HP Practices Tough Loyalty

Discussion
Sep 19, 2005
Avatar

By John Hennessy


Last week, Hewlett-Packard CEO Mark Hurd warned HP will cut partners it deems not sufficiently loyal to the vendor.


“For the people who want to play with us, we are going to play with them twice as hard,” he said. “To the people that don’t, we are going to get them out of here.”


The “iron fist” Hurd plans to use in teaming with partners includes eliminating market development funds for partners who sell a solution with as much as “35 percent to 40 percent non-HP components.”


Longtime loyal HP partners applauded Hurd’s pledge. Pete Busam, vice president and COO of Decisive Business Systems, a Pennsauken, N.J.-based HP partner, called Hurd’s message a shot across the bow of partners going to market with HP in a spotty manner.


But Ron Cook, president of Connecting Point of Las Vegas, said he may look elsewhere if HP follows through with its loyalty litmus test. “We sell a lot of HP,” he said. “They are a major vendor. But if they do that, sorry, but goodbye. I don’t want to leave, but if they are planning to divorce me, they leave me no choice. I must maintain vendor neutrality.”


John Thompson, vice president and general manager of HP’s Solution Partners Organization Americas, said the company has “no hidden agenda” regarding channel program changes that reward solution provider loyalty. The move to drive higher attach rates is a process rather than an event, he said.


“We have been rolling out programs around loyalty and attachment for quite some time,” Thompson said. “If a partner sells some other products from other vendors, that is part of business. But those partners that pursue us strategically, we will work with strategically. Those partners that pursue HP opportunistically, we will work with opportunistically.”




Moderator’s Comment: Can loyalty be demanded of vendors or customers? What must retailers do to create a sense of loyalty with those parties it does business
with it?


HP’s new approach to loyalty with their VARs is just plain wrong. Good VARs deliver solutions that best satisfy the needs of their customers. That’s the
approach that generates additional business for the VAR.



Those solutions will include more HP products when HP products offer the best value and performance.



Rather than demand loyalty as HP’s Hurd has done, HP should work with its VARs to determine why its products are not included more often. What features are needed? What support
is missing?



By insisting on loyalty rather than practicing loyalty to its VARs, HP is engaging in loyalty abuse.

John Hennessy – Moderator

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

11 Comments on "HP Practices Tough Loyalty"


Sort by:   newest | oldest | most voted
Gene Hoffman
Guest
Gene Hoffman
15 years 5 months ago

Loyalty is a many-splendored thing! I suspect what is going on in the minds of many HP vendors and customers today is captured in the philosophic transference of this related thought:

If you are not too long HP, I will wait for you forever.

Don Van Zandt
Guest
Don Van Zandt
15 years 5 months ago

People won’t do what they don’t want to do. Holding people hostage to make them change a business strategy of delivering on their customers needs is ignorant.

I care, as the final consumer, that the systems I buy deliver on the price/value/benefits equation that I define.

I have bought HP when their prices were higher than virtually everyone else in the market because their reliability, features, and warranty made that a good decision. If they think that twisting their suppliers or “vendor partners” arms to make them try to sell me something I don’t want will work, more power to them.

I think that there will be (and should be) a revolt, whether public or behind the scenes, that will take them down a path they don’t want to travel.

Just a quick lesson in the free enterprise system – finding out what the customers really want and delivering it is always a better strategy than coercing people not to offer that solution from someone else.

Steve Wilson
Guest
Steve Wilson
15 years 5 months ago

Should be interesting to watch. In a space where the customers and resellers perceive “commoditization” but the producer claims differentiation, resellers will work the producers to drive down costs and improve their own margins. Will customers and resellers be able to perceive and pay for the reduction in choice? Hard to believe.

Tom Bales
Guest
Tom Bales
15 years 5 months ago

In spite of all the initiatives during the last 20 years that were supposed to “foster competition” and a purely market driven environment, we actually have less competition in the marketplace today and therefore even fewer choices for the consumer. The practices now include buying up the competitors (Compaq) and otherwise eliminating competition by whatever means available, including clouting it over the head with a big club as in the current case.

