Channel Strategy and the Recession

“Because things are the way they are, things will not stay the way they are.”
 Bertolt Brecht

I have been surprised with how executives perceive their channel strategy in battling the "Great Recession."  Through recent conversations, it has become clear to me that many executives have not completely thought through the impact of the events of the last 24 months on their go to market models

They have downsized, cut budgets, and exited markets but that has been a reaction to declining demand and revenue. Cutting cost is not change; it is doing more with less and should only be considered a short-term solution.

Executives must now explore what changes will impact the way future financial results are delivered to the company.  To begin, it’s helpful to look at what shapes and informs an organization’s channel and go-to-market strategy. There are four main forces at work:

1. Market Dynamics  
2. Customer Preferences
3. Product Attributes
4. Organizational Economics  

The four areas are interconnected - they’re like atoms bumping into each other and often – a change in one area sets off a domino effect in that changes in the market environment (the health of the economy, technology and regulatory changes, etc.) impacts customers’/consumers’ buying behavior, which may cause changes in product design, and so forth.

Smart and successful companies recognize and anticipate market shifts and, as a result, use market data to create, modify, and improve products, pricing, and channel strategies. Ultimately, these changes impact the organization’s revenue outlook and profits; in other words, their “organizational economics”, and ultimately how they go to market.

The “Great Recession” has been a significant disruptive event and it has impacted all four of the key forces. Companies who fail to recognize this will awaken to new competitors eating their lunch, customers who will just “disappear”, and more budget and resource cuts.

For example 

Years ago, I did some work for a technology company who was missing opportunities in a certain segment of the market and could not determine why. We uncovered that a new product innovation had given rise to a new buyer/key influence that was not being covered.  As a result, we developed a new value proposition, messages specific to that buyer, and a specialist sales force.

Two years later, we were re-hired because they were getting beat in the small/medium business (SMB) segment by a competitor, and couldn’t figure out why. Everything that was put in place two years prior had been working; they made sizable market share gains.

Finally, we discovered that the key consideration driver in the SMB had shifted dramatically from Product to Price (the cost of product and service) because of a downturn in the economy.

All the new messaging developed two years prior for the new buyer about their innovation was now being used against them. The smaller competitor was telling the company’s customers that they overbought, and that they had the right solution for their budgets.

“Because things are the way they are, things will not stay the way they are.” 

Things change, and typically faster than most people understand, and companies can digest. Included below are three tips to get your started:

1. Recognize that change has occurred - your mission is to discover it. Here’s another tip, static research will not be enough to unlock the insight you’ll need, look for YOY changes. 
2. Set up a system - monitor the four forces on an ongoing basis. Change can come from any direction.
3. Determine the key market driver(s) in your industry - for example in Healthcare: Regulatory/Legislative changes.  Establish research tracks in order to detect trends and do scenario planning on a ongoing basis.

And finally, recognize that channel strategy (actually any strategy), should be considered alive and fluid, it’s not “set it and forget it.”

How has your organization been impacted by the recession?