In a nutshell: How the design of multichannel sales systems influences the performance of B2B companies

Scientific articles contain valuable management implications, but are usually not very easy to digest. We summarize the core results so that you can use the latest research findings for your company.

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Original

Multichannel sales systems in business-to-business markets vary substantially in their designs and thereby either attenuate or aggravate agency conflicts between manufacturers and sales partners. Drawing on multiple agency theory, the authors introduce direct and indirect channel usage as focal design dimensions of multichannel sales systems and investigate each channel’s performance effects using a matched manufacturer–sales partner data set.
Whereas direct channel usage predominantly lowers agency conflicts in terms of information asymmetry and sales partner moral hazard, indirect channel usage amplifies moral hazard concerns. How those sales partner effects translate into manufacturer performance outcomes critically depends on governance mechanisms, confirming predictions from governance value analysis: formalization enhances performance outcomes for manufacturers in the case of indirect channel usage but diminishes performance in the case of direct channel usage.
The authors observe converse effects for centralization and information exchange: centralization and information exchange enhance outcomes of direct channel usage but diminish outcomes of indirect channel usage. […]
Our study’s focal managerial implication is that managers need to align multichannel design with governance choices, as multichannel designs can provoke sales partner moral hazard. For example, high levels of direct channel usage can induce sales partners to cooperate against the manufacturer. However, the results of our study imply that governance choices significantly affect whether such sales partner behavior also affects manufacturer performance.

Key statements

Most B2B companies today take a multichannel approach to sales. Some 80% of B2B suppliers have at least one indirect sales channel, such as an external online shop or active partnerships with dealers.
Especially when working with sales partners, so-called agency conflicts can arise. The sales partner (agent) typically has more information than the supplier (principal) – because of his greater proximity to the customer, for example. This advantage in terms of knowledge is then exploited to the disadvantage of the supplier.
In their study, the authors examine how direct and indirect sales channels affect company performance as part of a multichannel approach.
To do this, they rely on data from some 500 B2B suppliers and their sales partners.
The authors conclude that a direct sales channel reduces the informational disadvantage that suppliers suffer from in regard to their sales partners. On the other hand, an indirect sales channel increases this disadvantage.
Suppliers can improve their performance by focusing on centralization and a great amount of informational exchange in their direct sales channels. By contrast, centralization and sharing of information reduces performance when indirect sales channels are employed.
The following are starting points for achieving more success in your sales strategy:

  • Think global, act local: When it comes to direct market development, a centralized approach to sales is effective. That is, the headquarters specifies standardized customer handling processes for internal customer management, but the local sales units enjoy a certain degree of latitude in shaping their interactions with the customer. Forcing uniformity runs counter to differentiated customer management.
  • Optimize your online shop: Selling through an online shop is becoming increasingly popular for complex products that need to be explained, too. It is important to keep the ordering process as simple and straightforward as possible. It should also be possible to implement order to delivery as quickly as is feasible.
  • Define the rules of the game: When working with sales partners, it is crucial to determine the guidelines and processes in advance so as not to cannibalize the other sales channels and the collaboration with internationally active customers.

Source:
Homburg, C., Vomberg, A. & Mühlhäuser, S. (2020). Design and Governance of Multichannel Sales Systems: Financial Performance Consequences in Business-to-Business Markets. Journal of Marketing Research, 57(6), 1113–1134. SAGE Journals.