Upon reading this, one might initially believe we are desperate for content and relying on “Channels 101” for inspiration. Yet, I can assure you the reverse is true. I have been involved in several engagements recently where we were asked advice on specific decision points that were indeed counter to these basic tenets. So, don’t write this entry off as too basic until you read on to see if you recognize yourself in these tenet violations. The degree to which you embrace these tenets is a good measure of your channel culture. I find the biggest violators often do not have a channel culture and/or rely on the channel for less than 50% of their revenue. Here are the basic tenets and how the violations manifest themselves within each.
1)The channel is made up of independent businesses—each having their own agenda.
The fact that they are independent businesses directly translates to reduced mindshare for you (relative to a direct sales organization). They have more on their mind than making their vendors happy. So don’t assume they read your emails, understand your programs, or will “get by” with the administrative complexity of your programs (thereby increasing their administrative burden).
Unlike friends on facebook, quality is better than quantity in your channel community. Make sure your value proposition aligns with their go to market strategy and that your program makes it worthwhile for them to embrace. The closer the alignment, the more you will be mutually dependent for success . What’s more, your programs should be both easy to understand and easy to administer—even small improvements can help (such as shorter payment and reimbursement turnaround times which positively impact their cash flow). Lastly, note that ALL partners have a lifecycle—some are shorter than others. Recognize where each partner falls within their lifecycle for your products and adjust your engagement strategy accordingly. If any of your partners are no longer growing relative to your target rates (including opening more deals, increasing close ratios, using MDF etc), consider whether you should continue to invest in them (which will only result in diminished returns) or put them on a “maintenance” program. Successful channel segmentation is much more than assigning a medallion level based on volume.
2) Channels are about efficiency–they should be the preferred alternative to you engaging customers directly.
Once upon a time when cars didn’t have airbags and people dressed up to get on airplanes, computers were the size of a small house and were sold to large enterprises who could afford them through a direct sales model by someone wearing a blue suit. As the technology became more affordable, and accessible to SMB markets, the channel was born–because the direct sales model was cost prohibitive. All things being equal, everyone would sell direct if they could. Even Coca Cola would prefer to have someone standing by the entrance of every convenience store to put your favorite Coke product directly into your hand–rather thanlose a sale to Pepsi. But they can’t, because it is not practical.
Yet, the issue of “channel conflict” never seems to go away. The trust between the direct and indirect sales teams is ever-present. According to the tenet, this should not occur—so why does it? There are several reasons too lengthy to address here, but if it does, your basic channel strategy is flawed. Either the lines that defines who owns what prospects are not clearly defined, you have too many partners so you’re only competing against yourself, or you do not have the opportunity management/referral programs in place that honor named accounts or that reward partners justly for referrals in cross-channel sales transactions.
3) Your channel strategy should be aligned with how, and where, your customers want to buy.
The second component of distribution efficiency is to align your channel strategy with the consumer purchase preferences. Your partner makeup should be born from an understanding of your consumer’s purchase habits (throughout the buying process). For instance, the well published rise of the Managed Services Provider as the new channel darling is no coincidence. The trend exists because small businesses prefer to buy this way believing it’s a better alternative than investing in comprehensive IS staff or in some cases a costly infrastructure. But it also means that to survive, a reseller must adapt to a different business model relying on a recurring revenue stream with monthly billing cycles, rather than a project based model providing larger sums of cash in advance. So, to capitalize on this trend, should you find new resellers? Or help your current reseller community convert to a MSP model? Well, there may be some exceptions, but generally it’s not your job to keep your channel partners viable if their go-to-market business practices are flawed. The percentages are against you if you try. For instance, on the retail side, the reason CompUSA is dead, and Best Buy is dying, is because they are no longer the preferred shopping outlet for consumers. Spending energy on keeping them alive is only postponing the inevitable. The adaption of managed services is no different.
Your channel strategy can, and should, be designed to be a competitive advantage. One that efficiently moves your product to end users, capitalizes on market opportunities, and is the result of many successful partnerships. But it can’t be optimized if these basic tenets aren’t followed. So, the next time you want to revise your channel strategy, run it past these tenets to see if you are really moving the program forward—or not.