Written by David Tebbutt, PC Dealer 02/88 item 01 - scanned

Shifting morality scares off dealer loyalty

For the past year and a half, I have been trundling round a variety of dealers, distributors and manufacturers, learning all about their strategies and how they're going to take over the world. Whenever I visit a dealer I hear complaints about channel conflict, while all the manufacturers and distributors tell me how they think they've resolved this problem. With one or two exceptions (stand up Compaq and Softsel), they've usually resolved it in a manner entirely beneficial to themselves. The dealer spends years investing in an account in the hope of loyalty and a reasonable payoff as the volume of business increases. The dealer's staff are sent in to hold the client's hand as it climbs the learning curve. Then just when the dealer thinks future business is secure, the customer decides to accept a cheaper offer from a distributor.

Of course, the client has a different point of view and wants all the help that's available in the early stages. The dealer knows this but, equally, knows the business will be lost if a commercial rate for the help is quoted.

The dealer never quite gets round to charging for handholding. Once the client knows the ropes, and understands what is needed to make the system work, cheaper alternatives are sought and, almost inevitably, they are found. If the volumes are right (and, sometimes even if they're not), the business ends up with a distributor. The poor old dealer can't possibly compete on price and all future sales to that client may be lost. The same distributor might even be supplying the dealer, although the distributor may not see a conflict. Many set up two completely separate operations: one for corporates, one for dealers. In business terms this may work very well. There may, indeed, be no cross-fertilisation between the two parts of the company. It doesn't alter the fact that a dealership might still find itself supporting its own competitor and I can quite understand the irritation the dealer must feel.

A dealer friend tells me that he has customers who don't qualify to be corporate clients of a distributor, so they are made dealers instead. It annoys him to go to an accountant's or a solicitor's offices and see the distributors' freebies around the room. It seems that the word 'loyalty' means nothing to many customers and distributors. They are motivated by the bottom line and, perhaps short-sightedly, regard a direct relationship as mutually beneficial. That's fine until something goes wrong. Then what? Do they go back to their original dealer? Do they get someone else in? Do they ask the distributor to support them?

I know someone who makes a good living out of telephoning clients who've deserted him and asking them how they're getting on. Quite often they admit that getting a box from a courier isn't quite the same as getting stuff delivered and installed. He then offers to go in and get things going, charging a healthy fee into the bargain. By not making a fuss about the original desertion, he frequently wins back the account.

Ultimately, there will be major corporates and tin pot buyers who will still go to the distributor. They look for nothing beyond a cheap deal. They do their own support and you have to put their desertion down to experience. There will also be distributors who see nothing wrong with competing with their own customers, because morality doesn't come into it. There may be other honourable exceptions I don't know about who have decided that they have a conscience and who have figured out how to serve dealers without going behind their backs and luring away their hard won accounts. I think that distributors who don't make morality part of their bottom line are deluding themselves about the long term loyalty of the dealers who buy from them.