Aligning Business and Channel Strategies - a very demanding task

Having meet so many Executives on my channel courses and trainings I have seen some of them that are very good at Channel Strategies, while others really can’t, and I have to be honest that I have wondered how it is that one can do it, while the other can’t ..…and another thing that interests me is how they do can do their channel strategies consistently good? So what I’m trying to do in this forum article/discussion is to stimulate your thinking about how to align business and Channel strategies and hopefully get a lot of good discussions and input from that.

I do realize that most senior business executives have growth, innovation, better protection against risks, cost control, resource efficiency and a stronger ability to cope with constant change as major business objectives for the years to come. However, we all know that a well planned and executed strategy to take products to market is the foundation of any successful company. And through the implementation of an indirect sales force, the vendors or distributors are aiming for higher market shares without raising the costs of the own sales force further (let’s face it, this is what channel sales is all about). Therefore the most executives view targeted investments in an indirect sales force as important elements in achieving their objectives. What is for me however very interesting, is that research reveals that about 75% of all channel initiatives fail to deliver the expected business value (Gartner Group - 2006).

Every one of us that works with channel strategies fully understands that, what sounds quite simple in theory can in reality, incorporate many different challenges and issue (I guess that is why 75% of all channel initiatives fail to deliver the expected business value). This leads us back to what I actually want to discuss; aligning business and Channel strategies. Let us take a look for what is needed when vendors and distributions around the world, create a strategic plan with focus on multi-channel revenue growth, they should not only take a look at best practice methodologies that have proven to work (you can read more on that in the best practice forum area), as well as you need to come up with some new innovative program with focus on identifying the important key initiatives that will differentiate your company and help you both gain growth and a competitive channel advantage.

By combining industry knowledge, research, as well as some channel best practice benchmarks and customer insight, you can now craft a channel sales strategy that aligns with your business goals. Typical questions you need to think about and addressed in the Channel strategy, include:

1) In terms of your Market Position:
• What is our current Channel SWOT position?
• Where are we in our Channel life cycle in terms of the “S-Curve”?
• How does our current Channel market share compare to our potential market share?
• How does our Channel Price-Quality ratio position us against our competitors?
• How can we strengthen our competitive differentiation in our Channel?
• What is our Channel innovation rate?
• How is our Channel brand positioned?
• Are we focused on the right Channel market segments?

2) In terms of your Financial Position:
• Which of our current Channel investments are delivering the most value to our business?
• What new Channel investments will deliver more value to our business?
• How do our IRR, ROI, ROS and relative cost structures position us in our Channel market?
• How do our Channel productivity indicators compare to market leading companies?
• What is our current level of Channel risk?

3) In terms of your Stakeholder Trust:
• How well are we meeting our key stakeholder’s needs?
• What stakeholder interfaces are building trust? Breaking trust?
• How can our Channel cope better with rapid, on-going change?
• What are our Stakeholder Satisfaction Indexes (e.g. Customer and Employee) telling us?
• How well are our value chain partners integrated in our strategy process?
• How are difficult Channel decisions taken?

These subjects and approach is not the strategy, however it aims at helping you better prioritize and align your Channel Strategy and thereby your channel investments – to realize those values that matter the most in reaching key business objectives – short and long term.

I hope this has helped or given you something to think about………and look forward to read some comments or new aspect or ideas to this discussion!

Regards your Moderator – Mark von Rosing

How to build a Partner Recruitment Program

What I'm trying to do in this forum article/discussion is to share with you some of the strategic best practice knowledge I have gathered over the years, about how to recruit Partners to become Partners and hopefully stimulate your thinking and get a lot of good discussions and input from that.

Once you have decided to sell through Partners/Partners you have to first decide which partners you wish to target. You must then a) put together your reseller program (for VARs and System Integrators), b) create your reseller kits (for retail and/or VARs/System Integrators), c) and then start recruiting--otherwise you have little to talk about. Trying to recruit partners, before you "have your act together" will blow rare and often single opportunities--sometimes eliminating a chance to try again later.

The Reseller Continuum
Partner Partners fall within a continuum. Typically, the more; -lower price/margin, -high volume your category (i.e., games, personal finance), the more you will target the mass merchants (Microsoft Navision Financials sell even in big B2B sales markets there ERP-Financial Business package, Target), superstores, and software chains. You will also target B2B on-line and catalog partners.
When your product is high value added, requires a lot of service and support, has lower unit sales, is custom developed, etc., then you would target the VARs and System Integrators, the regional dealers and corporate direct (Corporate Software).

