Outsourcing in a Dynamic Economy
How to outsource channel responsibilities
Channel Management Insights speaks with MarketSource Vice President of Sales and Marketing Services Bob Hunter and B2B Sales Services Practice Lead Chris Walter
Channel marketing managers are busier than ever before — developing and managing channel marketing programs, representing their companies at industry events, cultivating channel partners and more. In addition, because of the recession, they’ve taken on added responsibilities previously handled by other managers. And they’re doing all these things with a reduced channel support staff.
Some vendors may be reluctant to consider outsourcing as a solution, viewing it as yet another expense. But in fact, outsourcing can help increase profitability and efficiency, allowing an organization to focus its resources on its core strengths. The challenges lie in choosing the right outsourcing organization and deciding how and what to outsource.
To determine the best ways to navigate the complexities of outsourcing, Channel Management Insights turned to MarketSource Vice President of Sales and Marketing Bob Hunter and B2B Sales Services Practice Lead Chris Walter. The following discussion provides their insights into the world of outsourcing.
CMI: How can vendors best utilize outsourcing to supplement their internal channel staff?
Walter: First, they need to consider two growth mechanisms of channel management — to increase the population and/or to increase productivity. In retail, population means more stores. In direct sales, it’s more sellers. In the channel, it’s more partners or resources to support a program.
Increasing productivity involves taking what you have today and making it more productive, perhaps with sales engineering, sales support or a sales specialist function. So the question becomes how can outsourcing help increase the number of partners and increase partner productivity? Outsourcers can run demand-generation programs and guide partner candidates through the prerequisites; they can act as filters, qualifying candidates, ensuring that channel managers only spend their time with worthy parties.
Hunter: Many organizations have legacy-type channel structures that are difficult to change from within, but with today’s technologies, they may not need these structures. Outsourcing lets vendors gradually adopt new technologies, processes, best practices and organizational structures to improve their channel development and management productivity.
CMI: What are some activities to consider for outsourcing that offer cost savings and improve efficiencies?
Hunter: From an activity perspective, many companies focus on the 80/20 rule, giving the most attention to the 20 percent of partners that produce 80 percent of their business. But that leaves a large, untouched population that can grow if it’s focused on properly. The problem is, it can be hard to work with a large number of resellers. Outsourcing the management of the 80 percent of partners that are underdelivering can make the channel account managers working on the remaining 20 percent more effective and produce new revenue streams from the 80 percent.
Walter: With a sales support program, vendors can transfer some of the activities from their staff to support specialists who can handle the back-office, administrative elements of a sales rep’s job. This frees up the sales rep to have more face time with prospects and clients. Being able to quickly scale up and down resources on a global basis is a very attractive reason to outsource a function. In addition the outsourcing organization can bring technologies and processes to bear that lower the costs of interacting with partners and automate campaigns for greater efficiency.
Bob referenced the 80/20 rule. Outsourcing can provide vendors a turnkey, efficient way to engage the lower-performing partners or untapped markets. In each case, the pure sales numbers may indicate a profile that would not justify certain levels of sales resource deployment. By leveraging outsourcing to effectively and efficiently mine that space, vendors often find untapped share — partners that are doing a large percentage of business with competitors or large sales opportunities masked in a poor aggregate market.
Hunter: MarketSource offers an automated marketing system that helps vendors address large populations and touch resellers at a low cost per touch. This tool can read the digital body language of people on the other side of the conversation, recording e-mail opens and click-throughs, website visits, what people are looking at and how often. We score this information and provide it to vendors with an integrated sales system, so sales support and channel managers know which vendors to speak to and thereby direct resources more effectively.
CMI: Are unique channel programs with very specific guidelines and requirements candidates for outsourcing?
Walter: They can be. But in many ways, they miss the full opportunities of outsourcing, since their programs often focus on getting tactical things completed instead of long-term results. They miss the “force multiplier” outsourcing provides — folks working on and analyzing information to provide vendors intellectual horsepower.
CMI: Does the cost of outsourcing make sense in this dynamic economy when expenses are viewed under a microscope?
Walter: The key thing is to look at the true cost of a program, including the cost of executives’ time when they could be doing other things, the cost of training, the cost of communicating with partners, the cost of new technology or user fees for existing technology, the opportunity cost, and the increasing burden on current employees.
Turnkey outsourcing provides teams that would be the envy of most vendors and reduces opportunity costs, touching resellers at a fraction of the cost. Outsourcing organizations can also get through tests and pilots faster than most vendors, making channel programs profitable in less time. And, of course, they can produce incremental revenue!
Hunter: Most companies have task-oriented structures and work better back office than front office. They don’t have a business process office or dedicated training office, for example. The outsourcing organization masters the sales and marketing processes so vendors can be more successful in these areas.
Walter: With most vendors, marketing provides the predominant maintenance and nurturing of their partners. But to be successful, they must understand these resellers, their needs, goals and challenges. And they must market to them with the right product positioning, since resellers are inundated from all sides with marketing materials. Few vendors have staff who can do all these things to anything more than the top 20 percent of resellers. An outsourcing organization can drive the program appropriately for greater partner satisfaction and continue to zero in on partners with the information they provide.
