Attention All Hp Buyers Have You Registered With the Toner Police?

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Attention All Hp Toner Buyers Have You Registered With the Toner Police?
HP's Steve Sakumoto talks exclusively to OPI about the next phase of the company¹s supplies channel program in the US

Last year, Hewlett-Packard caused a few ripples in the industry when it required resellers in the US to become Œauthorized¹ if they wanted to continue selling HP ink and toner. Now the manufacturer is taking this program a stage further by requiring these authorized resellers to meet a set of criteria that will give them Œqualified¹ status. Steve Sakumoto, VP and General Manager of HP¹s US Supplies Sales Organization, Printing and Personal Systems, reveals the next phase of the program to OPI.

OPI: Steve, this is the second interview with OPI in the last few months.

Could you start by briefly reminding us of your recent channel changes in the US?

Steve Sakumoto: When we last talked, our message was that HP has been working for the past two years now on really trying to improve the customer brand and purchasing experience in the reseller channel around HP ink and toner. What we had seen over the years was what we would describe as a broad scale ­ I¹d even go as far as saying a rampant and flagrant ­ brand corruption of the HP brand and our messaging. We had resellers advertising remanufactured or compatible products using pictures of HP products, using HP naming standards, etc, even to the point of detailed descriptions. Often it wasn¹t until well down into the product description that the customer might finally realize that it was not an HP original.

We found that this was causing a lot of customer satisfaction issues, so when we last spoke we were on the verge of launching a change in our distribution strategy from a completely open model to one that we call Œauthorized¹. This would require resellers to ­ at a minimum ­ register with HP and provide some basic business information. What that was supposed to do was really just enable HP to understand who the resellers were and to identify them.

That went into effect 1 November and it seems to be working fine. We do have fewer resellers than we had before ­ from over 15,000 to about 8,000 ­ but that¹s still a tremendous amount of reseller coverage. Customers still have many avenues to source HP supplies and it hasn¹t been a problem.

OPI: That¹s almost a 50% decline in the number of resellers. Surely not all of the other 50% were misrepresenting the HP brand, so why such a large drop-off?

SS: Well, when we did the analysis we found that there was an extremely long tail of resellers. We had literally thousands of resellers that had less than $1,000 of annual HP sales on record.

We believe a lot of those were possibly not bona fide resellers: they might well have been heavy end users that had positioned themselves as resellers to buy for a discount. It just goes back to some basic business fundamentals around identifying resellers and making sure that they were actually true business resellers. What¹s important is that we haven¹t seen any degradation or loss of business on an aggregate business.

OPI: Really? Not even on a small basis?

SS: We have seen some shifting around within the channel. Remember, there are two things we did which are related but independent. One was the authorization process, and separate from that is we had eliminated our two-tier distribution model. We now have nine official Tier One distributors and we eliminated a sub-tier of distribution.

What we¹re seeing ­ and we have a lot of data to back this up ­ is that this sub-tier is burning off inventory which has had a short-term impact on the Tier One distributors. At the same time, we have not seen any drop-off in sell-through to end users.

OPI: Did you have any hiccups in the approval process?

SS: We had some hiccups where we were not able to process all of the resellers in a timely manner. We¹re still working through the tail end of that backlog.

OPI: So by the time this article is published, you expect to have cleared that backlog?

SS: Yes, we will have either cleared the backlog or given further instructions to those still waiting.

OPI: Those that are still in the pipeline, are they now unable to sell HP?

SS: Yes, they are currently unable to sell HP products. So end users who formerly bought through them will have to source from other resellers. But with 8,000 of them out there, that shouldn¹t be an issue.

OPI: But that¹s probably not much comfort for resellers that are still going through the approval process.

SS: Agreed, it is probably a challenge for them.

OPI: Tell us what you¹re doing now.

SS: What we¹re now announcing is a new program where we¹re going from Œauthorized¹ to Œqualified¹. So last November we went into authorized, and effective 1 November this year, we¹re going to move from authorized to qualified.

OPI: Is this an additional program or just taking the current program to another stage?

SS: Well, it is a new program from HP, but it is strategically along the same lines of continuing to focus on improving the end-user purchasing experience. The original move from open to authorized focused around some basic business information and basic registration of a reseller as an authorized reseller. What we¹re doing with qualified is we¹re going to be instituting a set of business and performance requirements for resellers that they will have to be able to meet in order to become a qualified reseller.

These requirements are basically aligned with our strategy to ensure that our end-user customers are getting a superior purchasing and service experience from HP and our resellers.

OPI: So those resellers that have gone through the process of becoming authorized must now become qualified.

Is that right?

SS: Yes. We are requiring that for resellers to continue to sell HP ink and toner post 1 November of this year, they must be a qualified reseller.

That will require resellers wanting to continue to sell HP supplies to meet certain business performance criteria that we believe will greatly enhance the customer purchasing experience.

OPI: What are the criteria?

SS: The criteria will include things such as a minimum sales volume, customer service, delivery mechanisms and a fully functioning website.