Distributors
As described earlier, distributors are wholesale dealers who sell to other dealers (partners). Most partners (retail and VARs) prefer to order through distribution (some order direct, depending on the product and company size) since they have fewer phone calls to place orders (a few distributor calls instead of hundreds of separate vendors), the distributor will often provide financing (allowing partners time to sell the items prior to having to pay for it), will warehouse inventory and manage returns.
The benefit that wholesale distributors provide to vendors is warehousing and inventory balancing (some partners may return items, that other partners will order), credit and collection for thousands of partners, an established customer base of partners that will order product, promotional programs to reach specific partners (they know which ones are ordering competing or complimentary products and can help you target these accounts).
The disadvantage of using a distributor is you sometimes don't know who is buying your product--so you can't establish as direct a relationship. You know who the national's are since you have to sell in and they can tell you what they ordered, but not the regionals and independents. In retail, I typically expect the nationals to take apx. 1/2 to 2/3rds of the distributor inventory--however, it is the regional and independents that take the rest (although with the advent of the internet partners, the ratio may have changed), and they seldom require expensive co-op and MDF, so for your overall margin's sake, it is critical to get these regional and independent partners selling your product.
The other disadvantage of using a distributor is that they require margin, which increases your final street price. The average margin that a distributor will tack on is 5 points--although this can vary significantly by software, accessories, and hardware.

Retail
If you are going into B2B retail you will need to further define which retail outlets will sell your products--which determines your target. Many of the retailers segment themselves by the type of product and price point that appeals to their intended market. For example, a mass merchant like Wall mart would cater to the sub €49 and less relatively non-techy audience--with most software being personal productivity and games within the €9.95 to €39.95 range (you will not see a €599 copy of Photoshop sold in Wall mart).
On the other hand, the consumer electronics superstore, Frys, caters to the techy (with qualified technical staff), and they supply everything from motherboards, power supplies and processor thermal paste, to consumer game software--both locations will sell the lower-end products, but only Fry's will sell the high-ticket, specialized packaged software (like Photoshop).

Recruiting Retail Partner
Recruiting the national retail partner is relatively straight forward. They have single national offices that you can visit, e-mail or call, with single buyers that handle your product category. You have to contact the buyer, present your product, pay extortion fees (MDF/Co-op), and you're in (at least for the first month--and your out again if you can't meet the minimum turns/location for that chain). The mass merchants have a similar process, but they are sometimes serviced via a merchandising firm such as Lenovo that uses this model. Even in the B2B space it happens that a merchandiser "owns" select shelf space (in inches) and it is their duty to select the best products to maximize revenue for the store (and them).
Regardless, the process is fairly straight forward with the national accounts--direct sales and relationships are king. I have gotten products into national retail locations simply because I know the buyers, and they know that I already know how to play the game...so we play. Some of the products I have gotten in have never made it past the door in multiple prior attempts. Having the right material together, proper packaging and relationships increases the odds that you'll get this rarest of shelf space.
Regional chains, on the other hand, can be sold into similarly, but it may take more effort to ferret them out. The nice thing however, is that regional chains don't seem to know how to play the MDF/Co-op game as well, so it is less expensive from a 'fund" basis--but more manpower intensive.

VARS and System Integrators
In contrast, VARs (Value Added Reseller) and System Integrators are often highly specialized, very fragmented and you often have to market to them to pull them out of the woodwork. There are VARs that only cater to CADD, while others only sell into telcos, still others may concentrate on physical security enterprise software. Unlike the mass merchants, chains and superstores, you often have to find them one at a time (your biggest system integrators may have dozens of offices, but many VARs are single shop locations). As a result, finding the right vertical partners could prove challenging.
In addition, once you've found the right VARs, you may still have to train them and walk them through your product sales process multiple times before they can even close one deal. Sometimes it can take a good 6-12 months of concentrated effort before you have a trained and modest VAR/System Integrator reseller base.

Recruiting VARs and System Integrators
The first step, once you have identified the type of VARs you want (by size, certification, vertical expertise, accounts, etc.), is to source your reseller type and build your database. This can be done from the following sources:
• Vertical trade shows
• Hire a training/rep firm
• Wholesale distribution
• Retail or VAR Vision
• VAR Xchange - in all it's variations (sometimes they have vertical events (like "Security Xchange")
• Advertise in a industry magazine or a reseller trade pubs and collect the respondent names
• A reseller-centric trade show
From experience, some specific approaches to consider, include:
• PR. Always lead with PR, it is 1/7th the cost and 15 times more believable. Partners tend to sell what they know about and what gets good reviews. You will need to submit your press releases for first looks, product for reviews, etc. in order to get the massive buzz that can happen via the press. To prove this out, at one company we received apx. 4 times the reseller and customer inquiries from our press, than from our entire display ad campaign.

