Interview with Joy Mead
Recall from Chapter 3 "Consumer Behavior: How People Make Buying Decisions" that Joy Mead is an associate marketing director with Procter & Gamble. Listen to this audio clip to hear Mead discuss how Procter & Gamble has developed insight about consumers and shared that insight with its retailers to help both them and the manufacturer succeed.
What shouldn’t you do when it comes to your channel partners? Take them for granted, says John Addison, the author of the book Revenue Rocket: New Strategies for Selling with Partners. Addison suggests creating a dialogue with them via one-on-one discussions and surveys and developing “partner advisory councils” to better understand their needs.
You also don’t want to “stuff the channel,” says Addison. Stuffing the channel occurs when, in order to meet its sales numbers, a company offers its channel partners deep discounts and unlimited returns to buy a lot of a product. The problem is that such a strategy can lead to a buildup of inventory that gets steeply discounted and dumped on the market and sometimes on gray markets. This can affect people’s perceptions of the product and its brand name. And what happens to any unsold inventory? It gets returned back up in the channel in the next accounting period, taking a toll on the “stuffers’” sales numbers.
Lastly, you don’t want to risk breaking the law or engage in unfair business practices when dealing with your channel partners. 1
We have already discussed confidentiality issues. Another issue channel partners sometimes encounter relates to resale price maintenance agreements. A resale price maintenance agreement is an agreement whereby a producer of a product restricts the price a retailer can charge for it.
The producers of upscale products often want retailers to sign resale price maintenance agreements because they don’t want the retailers to deeply discount their products. Doing so would “cheapen” their brands, producers believe. Producers also contend that resale price maintenance agreements prevent price wars from breaking out among their retailers, which can lead to the deterioration of prices for all of a channel’s members.
Both large companies and small retail outlets have found themselves in court as a result of price maintenance agreements. Although the U.S. Supreme Court hasn’t ruled that all price maintenance agreements are illegal, some states have outlawed them on the grounds that they stifle competition. In some countries, such as the United Kingdom, they are banned altogether. The safest bet for a manufacturer is to provide a “suggested retail price” to its channel partners.