Danger in the Water: A Screen Play
I'm going to tell you a story about channel marketing. Only it plays out differently than you might think. Names have been adjusted to protect the innocent (or guilty).
Act One: Where the Hell's the Mac & Cheese?
The screen opened to an executive dashboard. It showed four main charts that totaled up to $79MUSD in early market benefit. I felt a pit in my stomach as I watched an EPC partner slide the date selector back and forward slowly one day at a time - the wrinkle in his forehead deepening by the second. My boss was confidently explaining how a utility company could start just a little earlier than they initially planned and see a project IRR increase of nearly 3%. I was mainly just hoping my model didn't break.
I began to drive the live presentation, highlighting the table of projected energy prices when I noticed everyone's faces gradually shift from skeptical to... something else. I cut my eyes over toward a shorter guy with the receding blonde hairline - Bradley I think. He was nearly reenacting a scene straight from The Simpsons. (Imagine Mr. Burns dry washing his hands while staring at money) They had all just realized the seasonal impact on energy prices in Maryland.
The taller gentleman with the slightly Hispanic accent nonchalantly asked for a copy of the model I created. That stomach pit bottomed out again, only this time I wasn't certain why. That question just didn't feel right. We hadn't done a great deal of work with this company in the past, though they did have a decent reputation as an Architect Engineering firm. I looked over and my boss had a look on his face that - in that moment - oddly reminded me of how most 5-year-olds would react to pan seared organic zucchini pasta with a light drizzle of truffled mozzarella.
"Seriously mom... Where the hell's the mac and cheese?"
Act Two: The Pain of Nostalgia
We all wanted to secure this contract, but there is always the chance, this early in bid negotiations, that an EPC partner could drop you and go with a product producer that better fit their internal profit goals. The art of the partnering to win an energy bid can get pretty elaborate when price sensitivity is a factor. I was thinking through this when I recognized where that sick-to-my stomach feeling was coming from.
I'd actually felt it before in March of 2011.
I was working with a family owned soap and beauty products company. There were a number of retailers the company contracted with and I was helping two of those retailers understand customer flow and set promotional pricing and in-store product placement to maximize the impressions and revenue of my client's soap products. Only, I didn't sign any kind of exclusivity contract for my client. I had effectively just given the retailers a better game plan, expecting them to use it to my client's benefit.
The two retailers used my ideas to set up brands with higher margins than my little soap making client. In not fully assessing the channel that my client was attempting to market through, I'd given away the product in an ad and negatively affected their revenue stream.
It (at the time) was one of the worst failures of my adult life.
I ended up working it out and helping my client in the long run, but as an MBA who studied nothing but marketing, and operations management for 3 years, it was an embracing rookie mistake.
I reached over and tapped my boss's notebook and scribbled "maybe a consortium?" in blue ink. His eyebrows, which were previously approaching cro magnon proportions shot up and the edge of his mouth twitched up toward a smile that he quickly shifted into a flat line. He gestured at me to make the pitch. ::deep breath:: Here goes. Crap... what's that tall guy's name again?
Act Three: Indecent Proposal
"Lorenzo we would be happy to get our market research over to you. Before we do, I think there's another way we can all benefit from presenting this material delicately to the utility."
Lorenzo (huh - I guess right) frowned a little and cocked an eyebrow, "what'd you have in mind?"
"If we approach the utility in a consortium, we can provide the reduced schedule without passing ALL of the benefits through to the utility. By offering financing, we can capitalize on the Interest during construction savings, then pass the peak season energy profits through to the utility."
Lorenzo narrowed his eyes. He knew we wouldn't have to disclose our agreement terms if we form a consortium but we would have to if we presented Siemens as a just a supplier. A slow smile spread across his face, "It would reduce our risk exposure and increase our bottom line."
I grinned, "Yup."
Epilogue: Hold My Beer
If paid ads are a kiddy pool, and a limited media run is swim camp, EPC partner negotiations are base diving. Instead of staying on the side lines or saying "hold my beer" and jumping in belly first, You have to figure out where the rocks are and dive. It's at least 6 months of synchronized swimming a whole lot of invested capital once you're in the water.
Fortunately, I'd recognized the EPC as a turbulent sales and marketing channel. One that like the two retailers, would consume our advice for free and use it to make money without us. I'd also spent the better part of a year under the mentorship of the brightest sales and marketing minds in the energy business and had a decent understanding of the various offerings Siemens could make.
It took a few months of convincing the grid authorities to allow the plant to come online sooner than initially contracted. We also had to scramble to get the plant into PJM's capacity market ahead of schedule, but we won the bid.
This time, I took home the win and walked away with a lesson.
Effective channel marketing is more than optimizing content and ad spend. It also includes establishing cross-functional partnerships and fostering long-term relationships with each of them. To do this you have to take time to asses the needs, of each of those partnerships and work to keep your goals aligned with theirs.
Anything less and you are missing out on valuable opportunities to grow your business.
Good luck in your business endeavors as we enter April, and thanks for reading.
-Alfred E McNair, MBA