Raising the Stakes on Channel Partners
You can’t be successful at business without understanding market distribution business models.
With distribution now representing more than half of almost every industry’s activities, the ability to optimize market channels has never been so important.
At one point, third-party reseller channels were used primarily for simple sales. Long-cycle, complex business-to-business (B2B) sales seldom found their way into reseller channels.
Then times changed.
Today, more suppliers, manufacturers, and companies use indirect channels for complex sales where multiple buying influences are present.
According to Gartner Inc., 70 percent of Global 1000 organizations now sell through third-party channels. In fact, more than 50 percent of the world’s GNP is transacted through indirect channels, a figure expected to grow to 65 percent shortly.
As products and services mature, they often end up in reseller channels. For example, in the 1950s and ‘60s, practically all computer technology was sold through direct sales teams. Today, much of it is sold through commodity-like reseller channels.
Benefits of Channel Partners
The benefits of channel selling offer tremendous advantages to a company. Lower distribution costs. Greater market coverage. Faster time-to-market. Access to a partner’s local presence, investment, expertise and customer base. And, above all, enhanced customer service because you’re taking care of your customers right where they are, and how they wish to be served.
However, companies have embraced channel selling with gusto without fully realizing that it demands a channel management model, not unlike direct selling.
Which is to say a structured and a well-thought-out approach to managing partner relationships. Unfortunately, many channel development systems are disbanded because of low performance when, in fact, some reasonable adjustments could turn them around.
As Albert Einstein famously said, “Doing the same thing over and over again and expecting different results is the definition of insanity.”
And insanity it is with many suppliers who try to manage their channels through a basic transactional buyer-seller model. They struggle. And years go by while they valiantly try to realize their financial expectations without asking the hard question─what needs to change?
Process for Improving Channel Partner Performance
Using MHI Global’s ChannelPRO™ methodology, organizations can dramatically improve key performance areas:
Target Market Segmentation and Mapping: Do you have enough of the right type of coverage to address the market opportunity for your products and services? This key performance area (KPA) helps companies make the most of the hottest market opportunities. Establish partnering strategies and requirements by looking at:
Market segmentation processes and criteria
Potential market coverage gaps
Preferred channels in these market segments
Alternative channels strategies
- Where your products are in the market life cycle
The Whole Product: This KPA helps companies understand the totality of products, services, and attributes that partnerships must deliver to competitively satisfy end-user requirements. The “whole product” includes everything a customer/client needs to get the job done in addition to the base product.
This chart encapsulates a company’s understanding of:
the whole product concept
the economics of transferring costs to partners, and
how well the pricing model competes and meets customer requirements
Partners and vendors often contribute different pieces of the whole product so to deliver a complete and competitive solution; it’s crucial that respective roles and responsibilities are clearly defined. Focus in on these five:
Partner Selection & Recruitment: Under this KPA, vendors describe their “perfect” partner to determine how well potential new partners measure up, and if existing partners lack in any way. In this effort, you need to:
review entire recruitment process along with criteria to evaluate new and existing partners
determine the optimum recruitment strategy and steps needed in the recruiting process
assess if partners can deliver needed whole product elements to end-users
undertake an analysis to identify gaps between vendor requirements and partner delivery
- identify if remedial programs are in place to close partner performance gaps
Channel Enablement: Under this KPA, you need to determine what must be done to enable new partners to succeed. There are many steps between partner contract signing and profitable revenue. You need to question if:
a process exists to prepare partners to generate revenue
technical and marketing readiness programs are in place
plans are customized for each partner or if they are generic
the right resources have been dedicated to this process
commitments have been made to close gaps identified during partner analysis
- existing sales structure and roles adequately support partnering activities
Partner Programs: Under this KPA, vendors determine all the technical, training, and marketing investment they must make to enable and motivate partners. You should assess whether:
program objectives are clearly defined
critical “whole channel program’ elements are missing
partner program budgets are proportionate to the level of expected return
current programs influence partner behavior
existing financial incentives will attract new and desirable partners
- programs are being measured effectively
Partners often have choices about which vendors to invest in, so partner programs must be regularly benchmarked to ensure they are competitive.
Sales Productivity: Under this KPA, you should consider what are the best ways for your company to manage the sales process in a multi-channel environment by looking at:
alignment between divisions and market segments
neutrality of compensation between direct and indirect sales
the integration of partners into sales activities
channel conflict minimization
- implementation of consistent conflict management processes
Organization Alignment: Improving the degree to which business objectives and processes are aligned with partnering success offers the greatest benefits for many vendors. Company alignment is at the center of the ChannelPRO™ framework and the foundation on which success in other KPAs is established.
In this key KPA, you need to evaluate how well departmental practices support the company channel strategy. You should ask:
Is there a company understanding of the reasons they have engaged partners? Are these reasons consistent across the organization?
Are the right processes and systems in place to support channel sales growth?
Is there a channel business plan? Do all parties know about it, support it, and is it being implemented?
Do channel planning and decision-making processes include consultation with all those affected by their outcomes?
- Is there sufficient automation of channel programs?
You don’t have to struggle with underperforming channels, if you know what needs to change. And you’ll know that by using these guidelines and questions to get at the core framework of a sound channel management model.
You can build strong, long-term channel relationships. You can build greater market share, control costs and improve the overall sales experience for the end-user by making some key adjustments in what you are already doing in your channels.
To that end, we invite you to download our latest white paper, “How to Jump-Start Underperforming Channel Partners,” for a handy guide on what you can do beginning today to see better channel results soon.
It takes strategy, motivation and communication. READ MORE.
See you on the upside,
For more information, go to www.pleinairestrategies.com
Or call William L. MacDonald in San Diego at PleinAire Strategies LLC at 760.340.4277 or 213.598.4700