• Newsletter Advertising. Industry Publications have one of the largest customer databases and send weekly e-mail newsletters that have a "sponsor" listed on the top. Usually these sponsors will advertise a seminar or something generic. It appears that most sponsors do what everyone else does--which seemed pretty useless to me. I suggested a direct response to the VARs to get something free. I wrote the following copy for one of the companies I worked with (limited to 6 lines of text):

Sponsored by ChannelSales.org
First 50 replies gets Partner/Channel application FREE
Develop Partner/Channel applications in days, not months.
No time consuming ASP or PHP code—point, click, & publish.
Winner "Best channel software of the Year" PC Magazine 2007. Reg
€349. Only €99 until Dec 31st. Be one of first 50 and get it free!
www.channelsales.org

• Display Advertising. The advantage of PR is that it is cheap--the disadvantage is that they don't always relate your key benefits and messaging as you would prefer. They also don't always provide contact information. Display ads allow you to position your products and run reseller promotions for investigation. You can also announce promotions to local and regional partners that already sell your product, but you aren't aware of them, via display ads.

• Direct Response. Direct response can be via mail, Fax, or nowadays e-mail. This is especially effective if you have a reliable list of prospective partners (like a list scraped from your competitor's Web site). The only problem is that partners get bombarded with direct response and your info could get lost in the pile. One approach that has worked for me is direct mail 5 1/2 by 8 1/2 sized four color postcards--the reseller can see the offer and promotion without even having to open the envelope (better make it compelling). I have also had terrific response and ROI from card decks (like VAR Business)--specifically since they are relatively inexpensive. Of course these card decks use even smaller postcards--but it is the same concept (a compelling offer is required).

• Roadshows. I setup my first roadshow by recruiting 4 other vendors for a 1/2 day demonstration to 3 cities. In the morning we invited VARs, and had customers in the afternoon. We had over 150 partners at our first regional event (at a hotel), and immediately booked for 15 more cities. We ended up seeing over 800 new VARs during this 8 week event--recruiting about 70%. The tour was effectively paid for by our four participating alliances--since we sponsored the event. Great ROI and results.

• Trade Show attendance. In the old days, many of the trade shows were reseller only, where you could hang out a sign and recruit partners. Most today are B2B end-user shows. Even still, bring the sign to recruit partners/partners--some of your best ROI will be from partners that eventually sell your products/services. There are still some specialized reseller events such as Retail and VAR Vision as well as many local events. Retail & VAR vision is a part of Gartner Group. Both of these events as well as many of the local events invite top Retail and VAR decision makers to view your presentations--and allow you to network and recruit partners.

• Promotions via distributors. Distributors have a complete list of direct fax, e-mail, spiffs and promotions to contact the partners you want and promote to them. See your distributor's packages for ideas of what they can offer.

• Telemarketing. There are many companies that can call for you on the possible partner direct with a massive database and provide NFR copies, information, etc. to get you connected. or, you could have your own Partner Manager team call into the possible partner accounts to contact and recruit them (I believe the last to be best).

• Alliance cross-marketing. Your alliances of complimentary products are always an excellent source for partners. You can contact their authorized VARs and offer bundles and promotions--knowing that their partners are already familiar with the space.


I hope that these best practice views on partner recruitment help you better prioritize and align your strategic Partner Recruitment Program.

Regards your Moderator – Mark

channel conflict!!!

Let me start with saying that I know that this discussion point is a very controversial discussion point. However as this is such an important matter, will I choose to pick up the discussion and look forward to different meanings and approaches.

The first question many companies address in wetter they should go direct or indirect with their sales and what about possible channel conflicts. Often the answer is do it--especially since the popularity of the Internet. The key, however is to avoid most of the channel conflict that will arise.

Channel conflict occurs when the vendor (you) and the partner, or different partner types (retail, VAR, mail order, Internet) compete for the same business. I say “most” of the channel conflict, since it is fine to have some conflict--partners may compete, and there may be some of the business that you can take direct . For example, you might go direct with massive deals that are too big for a partner to finance (such as a 1.3 billion deal overseas), or very small deals that don’t require any special training/installation/consulting--hence won’t provide margins for your partners who make money on their ‘value added’ services.

To minimize conflict you could:

1) Segment the products (different products are sold through different partner types or channels)
2) Setup exclusive or limited territories
3) Sell direct at a higher price than the average street price
4) Setup different promotions for different partners--rotating so they all have advantages at different times
5) Provide MDF/Co-op and let the partners choose to establish their own competitive advantage
6) Setup partner levels--rewarding higher margins and support for higher authorization (the partners choose whether they can be competitive)
7) Setup a process to determine if a customer has worked with a partner prior to taking the business direct (so you don’t steal business they cultivated), etc.

