have come to recognize the need for more direct selling, and have adopted a more flexible approach to who can sell what in “their” territory.