Marketing - Managing the Evolution

2. Managing the evolution

At first, Cisco’s business flourished, as is illustrated by the increased net profit the company made in each year in the period from 1997 to 2000 (Appendix 2)=Exhibit 1. However, after the dot-com crash in April 2001 Cisco took a substantial hit in terms of sales revenues. The market crashed, many companies within the industry ceased to exist and only large players remained. This lead to a highly competitive market. Cisco survived this dot-com crash, but suffered a loss over the year 2001 and the relationships with its channel partners were damaged. Cisco therefore implemented a new strategy, which aimed to decrease competition between resellers and to decrease the disaffection and dissatisfaction resellers had developed against Cisco. The main goal, which was not stated in the strategy itself, was to become profitable again. How did Cisco manage this evolution? To answer this question, we will focus upon three criteria. These criteria are customer focus, suitability, and effectiveness and timeliness of the response. We will elaborate on each of these criteria in the following part.

2.1 Customer focus

As part of the restructuring plan for channels, Cisco launched an engagement plan. In this plan, resellers would be brought into the sales cycle early in the process. As mentioned earlier, this enabled Cisco to use regional partnerships and identify its partners core competencies. The engagement plan was aimed to smoothen the sales process by integration. As another part of the ‘Value over Volume’ approach, Cisco restructured its ‘value added reseller’ (VAR) pyramid structure to put more emphasis on specialization (Appendix 3 = Exhibit 5). This lead to a reduction in half the number of gold-, silver-, and premier-certified partners. This means that half of the these partners no longer qualified for the gold, silver or premier rating and lost the advantages accompanying them. Obviously, this leads to assume that customer satisfaction was...