It’s a big world and in a global industry like broadcast technology hardware and software, even the largest vendors must rely on a mix of direct and indirect sales channels.
As part of the 2009 Big Broadcast Survey, I asked technology purchasers how they typically buy broadcast technology hardware and software — direct from a vendor, or through a third-party channel like a systems integrator (SI) or dealer.
The results are interesting because they highlight that there are some times when it makes more sense for vendors to use a channel than go direct. They also show that there are some types of buyers who are more used to buying through the channel versus direct.
It turns out that overall, about 2/3 of customers purchase through a third-party supplier (dealer or SI), with the rest buying directly from the vendor.
However, when you break the results down by the type of customer (as I have done in the chart below), you quickly see that there are differences between the typical purchasing habits of various customer types, and this information has important implications for vendors.
Question: How do you typically purchase broadcast technology products?
Out of six different customer types, only “cable/satellite/IPTV operators” (companies like DirectTV, Sky, Comcast etc) and ”cable programmers” (companies like Discovery and HBO) typically buy more than 50% directly from vendors. Perhaps this is because there are not that many of these customers, and they tend to be large.
These customers also appear to rely heavily on systems integrators to plan and impliment their projects. Many of these projects are large end up being “all or nothing” for vendors, so they are clearly paying special attention to these customers, and fighting for the business.
At the other end of the spectrum, customers in post production, government and education typically buy through a dealer. There are probably a variety of reasons for this:
- In post production there are specialized local dealers who have both in-depth knowledge of the market and deep relationships with this (relatively small) customer base. For many vendors, it makes sense to sell through these dealers rather than pay for a dedicated sales effort. The downside of this is that it concentrates the power with dealers since they “own” the relationship with the customer base, increasing the risk of substitution.
- Government is another category that requires strong relationships, and in some cases specialist credentials such security clearance and/or extensive operational experience. Selling to the government (at least at the national level) can be lucrative for vendors, but it can also take major effort to break into this market. At the local government level (e.g. every town hall in a country), the market is enormous but very disparate, and therefore often left to local resellers. In aggregate this is a large market, but most vendors are not geared up to go after it direct.
- Education is arguably the largest market of all — after all there are many more schools than broadcasters and/or town halls — and yet only 20% of these customers typically buy broadcast technology hardware and software direct from vendors. it’s likely that because of the size, not to mention huge diversity, of this customer base that a specialist dealer with deep relationships at the local level will always be best positioned to win this business.
This leave “broadcasters / TV station” customers in the middle of the pack. There are likely a variety of reasons for this. For example, this is broad category that encompasses state / national broadcasters as well as local players. Vendors with limited resources (e.g. just about all of them) who are after large sales will tend to concentrate their efforts on the biggest part of the market (in value terms) and leave the rest to dealers. Also there are certain regions (like parts of Asia and South America) where the most efficient way to sell (even to the largest broadcasters) is through third party distribution.
I should point out that this question does not ask about the value of product purchased from each category, but if I did I think that it would further highlight the important role of systems integrators and consultants. As customers look to cut cost they often eliminate technical staff positions, effectively outsourcing their technical design and installation to third party consultants — systems integrators in particular. SIs were found to play a strong role in all categories — and particularly in those which tend to have large, complex projects. After all, if a broadcaster is buying a replacement part for an existing system it’s easy to go to a dealer; but if they are building a disaster recovery facility as part of a major strategic initiative, they are likely to go with an SI.
These finding highlight that it’s important for suppliers to tailor their approach to different markets and customer types. It also demonstrates that the third-party distribution channels are a crucial part of their business, because they account for a significant portion of the market access that all vendors need to survive and thrive.
