17 July 2008

Stop disintermediation with relationship management

By Jim Pinto

The Internet has brought easy information dissemination, direct communications between customers and suppliers, and easy product selection and purchase. This puts pressure on those who do nothing more than act as intermediaries—their functions simply disappear. That’s called “disintermediation”.

In the past, information flowed through intermediaries who had exclusive, direct access to sources of products, services, and information (examples: travel agents and stockbrokers). These types of businesses are disappearing rapidly through “disintermediation.” To survive, they must offer specific services not readily available.

The industrial automation and controls business is somewhat different. Manufacturers use products in relatively low quantities, and programming and modifications demand expertise. Industrial users have special requirements for a wide variety of different products and systems, which needs significant amounts of special applications knowledge and experience.

In the automation business, most manufacturers provide marketing, engineering, manufacturing, and inventory. Their sales channels are links with their customers, providing coordination, selection, communication, and exchange functions.

My reference to “sales channels” includes not only independent sales representatives and distributors, but also people in larger organizations that do the sales and support functions. In successful industrial businesses, independent sales organizations are used instead of direct employees when the services they provide are more effective and at a lower cost.

To be successful, sales representatives and distributors must provide applications, engineering, and facilitate the availability of optimized solutions. They must develop customer relationships that make a significant difference in a complex business environment. The best industrial automation sales channels are not just intermediaries, they are “infomediaries.”

The prime targets of disintermediation are those distributors who still believe their own core competency and number-one selling technique is: “I’ve got it in stock.” Today, it does not really matter on whose shelf the product resides. What really matters is making sure the customer has access to the best solutions, within the expected timeframe. Good sales tactics make the transaction seamless for customers and suppliers.

The winning sales channels in industrial automation are those who deliver products at the right price and the right time. Price and delivery includes application-specific knowledge for trouble-free installation, painless logistics, systems design, service, calibration, maintenance, and upgrade. Smart sales people provide consultative selling with a focus on applications engineering and systems design expertise. They offer the best solution for the customers’ application.

Leading-edge industrial sales reps and distributors must move strongly toward relationship management. They must develop creative programs that help them become extensions of the customers’ technical staff. They must find ways to add value to their customers’ businesses through background knowledge, experience, and consulting abilities. They must use to their advantage the new technologies that conventional sales channels see as a threat. They must share their knowledge with their suppliers and their customers, providing a close relationship to all the partners in the relationship. That must be their competitive edge. 

There is plenty of room at the top for good relationships. Those are the winners.

Related links:

• InTech eNews – New disintermediation perspectives
  http://r.listpilot.net/c/isa/21bkr1z/19tav
• The Myth Of Disintermediation:
  http://www.informationweek.com/794/94uwmh.htm
• Disintermediation Stirs up Industrial Automation:
  http://www.jimpinto.com/writings/disintermediation.html

Behind the byline

Jim Pinto is an industry analyst and founder of Action Instruments. You can e-mail him at jim@jimpinto.com or view his writings at www.JimPinto.com. Read the Table of Contents of his book, Pinto’s Points, at www.jimpinto.com/writings/points.html.