For some strange, probably genetic, reason, human beings are irresistibly attracted to the word “discounts”. As buyers, we think that the word signifies a good deal. As sellers, we think that discounts generate more sales. So the vivacious cycle continues. When in reality nobody really wins. We all know that even if a product is advertised as being 90 percent discounted, the seller is still making money on it, for nobody sells at a loss.
And yet, especially in the IT channel, everybody is willing to beat the competition’s price. If A is selling a digicam for Rs 3,500, then B will offer it for Rs 3,300. Without realizing that in doing so they are actually de-valuing the sale. For, when we make price the only criterion for sale, then we begin to discount the product from the beginning and lose the opportunity to upsell or value-add. Both of which can only happen if we are convinced that the product is worth a little more money. We can only convince the customer to spend a little more on the product, if we ourselves pitch the intrinsic value of the product correctly. But we have targets to achieve and numbers to accomplish, so we resort to selling the old-way, by cutting down on our own margins.
And then when we get manufacturers also targeting the same buyer, we scream foul. We hold morchas and threaten boycotts, all in the name of safeguarding the partner’s interest. If a manufacturer indulges in direct sales, it is labeled as channel traitor. We hardly stop to analyze why companies have increasingly started approaching customers directly. Does it feel that the partner is not creating the right market for the product? Or is it sometimes just a case of retaining one’s brand positioning in the market? In its October 14th issue, 360 Magazinehighlights the growing trend of manufacturers going to the customer directly and the impact of this on the partner.
When products are discounted, the effects are on multiple fronts. One is that too much of a discount makes the customer question the ‘real value’ of the product. Secondly, on a wider scale, the company’s position in the market takes a hit. And lastly, the partner himself compromises his position by setting himself as box-pusher and not a value-added reseller.
Direct sales by manufacturers are definitely not a healthy practice. And should be discouraged now rather than later. But how can any channel partner seriously take up this issue with the manufacturer when he himself will discount his peer’s quote for just a few hundred rupees?