This article provides an in-depth look at a value-based channel management model at Cisco Systems for managing the Value-Add Reseller (VAR) channel. In March 2001, Cisco initiated a change from a volume-based channel management model, which had been driving out partner value, to a value-based model that tied channel rewards to specific channel value-add activities. Critical components of this new model include: identifying opportunities for channel value-add; architecting channel programs to enable channel value-add; tying financial rewards to value-add channel activities including a "holdback system"; and exercising significant discipline to manage field pressures for volume-based rewards and diluting certification requirements. It demonstrates that VARs can serve as a significant sales channel, profitably selling complex solutions to satisfied customers under a value added channel management framework. They can also uncover demand opportunities that are incremental to the pull marketing of even a strong brand like Cisco. However, companies need to exercise significant discipline to avoid mixing volume-based rewards with a value-based framework.
Marketers planning promotional campaigns ask questions to boost the odds that the messages will be accepted: Who should receive each message? What should be its content? How should we deliver it? The one question they rarely ask is: When should we deliver it? That's too bad, because in marketing, timing is arguably the most important variable of all. Indeed, there are moments in a customer's relationship with a business when she wants to communicate with that business because something has changed. If the company contacts her with the right message in the right format at the right time, there's a good chance of a warm reception. The question of when can be answered by a new computer-based model called "dialogue marketing," which is, to date, the highest rung on an evolutionary ladder that ascends from database marketing to relationship marketing to one-to-one marketing. Its principal advantages over older approaches are that it is completely interactive, exploits many communication channels, and is "relationship aware," that is, it continuously tracks every nuance of the customer's interaction with the business. Thus, dialogue marketing responds to each transition in that relationship at the moment the customer requires attention. Turning a traditional marketing strategy into a dialogue marketing program is a straightforward matter. Begin by identifying the batch communications you make with customers, then ask yourself what events could trigger those communications to make them more timely. Add a question or call to action to each message and prepare a different treatment or response for each possible answer. Finally, create a series of increasingly urgent calls to action that kick in if the question or call to action goes unanswered by the customer. As dialogue marketing proliferates, it may provide the solid new footing that Madison Avenue seeks.
The List is HBR's annual attempt to capture ideas in the state of becoming--when they're teetering between what one person suspects and what everyone accepts. Roderick M. Kramer says it isn't bad when leaders flip-flop. Julia Kirby describes new efforts to redefine the problem of organizational performance. Joseph L. Bower praises the "Velcro organization," where managerial responsibilities can be rearranged. Jeffrey F. Rayport argues that companies must refocus innovation on the "demand side." Eric Bonabeau describes a future in which computer-generated sound can be used to transmit vast amounts of data. Roger L. Martin says highly reliable corporate systems such as CRM tend to have little validity. Kirthi Kalyanam and Monte Zweben report that marketers are learning to contact customers at just the right moment. Robert C. Merton explains how equity swaps could help developing countries avoid some of the risk of boom and bust. Thomas A. Stewart says companies need champions of the status quo. Mohanbir Sawhney suggests marketing strategies for the blogosphere. Denise Caruso shows how to deal with risks that lack owners. Thomas H. Davenport says personal information management--how well we use our PDAs and PCs--is the next productivity frontier. Leigh Buchanan explores workplace taboos. Henry W. Chesbrough argues that the time is ripe for services science to become an academic field. Kenneth Lieberthal says China may change everyone's approach to intellectual property. Jochen Wirtz and Loizos Heracleous describe customer service apps for biometrics. Mary Catherine Bateson envisions a midlife sabbatical for workers. Jeffrey Rosen explains why one privacy policy won't fit everyone. Tihamer von Ghyczy and Janis Antonovics say firms should embrace parasites. And Jeffrey Pfeffer warns business-book buyers to beware. Additionally, HBR offers a list of intriguing business titles due out in 2005.
In spring 1998, Pradeep Jotwani, vice president and general manager of the Consumer Products Business Organization of the Hewlett-Packard Co. (HP), was contemplating the increasing success of e-commerce and its implications for his division. The consumer products group had started selling refurbished printers through an Internet outlet center in December 1997, but Jotwani was now considering a move to sell new printers directly to consumers via this new channel. If he were to make such a move, he wondered which products to sell online at what prices, and how to communicate this strategy to the channel partners without damaging the existing distribution structure.