Resellers will also have to have a physical address where they conduct primary business operations; they must appropriately use HP¹s brand, trademarks, marketing materials and marketing messages; and they must be in good standing with HP.

OPI: Why a minimum spend?

SS: Well, the minimum spend will be fairly low ­ $15,000 of purchases of ink and toner from HP over a six-month period. We simply believe that if resellers are not doing at least $15,000 every six months, they will not have the sufficient business scale to properly support and present the HP brand experience.

OPI: All this sounds like you have to go through another round of approval processing. How do you plan on ensuring that the additional volume of work gets completed in time for the 1 November deadline?

SS: It will mean additional work for HP. We do not believe it¹s additional work for the resellers because the resellers will either have met these qualifications already or they will quickly realize that they do not have the appropriate scale or resources to qualify for the program. Because we¹re pre-announcing this, we¹re giving the industry ­ as well as ourselves internally ­ a lot of time to prepare. A full year will have passed for the industry to have adjusted to the authorized program; then from 1 November we¹re going to move to the next phase of progress.

OPI: Is 1 November a hard deadline? What happens to resellers that haven¹t qualified by then?

SS: Some HP partners have been automatically accepted into the HP Qualified Supplies Partner Program because they already meet the program criteria. There is no action needed from these partners.

The remaining resellers with an active US Partner Agreement will be conditionally accepted into the program to allow them six months to meet the criteria. HP will use the period from 1 April to 30 September to verify compliance, and resellers will be notified before 1 November of their status.

The same for new resellers ­ they can apply at any time and they will be given six months to qualify.

OPI: How do you think the reseller community will react to having to jump through another set of hoops to become qualified? They¹ll probably be wondering what¹s in store for them in 2015.

SS: I can¹t speak for the reseller community, but I do know that those resellers who are currently able to deliver the appropriate HP customer experience are going to be delighted with this program because they are the ones that have invested on many levels to build a business where they can deliver that quality experience to our joint HP end-user customers.

Those resellers will feel very good that HP is actually recognizing them with the qualified status and allowing them to be differentiated from a broader group of registered resellers.

OPI: How will you measure whether this program has been a success for HP?

SS: Longer term I think the ultimate measurement will be a dramatic reduction in the number of customer complaints ­ in areas such as product expectations, the purchasing and delivery experience, after-sales service ­ which we receive directly or hear about through our reseller partners.

OPI: And how will that work in practice?

SS: We will have a tiered system that evaluates resellers based on some performance metrics that we¹re still working through, and then our funding program will be scaled to those tiers. Basically, this will mean that resellers that are doing more for HP ­ those that provide a superior brand experience and most appropriately present HP products ­ will get more funding on behalf of HP. That will be  rolled out in the second half of this year.

OPI: There will obviously be some resellers that can¹t qualify. Will you give them any form of assistance or a grace period to meet all the criteria?

SS: The program is not intended to exclude anyone. It will be the resellers¹ own choice if they want to service HP customers appropriately, and they¹ll then have to decide if they are prepared to make the necessary business investments or if they feel that they can get a better return with their assets doing other things.
 
OPI: This qualified program is just for the US market. Are there any plans to do something similar elsewhere?

SS: As I said last time, the other country management teams are constantly evaluating what we do in the US and it¹s really going to be up to them, based on their business conditions or customer set, whether they do something like this or not.

OPI: Are you aware of anyone thinking about replicating the authorized model?

SS: Not at the moment. But I know countries in Europe like the UK and Germany are looking closely at what we¹re doing.
 
OPI: There must be ways around this and I¹m sure some savvy dealers will find ways of procuring HP inventory from elsewhere.

SS: Of course, there are always opportunities for gray marketing, sideways selling, etc. These are all against our distribution policies and resellers that participate in these types of activities will be disqualified from our program.

OPI: How will you police that?

SS: We have a team of folks that are in charge of what we call channel compliance, and their job is to constantly monitor activities online, activities that get reported to us directly from channel partners or things that our sales organization observes directly.

This team is responsible for identifying a potential violation, obtaining the documentation that proves whether a violation occurred or not and then taking appropriate action.

OPI: Are your distributor partners aware of this and, if so, what¹s their reaction?

SS: By the time this article goes to press, we will have communicated these changes to all the Tier One distributors.

OPI: When we spoke previously you anticipated that at some point you would develop a Preferred Partner Program. Is the qualified program another name for that or is this something different?

SS: This is slightly different. The move from authorized to qualified will put in place a set of business and performance requirements which we believe will deliver some minimum service, support and presentation capabilities within a certain set of resellers.

We are still moving forward with our Preferred Partner Program, but it will be an invitation-only program for resellers that have met the qualified status but go far beyond that and really deliver a superlative experience. We will be inviting an elite group of resellers to join us and we will refer to them as Preferred Partners.

OPI: Do you have any sense of how many Preferred Partners you will have?

SS: No, we haven¹t finalized that yet. It¹s going to be a fairly small number to start with and it will be reserved for those partners that we know unequivocally would deliver what I call a superb customer experience.

 

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April 22, 2014 at 12:22 PM