How to Defend Against the Gray Market Threat Part 3

Part 2 of this blog series looked at the impact of gray market sales on software vendors and device manufacturers. In this third and final installment, you will learn how to defend against diversion of your goods on the gray market.

If you want to preserve the integrity of your sales channels, products, and revenue, while keeping your customers happy, it’s important to limit exposure of your software and intelligent devices to the gray market. The question is whether you should take a reactive approach, a proactive approach, or a combination of the two.

Reactive Approach: Customarily, defending against gray markets has fallen to attorneys and the court systems in the form of litigation. There are some key cases where the courts have, for various reasons, ruled in favor of product manufacturers like Caterpillar, Kia, Gucci, and Intel. That’s all well and good, but these are reactionary measures that can only be taken if you’re aware of the gray market activity and have grounds on which to prosecute.

The truth is, unless you have dedicated staff to detect the gray market activity involving your products and deep pockets to fund litigation, most cases go undetected and/or uncontested, allowing diversion of your products to continue.

Although it’s impossible to ban the diversion of products through gray markets, software vendors and device manufacturers would be wise to implement proactive strategies to help reduce the damaging impact of such activities.

Proactive Approach: Fortunately, there are proactive ways you can defend against diversion of your software and intelligent devices. Gemalto Sentinel is a powerful software monetization technology whose software licensing and entitlement management capabilities enable you to:

  • Differentiate Your Products for Various Market Segments
    Sophisticated software licensing technology enables you to develop different versions of your products to suit:
    • Specific geographic regions
    • Health and safety regulations
    • Packaging requirements
    • Consumption habits
    • Technical standards
    • Strategic price points

When you use software licensing to differentiate intelligent devices for various market segments, this reduces the operating costs associated with production and inventory and also restricts gray market sales.

  • Track and Manage License Terms, Distribution, and Usage
    Entitlement management can be used to manage and enforce software licensing from distribution through product activation and usage. By electronically issuing and controlling activation codes, you can track and manage all products from time of manufacture – whether in your own plant or a contract manufacturing plant – to distribution and ultimately to activation at the end user site.

In short, the sale of your products by unauthorized channels creates competitive stress on both your company and your authorized distribution network. Gray market sales have the potential to destabilize the integrity of your legitimate sales channels, violate your agreements with distribution partners, and quite frequently lead to dissatisfied customers.

Companies that recognize the risks and develop countermeasures to mitigate that risk will go far in protecting their businesses against the perils of gray market trade. Those that choose a proactive approach using Gemalto Sentinel software licensing and entitlement management will realize another huge benefit – business growth. And what could be better than that?

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