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Companies Take Different Approaches in Distribution Chain

By | December 1, 2009

      There is more to marketing a product than simple sales strategy. Marketing is a defining trait of a company, and one that often makes it stand out from its competitors. Examples of this abound in all industries. In the telecoms sector, a company such as Taiwan’s HTC Corp. managed to grow into one of the largest handset manufacturers in the world while remaining virtually unknown to the general public for years. Only recently did it decide to move away from being purely an outsourcing company and become a player that targets its own branded products to the mass market. On the other hand, in an area such as consumer electronics, retail strategies for brown goods are extremely sophisticated and often might appear, at first sight, to be contradictory. Companies such as Apple, Samsung, Panasonic and Sony, for example, rely on a network of their own branded outlets competing with retail shops in which their products are sold alongside those of other brands. Online sales strategies, of course, further complicate this diverse sales market.

      Within the technology sector the relationship between companies and their clients can be intricate. There are market players, for example, that tend to expand vertically the range of products and services they offer. In many cases, however, companies choose deliberately to occupy a limited portion of the value chain, focusing on core competencies and leaving other aspects of the business to partners or resellers. In particular, the use of distributors and resellers is a well-established business practice in highly-technical industries in which specialization is key to success. The satellite industry is no exception, though resellers and distributors are, to a certain extent, limited by the nature and size of the industry itself. “Distributors in the satellite industry are relatively undersized compared to other industries because there is not enough equipment in the marketplace to sustain them,” says Dean Griffler, senior vice president of global sales, iDirect.

      The marketing methods chosen by satellite companies are far from universal, however, as each company has its own approach depending on history, market niche and geographical area in which it operates. In a global, vertically-expanded market such as satellite, this comes as no surprise.

       

      Common Partnerships

      While the relationship between companies and their partners does not follow a single blueprint, the fact that the use of resellers is a common industry practice is evidence of the fact that their contribution is believed to be beneficial for the industry. Some market players, such as iDirect, even go so far as to rely completely on resellers in their business model. “In 2001, when we restarted our business, we took a radical approach. We decided to sell off our service provision business and focus completely on selling our equipment to various forms of resellers in the marketplace. Naturally, when we took such a decision we also committed to support them fully,” says Griffler. iDirect currently relies on three classes of resellers: network operators or service providers, virtual network operators, and typical resellers. “The core of our business is represented by network operators or service providers. These are entities that might have a hub in their teleport and purchase remote equipment from us to fulfill the orders they receive from their customers,” explains Griffler.

      Virtual network operators, on the other hand, are customer-facing companies that rely on host network operators for the RF part of their business. Large satellite operators, such as Intelsat, partner with many of these large virtual network operators around the world. From a distribution point of view, virtual network operators have what amounts to a reseller contract with iDirect. Finally, typical resellers, i.e., companies that act as a straightforward point of distribution for a company’s products, make up iDirect’s third category of business partners. “This used to be a central part of our business, but we are defocusing from it,” says Griffler.

      Other companies have taken a different approach to their sales network and operations. Germany’s ND SatCom, a supplier of satellite-based broadband VSAT, broadcast and defense communication network solutions, has chosen to adopt a two-pronged approach. It has a direct presence in the marketplace alongside that of their resellers. While ND SatCom can take advantage of a global network of offices in Germany, the United States, Canada, Mexico, the United Arab Emirates, China and Singapore to provide sales and technical support to its customers and partners in the regions, the company still relies on a long list of regional resellers. “Although we have done the majority of our business directly with customers, we prefer to work through local partners and sales channels,” says Karl-Heinz Weltz, director of sales for ND SatCom’s Europe & Africa division. “We are about to launch a new partnership program to intensify our business with certified partners.” Local knowledge and the possibility to have a regionalized support network are often cited as among the most important reasons that for a company to go to market through resellers. “We see many benefits in cooperating with local partners, as they bring significant value to the business such as local content and applications, installations and services,” he says.

      Above all, resellers are seen as playing an important role in today’s marketplace in that they add value to products and services — value-added resellers (VARs). As a neutral technical service provider, European satellite operator SES Astra looks at resellers as strategic allies. “We believe that resellers can add value to our fleet by offering a number of value-added services such as ingesting customer content, grooming and consolidation of SD and HD content into bouquets, multiplexing, encryption and SMS services, uplinking, fiber backhauling/contribution, investing and operating IP/data networks, and various other services,” says Eddy Frankland, vice president and general manager, enterprise solutions, SES Astra.

      This view is echoed by most market operators, however, for companies such as iDirect, often there are other elements that come into the equation: namely the fact that partnerships with non-exclusive resellers stimulate competition in the marketplace. “We give every single one of our network operators the opportunity to participate,” says Griffler. “Our partners know that we do not participate in the business, and the advantages of this approach are several-fold: One is the fact that our network operators really come to trust us, because they know we are not going to take away the cream — i.e., the better deals. … Another advantage that I see in having resellers is that it forces us to train our partners really well so that they can be self-sustaining. We bring a level of education to the marketplace,” he says.

