How to manage channel conflict

Many brand manufacturers struggle with channel conflict; particularly with eCommerce.  It’s not uncommon for a brand to wrestle with an eCommerce strategy that generates ROI without damaging channel relationships.  Retailers, particularly large chains, possess a significant advantage, as they have direct access to the customer.   Retailers are increasingly using their advantage to build out new revenue streams by developing private labeled products that compete with the brands that they stock.  

Private label manufacturing has never been easier than it is today.  New product design, especially when knocking-off a competitor, can be completed in weeks.  Coleman tents can be found at Dicks Sporting Goods and Bass Pro Shops, right next to the retailer's private label tents.   Huggies Diapers competes, not only with in-brand offerings from nearly every grocery store chain that shops them, but also with Amazon.  The eCommerce giant recently launched Amazon Element, an in-house brand of diapers and baby wipes.   

Brand manufacturers have an opportunity to develop and grow a direct-to-consumer online channel.  If done correctly, the channel can enhance the sales of other channels, as opposed to the perception that online will take away from other channels.  It doesn't have to be a zero sum game.   Direct to consumer channels can increase brand awareness, influence sell-through at retail and provide the manufacturer with a quicker way to test out new products.  

Tesla, the auto maker maverick, led by Elon Musk is moving beyond the traditional dealership model by adding a direct to customer model. But, what about 'traditional' consumer brands, that more frequently face increasing competition from the channel?  What do you do when you have an indirect relationship with the customer?  

Build a direct path to your customer.  The benefits of doing this well are significant - increase in brand loyalty, increased product margins and, most importantly, greater control of the customer experience.  So, how do we do this without creating issues with the channel?

#1.  Build a consistent customer experience across all channels, including retail.  Know your customers personas, and customer buyer journey stages.  Tailor your messaging to the customer, based on who they are and where they are in the buyer journey.  Make sure that they receive the same message whether they’re online, on a mobile device, calling customer service or (to the extent you can control it) in the store.  Explore how you can truly add value to your customer during your interactions and then execute on your findings.

#2.  Don't alienate the channel - incorporate retail into your experience.  View your brand’s online storefront as a showroom first, eCommerce site second.  Our first responsibility as a brand is to represent the brand across all channels.  In the context of the buyer journey, the customer has to get through the product research & review phase before they can consider the ‘where to buy’ question.  Once they ask the ‘where to buy’ question, make sure you answer it equitably. 

Location & inventory aware dealer locator functionality lets you to more easily and accurately direct a customer to their favorite local retailer.  Close the loop on retail sales through location specific retailer point of sale (POS) data analysis or incentive redemption (web generated item specific coupons, etc.)  Track retail referrals as goals and give the proper attribution to your brand site.  Make sure your retail channels are aware of what you're doing to generate demand and increase sell-through.  It's shocking how few consumer brands can provide any level of quantifiable digital channel metrics to support their brand promotion at retail.  

#3.  Build and maintain price equality across channels.  You obviously don't want to alienate your retail channel by competing with them on price, but you also have to be aware that the online channel is extremely price competitive.  We’ve seen brands price themselves completely out of the online space by sticking to MSRP when the channels are regularly 40 points below.  If you’re placing a revenue target on online sales, that channel has a pricing strategy to support that quota. 

#4.  Use retail sales as an opportunity to build a client relationship.  Retail will carry a small subset of your total catalog.  Consider a retail sale as a warm lead; the opportunity to more meaningfully (re)introduce your brand to a customer.  If they've bought your brand, there's a reason.  Find it & build on it.  Make sure they receive the full value of that purchase -- the experience associated with the purchase. 

Much of this occurs after the sale and requires the brand to have a community of sorts that the new customer can associate with / belong to.  Retailers & brands call this the third shelf.  After purchase you want to work actively, diligently to convert your new customer from being brand aware to a brand advocate.  Brand advocates buy 3-4 times more and refer twice as often as non-advocates.  Don't discount the value of the brand advocate.  Don't simply let the retail purchase occur without extracting the full value out of that transaction.  

Notice that what we’ve done here is shifted the channel conflict conversation from a zero-sum mindset to a rising tide mindset.  It’s much healthier and productive to obsess over how to differentiate your offerings from your brand competitors than to agonize over the size of the slice of pie that each channel is getting.