Rather than actually compete with anyone, they are simply trying to force the competition out of the marketplace. I seriously doubt that an informed consumer base will put up with those kinds of tactics and suspect that HP is shooting themselves in yet another foot.

David Zahn
Guest
15 years 5 months ago

Hurd is being quite clear in his statements – I don’t want you to be loyal to us because we are best for your client’s situation, I want you to be an extension of us blindly. He is cutting the veneer of objectivity that the VAR provides to customers by demanding it is HP or nothing.

John, your comments are accurate about needing an approach that provides better insight into why HP is NOT more frequently selected by the VAR and what it would take to improve their utility. I am not at all certain that they are not doing that as well. If in fact, they are ONLY strong-arming their partners, then there is little hope for “loyalty” of any kind.

As a business strategy, I can “follow” what Hurd is doing, and it may not even be a “bad” move from his perspective (if he weighs potential gain vs. loss through this initiative), but it is not consistent with a loyalty-based approach.

Peter Fader
Guest
15 years 5 months ago

The negative PR alone should be enough to make them rethink this dumb idea…

Bill Bishop
Guest
Bill Bishop
15 years 5 months ago

You can’t demand loyalty; it has to be earned, and it’s likely that the HP strategy will enhance loyalty for those partners who are already in alignment with them.

Unfortunately, it appears that too many supermarkets are disadvantaged in the area of loyalty-building with suppliers versus other competing channels. Retailers we see who are building loyalty with their partners:
>Reach out to new potential partners in ways that help the partner feel important and see the potential opportunities.
>Maintain a clear, long-term strategy that makes it evident what’s expected from partners.
>Meet regularly with partners to discuss priority issues and to identify ways to work together against these issues for mutual benefit.
>Scorecard performance and provide constructive feedback on a regular basis.

In our experience, there’s a strong relationship between retailers who follow these practices and retail success.

Warren Thayer
Guest
15 years 5 months ago

This one’s really basic. All parties should be working towards fulfilling the needs of the consumer. This goes directly against that, so it’s a very bad move. Dumb.

Ken Wyker
Guest
15 years 5 months ago

I still find it hard to believe that HP has made such a foolish public comment. I can only assume that they have gotten a lot of pressure from “loyal” VAR’s to make it easier for them to compete when they offer more HP products and felt that this was the best way to give them what they want.

I have no problem with the pledge to reward loyalty, but where’s the logic in threatening vendors that sell a mix of your products and others?

Mark Burr
Guest
15 years 5 months ago
Mr. Hennessey’s comments and just about all comments are so solidly against this, I am surprised. Not that nearly all of you think its a dumb idea, which it is, but rather that when it comes to other loyalty programs, many here (not all) take nearly the same approach. It’s the same, regardless of your retail sector – period. The consumer owns loyalty – period. Thinking otherwise leads to these types of really dumb mistakes. Certainly, you can choose to reward your best customers. However, when you are doing so at the expense of your other customers, its a clear error in judgment. If you do so, how do you expect them to become one of your best customers? Its sort of the same concept in the supermarket. Too many supermarkets lose the opportunity to create good customers by penalizing them for not using a card to get ‘fair’ pricing. You have achieved a customers loyalty when they consistently choose you when they have clear alternatives. They own all the choices. Its up to you… Read more »
Mark Lilien
Guest
15 years 5 months ago

You catch more flies with honey than with vinegar. I assume that HP knows that, and calculated that the likely losses will not hurt HP profits. But the announcement’s implication is that HP isn’t competitive in all solutions, which is negative pr. Furthermore, under certain circumstances, attempting to force a customer an unwanted product if they want another product is against the anti-trust laws. For HP, the devil is in the details. Public arrogance generally leads to customer resistance. Just ask IBM, Microsoft, AT+T, GM, Accenture, etc.

wpDiscuz

Take Our Instant Poll

Has Mark Hurd found the secret to creating or destroying loyalty with his edict on companies that will be considered partners with HP?

View Results

Loading ... Loading ...