Companies increasingly use digital technologies to circumvent distributors and enter into direct relationships with their end-users. These relationships can create efficient new sales channels and powerful feedback mechanisms or unlock entirely new business models. But they also risk alienating the longstanding partners that companies count on for their core business.
Building a Direct-to-Consumer Strategy Without Alienating Your Distributors
Companies increasingly use digital technologies to circumvent distributors and enter into direct relationships with their end-users. These relationships can create efficient new sales channels and powerful feedback mechanisms or unlock entirely new business models. But they also risk alienating the longstanding partners that companies count on for their core business. The auto industry is a case in point. Porsche’s Passport program allows consumers to subscribe via a phone app to a range of vehicles for a fixed monthly fee. Your chosen Porsche is delivered to your house with insurance and maintenance as well as unlimited miles and flips to other models included. But if you’re a Porsche dealer, how do you like this idea? These direct-to-consumer offers threaten the very livelihood of dealerships, who historically have owned the customer relationship. And many dealers are fighting back.
How can companies position for the future without putting their current business in jeopardy? Three approaches can help in developing a digital distribution strategy that minimize risk: Embracing stealth (eg, targeting customer segments that have been poorly served or ignored by traditional distributors); creating hooks (eg, by bundling products, monopolizing a category, or developing features that are indispensable to a subset of customers); and minimizing pain by supporting downstream partners’ businesses.