There are multiple ways that you can reduce conflict--the key is to be aware that it could exist and of your ramifications (short and long-term), and that you do something about it to keep your partner and revenue targets satisfied.

One vendor long gone, Ashton Tate, had a terrible problem with channel conflict (they would sell direct and undercut a prospect the partner had cultivated)--as a result, their partners hated them. They still sold their products since they were so popular (dBase), but were rooting for a competitor to take them out--which happened.

It is also a problem if you have no conflict, since it usually indicates that you don’t have enough sales coverage--there could be parts of the market you are not covering (missing RFQ’s, not knowing about the opportunities, your product is not sold where the customers traffic, etc.).

I truly hope that this gave something to think about!


Regards your Channel Sales Moderator – Mark

 

Channel Marketing ??????

The most Partner Managers and salespeople I meet, actually have something against marketing……..and while I don’t really want to discuss why this is or how that could be changed. I would like to focus on how marketing could bring partners to your business (into your parter portfolio). Once they are there, then you can carry out your partner manager/selling activities. What the most Partner Managers and sales representatives that I meet don’t know is that marketing is the process of attracting. So anything the Partner Managers and salesperson does to get partners through the door is marketing, whether it is cold calling, a referral, direct mail or the offer of a free seminar. So a sales person does marketing as well, just another type of marketing then the company does (corporate marketing).

A Channel Marketing Manager is typically responsible for the sell-through function. There are cases where a Channel Marketing Manager handles all sell-in and sell through via the channel, and the internal sales people concentrate on selling direct--this may vary according to your organization.

The Channel Marketing Manager works in partnership with the head of Channel Sales and his Partner Managers to:
1. Establish a competitive partners program (authorization, margins, levels, etc.)
2. Help recruit partners
3. Prepare the proper partners collateral
4. Create partners kits (sell sheets, product slicks, catalogs, partners pricing, NFR product, distribution part numbers, contact information, reviews, etc.),
5. Manage partners database and Partner Relationship Management (PRM) software
6. Jointly invest the market development (MDF) and Co-op funds to increase channel sell-through.
7. This sell-through is accomplished through managing store, VAR and distributor promotions (spiffs, contest, rebates, specials, training, promotions, etc.),
8. Ensuring proper merchandising (retail only)
9. Ensuring adequate stocking levels
10. Running partners education
11. Setting up motivational contest to reward sales
12. Manage seeding programs.
This person is also part of the marketing team and participates with Product Marketing, PR, the Webmaster (for the partners portal) and Advertising to ensure that the specific partners needs are met.


So let’s just face it that a partner manager and a sales person as well as the company does partner marketing, both just have different parts to play!

I know this was a controversial note ………and hope that it gave something to think about!

Regards your Moderator – Mark

Das mächtigste Werkzeuge zur Beeinflussung von Partnern

Diesen Artikel schreibe ich bewusst in Deutsch, da ich persönlich der Meinung bin das hier die meisten Deutschen etwas lernen können. Dies ist nicht als Vorwurf gedacht sondern als ein Ansporn. Wir wissen alle das Lob motiviert und zeugt von Anerkennung - deshalb ist auch Loben eines der mächtigsten Werkzeuge zur Beeinflussung des Verhaltens anderer Menschen. Das gilt vor allem im Berufsleben, z. B. gegenüber Kunden, Partnern, Mitarbeitern oder Geschäftspartnern. Trotzdem geizen die meisten Vertriebsbeauftragten, Selbstständige und Unternehmer mit lobenden Worten und positivem Feedback an ihre Umgebung.

Trotz das viele Menschen sich nichts sehnlicher wünschen als Anerkennung und Wertschätzung durch ihre Umgebung. Dies gilt ganz besonders für das Berufs- und Geschäftsleben! Doch ausgerechnet hier kommt positive Anerkennung viel zu kurz. Dies kann ich als Däne eigentlich nicht richtig verstehen, denn unsere Kultur ist dort anders. Den glaubt man einer aktuellen Umfrage der Jobbörse Stepstone unter 10.000senden in acht europäischen Ländern, dann hat Deutschland das größte Aufholpotential, den dort sind "mehr als die Hälfte der Kunden haben den Eindruck, dass ihre “Einkauf“ von ihrem Lieferanten nicht geschätzt werden. Bei Mitarbeiter ist es noch schlimmer, den Sie hungern nach Anerkennung, den nur 28 Prozent wissen sicher, dass ihre Arbeit honoriert wird."
Ein Blick ins benachbarte Ausland zeigt überdies, dass es wie ich es erwähnt hatte, erhebliche kulturelle Unterschiede beim Verteilen von Lob und Anerkennung gibt: Vier von fünf befragten Niederländern sind sich beispielsweise sicher, dass ihre Arbeit anerkannt wird. Dort sehen sich lediglich 11 Prozent nicht oder ungenügend gewürdigt (mit 56 Prozent sind das in Deutschland fünfmal so viele Menschen!). In Dänemark, Schweden, Norwegen und Italien empfinden immerhin zwei Drittel aller Befragten genügend Wertschätzung.

