Walker Information
Helping you put the customer at the heart of every decision.

Who needs who more? The role of dependency in channel/supplier relationships

An emerging trend in the study of relationships is how dependent the parties are on one another for success. When there is a good balance of power, there is a greater likelihood of success in the relationship. However, when one party holds the upper hand, the door opens for issues related to trust, conflict resolution, and unfairness to creep into the relationship.

Dependency has been seen to take a couple of forms in channel relationships. The first is a cost-based dependency. For the partner, this comprises the margins made on a supplier’s products, the costs for becoming and maintaining the level of partnership, as well as any potential switching costs to move business to another provider. The higher these are, the more that power favors the supplier, with the supplier being more dependent on the provider than vice versa.

The second type of dependency is more benefits based. Again, in the partner’s eyes, this would be types of things like brand awareness, promotional consideration, innovation, and the ability to add value to existing products provided by a supplier. This could also be exclusivity to sell certain products, early access to product announcements, trainings, and networking opportunities/lead generation, among other things. The higher these factors are again raises the level of dependency the partner has on the provider.

To mitigate this dependency, partners also have some tools to rely upon. First, they can develop a services-orientation approach, to help to implement and support products from a provider, often times doing so in competition with the provider (with lower overhead costs associated with it).  Secondly, they can diversify their own portfolio, maintaining a relatively level of status with several providers to be able to offer many options to the end consumer, focusing more on breadth and flexibility, rather than low cost and depth with one provider.

When power is evenly distributed, there is much greater likelihood that the relationship will be more collaborative, with flexibility demonstrated by both parties to achieve a mutually successful outcome, and less likelihood that contracts provide the foundation and boundaries for the relationship, which can cause strife between parties. At the end of the day, reviewing relationships in light of the distribution of power may be essential to determining the best pathway to growth, increased market share, and enhanced profitability, for both the partner and the supplier.

Brad Harmon

VP, Consulting Services

Walker Information

About the Author

Brad Harmon

Brad Harmon

Brad serves as the senior client service contact for assigned customer feedback engagements, with an emphasis on industry knowledge, research expertise and creation of valuable insights. He plays an active role with clients from the program design stage through project implementation, and into post-project activities. He is especially trained to assist clients in translating findings into meaningful conclusions, developing recommendations, and facilitating client organizations in pursing action plans that will have a favorable business impact.

Connect with Brad

0 thoughts on “Who needs who more? The role of dependency in channel/supplier relationships

  1. I have discovered that solutions are usual simple but it take a careful mind to eliminate the complexities that come with it. What I got here came too simple to believe.

Share your thoughts

Your email address will not be published. Required fields are marked *