      This is a view shared in the marketplace. “Resellers increase competition and provide customers with a diversity of choice which is always good for customers,” says Frankland. But whatever the approach to market, be it through the use of exclusive or non-exclusive resellers, all players seem to agree that a key ingredient for the success of all business models is the fact that resellers should be supported, even if a direct sales model is still retained. “From a customer’s point of view, direct contact with the equipment supplier may be preferred,” Weltz says. “This is why we apply a direct touch sales model, which ensures that ND SatCom’s expertise supports customers as well as partners in the best way,” he adds.

       

      Close Relations

      While many resellers consist of external companies that do business with a number of suppliers, it would be wrong to assume that this is a universal rule. Spin-off companies, subsidiaries or entities somehow affiliated to their suppliers also are relatively common in the marketplace. The case of European satellite operator SES Astra is a case in point. Within SES Astra, the responsibility for resellers falls into the Enterprise unit — one of the company’s three vertical units alongside the Media unit and the Government and Institutions unit. In order to be able to address specific needs beyond satellite capacity, SES Astra relies on service companies such as Astra Broadband Services for satellite broadband; Astra Platform Service for playout and content management services; HD+ for HDTV technical services in Germany; and SES Astra TechCom for satellite consultancy services. You also have systems integrator and hardware manufacturer ND SatCom to add to that mix. “The service companies extend the range of services offered by SES Astra and provide integrated solutions to broadcast and telecommunications markets for media, enterprise and government segments,” says Frankland. The regionalization of operations also is an important element in SES Astra’s strategy. With offices in London, Munich, Madrid, Paris, Rome, Warsaw, Stockholm and Moscow, the company also has a strong local presence. “Our in-country sales teams are local experts who are our eyes and ears in the regional markets. Many of our pre-sales and marketing activities are initiated through these regional offices and sales teams,” he says.

       

      Opposing Viewpoint

      How do resellers see themselves and their role in the market? “Operators such as Inmarsat, Iridium and Intelsat depend upon Stratos to quickly ascertain and fulfill customer requirements via the deployment of our value-added services,” says Ian Canning, vice president, marketing and product management for Stratos Global Corp. “They also depend upon us to anticipate future customer needs and continually invest in new value-added services that meet those needs.” One of the key tasks a reseller should perform is to keep a pulse on the market, trying to meet and possibly anticipate customers’ requirements. “To maintain our high level of innovation, we employ some of the industry’s brightest product managers, engineers and [information technology specialists at offices worldwide,” says Canning. Through frequent summits and informal meetings, our teams keep abreast of how our services are meeting the complex networking requirements of our customers.”

      One of their major concerns is cost savings. “As our customers in the maritime, land-mobile and aero sectors evaluate the latest mobile broadband satellite services from Inmarsat, Iridium and other operators, they are already convinced that the new systems can improve the performance of their business-critical applications. Their chief concerns involve efficient use of available bandwidth, monitoring costs and minimizing unnecessary usage. To address these concerns, Stratos offers a suite of value-added services that enable customers to attain the highest possible performance and support from their communications networks, at the lowest possible cost,” he says.

      There are also risks associated with such a choice. First, a possible conflict of interests among players: How do those companies that also sell to customers avoid competing with their reseller networks? Weltz offers a glimpse of what is needed to harmonize strategies. “We ensure avoiding channel conflicts by establishing measures such as clear assignment of markets, segments and territories,” he says. The second issue is how can quality of service be guaranteed to the end user in an environment where resellers enjoy widespread freedom? The answers here are less clear-cut. “We can work with those who have issues. We can try to help them. We are very committed to our partner base. That’s the lifeblood of our business and we recognize that, but my sense is that over time, the cream is going to rise to the top, and that those people who are offering bad service will eventually go out of business,” says Griffler. “But the one thing I am not going to do is try to guess who’s going to be a good network operator and who’s not,” he says.

      In other words, for those who believe in the market, resellers should vie for business trying to differentiate from their competitors, and it is the market that should assess quality. “We never do exclusives in a market or in a vertical. Our partners should have to compete, differentiating their offering in the market based on service quality and not the fact that they have iDirect equipment,” says Griffler.

      Differentiation and quality of service is key, and companies pursue that in different ways. “We routinely put our prospects in touch with customers who have successfully deployed The Stratos Advantage suite of value-added services,” says Canning. “These testimonials help prospects understand how Stratos provides a granular level of customer support on a daily basis.”

      But above all there is nothing like competition to stimulate an environment where only those who can deliver value for money to meet their customers’ needs will be able to thrive.

      Giovanni Verlini is a communication executive and freelance journalist based in Europe. Email: giovanniverlini@hotmail.

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