Das heißt es gibt wirklich ein Lob-Lücke...
Ich sage nicht dass die Ergebnisse der Studie repräsentativ sind. Bin nur der Meinung das es einen gewissen Gedanken Anstoß geben sollte, dass gegebenenfalls viele Menschen von der Aushilfe bis zum Vorstandsvorsitzenden an einer möglichen "Kultur mangelnder Anerkennung" leiden. Dies alleine sollte Anlass sein, über das Loben nachzudenken.
Einen Mangel an Lob und Anerkennung gibt es nicht nur im Verhältnis von Vertriebsbeauftragten, Chefs und Vorgesetzten zu Ihren Kunden, Arbeitnehmern oder Mitarbeitern bzw. gleichrangigen Kollegen untereinander.

Meine Anregung an euch; denkt an Situationen wo ein Partner, Kunde, Kollege, Familienmitglied an "Unterernährung" in Sachen Wertschätzung leiden könnte und probiert dann mit lobenden Worten und positivem Feedback in eurer Umgebung einen Unterschied zu machen.

Wichtig für mich hier ist, das Ich in keiner Form anklagend sein wollte, dies ist ein Ansporn das man eventuell auch im Partner Management benutzten könnte. Ich freue mich von euch zu hören und verbleibe bis dahin mit den Besten Grüße aus dem heiteren Copenhagen.

Euer Moderator Mark

 

Why do some Partners fail and others not?

It is not because I have the answer, this is just a thought.

Several thousand books have been written on Partner and Channel sales methods and techniques.
With all of this available information, why then are so many partners struggling to meet their quotas?
Why are so many companies struggling to sell enough products and services to make a profit?

A cynic or pessimist might say that the products and/or services of one the one partner that doesn't make the quota are just "low quality", that they are unneeded, or that they are impossible to sell what they have.

Personally, I don’t buy any of those suggestions or excuses.

There are thousands of partners (companies) that go out of business despite having outstanding products and or services.

Why do these Partners fail......is there approach, method or technique wrong?

Regards Mark

 

Direct or Indirect sales ?

Indirect sales through partners, is a strategic possibility for growth and incremental sales for vendors. Though invaluable, no direct sales force, can hope to achieve the same coverage and breadth of expertise as an effective channel partner network. For sustainable growth, vendors and distributors are looking beyond their internal resources to extend their sales opportunities with the right partners. The question to go direct, indirect or both is often determined by the following:

1) Ability to recruit resellers. If you cannot get your product into distribution, or find resellers, the answer is simple, you go direct.

2) Product type. If you are selling a product that requires a lot of training, installation and support, you may go direct until you get your resellers trained and certified--or, if you have a large enough sales force, you may stay direct. However, if you have enough sales people to only cover the largest customers (10 sales people to cover top 100 telcos, but not enough to cover the middle 5,000 telcos), you may wish to use resellers to cover the middle market--then segment your product line, one for direct and one for resellers.

3) Market dynamics. As the market technology adoption changes and products that used to require support become easier to use, and customers know what they want--you may go direct (like Dell (it was actually a modest model in the early days, since most users needed more support but became effective

4) Price point. High-end premium quality consumer products (such as expensive cookware, the best vacuums, etc.) are sometimes sold direct (and usually person-to-person) since the benefits (which are real, but not always obvious) must be sold. However, this does not mean that high-priced products can’t be sold via the channel (boats, planes, million dollar SFA products, etc.).

5) Customer requirements. Some customers require mandate a direct relationship with the vendor to ensure their needs are met. In some cases, when an account insists on going direct, the reseller can still earn a bounty for delivering the qualified, pre-sold lead.

6) Ability to manage resellers. Much of the decision to go direct or indirect is also dependent on the companies ability to understand how the channel functions, come up with a competitive program, and manage the reseller programs and relationships.

The final decision on direct or indirect is based on your business model and how you address the questions above.

Regards Mark