The Changing Face of Channel Conflict

Channel conflict is endemic to indirect sales, but the forms of undue and unfair sales competition are changing as go-to-market models and motions evolve.

By Larry Walsh

Channel conflict is endemic to the technology industry, a phenomenon not unique but prevalent across every industry that uses indirect channels. Within a network of sellers operating in a finite market, the potential for conflict arises inevitably. However, as technology and channels evolve, the types and sources of these conflicts undergo change.

To clarify, channel conflict traditionally refers to scenarios where two or more partners, collaborating with the same vendor, vie for the same sale, known as “intrachannel conflict.” Another well-recognized form occurs when a partner competes with a vendor’s direct-sales force to secure a deal, termed “direct channel conflict.”

These classic manifestations of channel conflict are familiar, with most partners experiencing friction at various levels throughout their relationships with vendors.

Channel conflict, in its essence, isn’t inherently negative. The competition it fosters within an open market serves to maintain integrity among competitors, enhances pricing for customers, and elevates quality. Though competition is a cornerstone of a free market, partners seek assurances that their investments in developing opportunities will not face unwarranted competition; hence, the implementation of channel program features like deal registration and opportunity protection.

The landscape of channel conflict is transforming, with the evolution of the technology market introducing new players and dynamics into the equation.

During a partner advisory board meeting I facilitated recently, the discussion of channel conflict surfaced. Partners shared experiences of their opportunities being taken unjustly, identifying distributors, rather than direct sellers or other partners, as the source of this conflict.

A striking revelation from the Channelnomics survey on distribution experiences was that distribution is perceived as a source of channel conflict by 25% of vendors and 16% of partners. The issue often stems from distributors’ sales teams, which might circulate a partner’s opportunity among other partners to secure a sale that benefits their company.

An emerging source of conflict is the rise of marketplaces and digital sales platforms. The convenience and economic benefits they offer are shifting buyer preferences toward these platforms. Despite partners beginning to leverage these platforms for sales, they face significant conflicts, especially when customers transfer a curated sale to a marketplace to reduce their commitments to cloud service providers.

The advent of private offer mechanisms in marketplaces is addressing some aspects of channel conflict, allowing partners to navigate digital platforms more effectively. Yet conflicts persist, particularly as younger decision-makers show a preference for marketplace transactions over traditional sales engagements.

Additionally, the emergence of ecosystems is broadening opportunities for partners while also introducing new forms of channel conflict. In ecosystem sales, where multiple partners collaborate, often only one can officially record the sale, leading to disparities in profit sharing and credit among collaborators.

A concerning trend is some vendors’ apathy toward — or positive view of — channel conflict. These vendors see it as an opportunity to enhance sales outcomes at the expense of fair compensation for partners.

Channel conflict, understood as undue or unfair competition, necessitates diligent management. The onus is on channel leadership to recognize that channel conflict is neither static nor limited to traditional definitions. With the evolving nature of conflict, it’s crucial to establish clear rules of engagement, ensuring partners are well-informed about their market conduct alongside vendors.

Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide.

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