1990 1995 2001
Objectives Product adoption Gain market share rapidly Deal with market share slow down
Customer Large corporate Also small and medium size business Small office
Home office
Home networking
Channel Direct (sales force) Transitioning to VARS Addition of retailers and Internet channels
Big and small vendors
Grade A
- Dynamic, adaptive, flexible
- 3 ? tier reflects value ? added
- Demand pull
- Training school, certification, support
- Compensation linked to end-user satisfaction
- Enhance channels profitability
Grade C
- Too many dealers
- Multiple channels undermine VAR position
- Expansion to lower products/markets/channels inconsistent with Cisco's value adding capabilities
- May open opportunities for competitors
Channel Conflict
? Large VAR partners serving important customers
? Telecom companies entering the fray as distributors
? Cisco's online retailers
? Able to use Cisco's direct website
Solution to channel management
? In general four strategies
? Set product/boundaries
? Set market / customer boundaries
? Promote price convergence
? Compensate for cost ?to ?serve difference
Telecom Problem ? two strategies applicable
? Construct penalties or incentives to level the playing field
? Rationalize distribution intensity
? What Cisco did
o Provided a better handle on channel partners
o Communicated good faith efforts
Channel conflict
? Large VAR partners serving important customers
? Telecom companies entering the gray as distributors
? Cisco's online Retailers
? Able to use Cisco's direct website
Problem:
How should Cisco distribute VoIP (voice over IP)?
Alternatives:
? Through new voice VARS
? Through existing DATA VARS
? Both
Criteria:
a) Risk
b) Cost effectiveness
c) Profit potential
Voice VARS
? Pros
? Readymade access
? Channel for future products
? Cons
? They need higher margins
? Conflicts with existing VARS
Data Vars
? Pros:
o They need additional sources of income which may create loyalty
o Lower data margins
? Cons:
o Lack connections to customers
o Do not understand service needs
Combination of Both
? Pros
o Can appoint the best dealer for the task and market at hand
? Cons
o Margin structure is unclear
o Major conflict on primary line with the other dealers
Epilogue
? Went with Voice vars in selected markets
? Data VARS who were either qualified or willing to invest in the learning
? Introduced a VIP (value incentive program) to award additional discounts and deal with the margin issue... displayed 300 characters
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1990 1995 2001
Objectives Product adoption Gain market share rapidly Deal with market share slow down
Customer Large corporate Also small and medium size business Small office
Home office
Home networking
Channel Direct (sales force) Transitioning to VARS Addition of retailers and Internet channels
Big and small vendors
Grade A
- Dynamic, adaptive, flexible
- 3 ? tier reflects value ? added
- Demand pull
- Training school, certification, support
- Compensation linked to end-user satisfaction
- Enhance channels profitability
Grade C
- Too many dealers
- Multiple channels undermine VAR position
- Expansion to lower products/markets/channels inconsistent with Cisco's value adding capabilities
- May open opportunities for competitors
Channel Conflict
? Large VAR partners serving important customers
? Telecom companies entering the fray as distributors
? Cisco's online retailers
? Able to use Cisco's direct website
Solution to channel management
? In general four strategies
? Set product/boundaries
? Set market / customer boundaries
? Promote price convergence
? Compensate for cost ?to ?serve difference
Telecom Problem ? two strategies applicable
? Construct penalties or incentives to level the playing field
? Rationalize distribution intensity
? What Cisco did
o Provided a better handle on channel partners
o Communicated good faith efforts
Channel conflict
? Large VAR partners serving important customers
? Telecom companies entering the gray as distributors
? Cisco's online Retailers
? Able to use Cisco's direct website
Problem:
How should Cisco distribute VoIP (voice over IP)?
Alternatives:
? Through new voice VARS
? Through existing DATA VARS
? Both
Criteria:
a) Risk
b) Cost effectiveness
c) Profit potential
Voice VARS
? Pros
? Readymade access
? Channel for future products
? Cons
? They need higher margins
? Conflicts with existing VARS
Data Vars
? Pros:
o They need additional sources of income which may create loyalty
o Lower data margins
? Cons:
o Lack connections to customers
o Do not understand service needs
Combination of Both
? Pros
o Can appoint the best dealer for the task and market at hand
? Cons
o Margin structure is unclear
o Major conflict on primary line with the other dealers
Epilogue
? Went with Voice vars in selected markets
? Data VARS who were either qualified or willing to invest in the learning
? Introduced a VIP (value incentive program) to award additional discounts and deal with the margin issue... displayed 300 characters
