This article originally appeared in VAR Insights.

Channel Conflict:  The Good, The Bad, and The Ugly

The New York City VAR was certainly having serious doubts as to the value of their relationship with the Vendor (Part II).  Not only did they join the Vendor’s partner program before establishing a foundation for the relationship (Part I) but they also failed to get insight into the Vendor’s sales organization.  Imagine their surprise when they discovered the Vendor also sold their products and services directly to the customer (Bad).  This subject was never discussed.  Now the VAR had to deal with probable channel conflict (Ugly).[1]

Channel conflict.  Two words that can make a channel partner see red.  There are various forms of channel conflict.  In this case, the Vendor has a direct sales team creating a scenario where the Vendor and the VAR are possibly competing for the same customer.  The VAR realized they should have gotten more information on the Vendor’s sales organization before they joined the partner program.  Can they mitigate this situation and actually get something good out of it?  Absolutely, by asking the Vendor to map out their sales organization and to describe how they sell:

  • Do they sell to a set of named accounts or can they sell to any customer?
  • What are the practices and policies when their direct sales team is in the same account as their channel partner?
  • Do they have customer registration and does it apply to the vendor’s direct sales team as well?
  • Is the partner compensated if the vendor sells directly into one of their customers?

Should the channel partner avoid vendors with direct sales teams?  They can, which reduces the number of vendors available to work with.  Or they can minimize the impact of the channel conflict by having an open and direct conversation with the vendor and being prepared for what to do if they sell into their accounts.  If the vendor is willing to develop solutions, such as compensating the partner when a direct sale is made into their account, then the Bad and Ugly channel conflict can turn into something Good.

[1] Channel conflict occurs when a vendor not only sells directly to the customer but through the channel as well.