Hunter: The ideal would be to get perfect marketing information to the ultimate resellers, information built specifically for each organization and its situation. No one can do this, but outsourcers can profile resellers better because they’re at a closer level to them than most vendors. Outsourcers can provide greater segmentation and track where each dollar is spent.
Many large organizations struggle to bring marketing and sales together. But at an outsourcing organization like MarketSource, these departments aren’t separated; they both work on the deliverables with integrated marketing elements in sales programs.
CMI: Channel models are getting increasingly complex and tough to manage. Doesn’t this make it more difficult to outsource key channel sales and marketing functions?
Hunter: Channel operations are often complex due to “siloed” responsibilities. But we’ve cracked the code on this problem, especially with global resellers, where there’s inconsistency from one country to another, one region to another and one reseller to another.
At MarketSource, we look at the forest every day, not just the trees, seeing business problems and innovating. We have a single global team, even though we have local teams in different countries, so we maintain consistency globally and at the country level. And we bring in technology everyone can use, making broad integration possible.
Walter: Operational integration is very important for us, where we become an actual part of the vendor’s organization. At MarketSource, we not only have the ability to adapt and integrate processes, we can react, respond and adjust faster than an internal organization.
Vendors may think they need to tell outsourcers everything they need to do, but we know where the complexities are and have the strategies to simplify them.
CMI: Partners and vendors speak about the need for better presales support, that is, value proposition training, opportunity assessment and presales discovery training, marketing assistance and campaign planning. How does outsourcing fit the bill on these items?
Walter: Traditionally, vendors provide reactive, customer service-type support in the channel, but an outsourcer can provide the best practices to drive the channel proactively. It leverages a variety of elements that drive partner performance, leveraging collateral, building better positioning and overcoming the competition. Vendors must help their partners be successful in their own goals, not exclusively the vendors’.
An outsourcing organization plays a variety of roles in pre- and post-sales environments, based on vendors’ business models and what they’re trying to achieve. And it doesn’t just provide one-size-fits-all robotic communication; it adapts messaging and training to the partners’ business models. Vendors increase partner loyalty when partners receive information tailored to their needs, and it’s easy for them to do business with the vendor.
Hunter: An outsourcing organization also profiles partners and defines what the value proposition is for them. It determines where the vendor’s products fit. With most partners, a product is either reflex — an integral part of what they sell — or orphan, something they keep around because people ask for it. If a vendor understands its partners, it may be able to take a product from an orphan to a reflex status. An outsourcing organization addresses the partners’ needs, their situation, where the product fits and the appropriate value proposition.
CMI: What are some qualities vendors should look for in an outsourcing firm, specifically for a channel marketing program?
Walter: Reach and coverage, national versus regional players so the deployment is uniform, and the vendor does not have to string a group of regionals together. Staffing capabilities so it can ramp up quickly. Financial stability, the money to do the right thing and invest in the vendor to drive performance. And intellectual property, such as knowledge, best practices and experience using, deploying and integrating CRM and demand-generation systems.
Hunter: Vendors should ask questions like: What surrounds the outsourcer operation? Does it have analytics? Training organizations? Does it spend money on R&D? Can it do things you aren’t doing and couldn’t do because of required approvals? Does it have the ability to integrate, not just at the technical level, but with your company and culture? Does it have a sense of urgency and a focus on achieving measurable results?
Also important is the quality of the outsourcer’s culture, how it stands on its own, what matters to it, what it brings to the table, the experience of the leadership team and the folks executing the program, ideally people with diverse backgrounds and skill sets. Finally, but perhaps most important, what is its history of results? Has it helped channel organizations become leaders in their industry? Did the vendors’ channel programs achieve their stated ROI goals?
CMI: How should vendors measure the return on their investment?
Walter: Companies tend to sell ROI short, viewing it only as incremental revenue to cost or incremental margin to cost, not the actual costs to get the program up and running and to keep it going. As opposed to a head-to-head cost comparison, vendors need to look deeper at true cost within an organization based on the scope of services the outsourcer is providing. On the other side of the coin, there is often a halo effect within channels that may not specifically align with the activity of resources. In retail, purchases may occur outside of the time a sales resource is in a location, but the sale may have been heavily influenced by a prior in-store engagement. In the channel, interactions with sales resources can lead to deeper relationships in other areas that may not be reflected in the specific sales measures of the rep.
Hunter: Before launching a program, vendors should consider the costs of acquisition: salespeople, management staff, some level of subject matter expertise, automated marketing technologies, systems integration, training and training development, lead management process development and refinement, research, and analytics reporting.
Another significant element for determining ROI is the time it takes to achieve a positive ROI. Vendors typically take six to nine months to launch a channel marketing program; then they begin to make money. It’s usually 18 to 24 months to a positive ROI, with only 12 to 15 months of actual selling.
With an outsourcing organization, vendors are usually ready to sell in nine to 12 weeks. That’s all the time it takes to put everything together, including a continuous-improvement model, making the program more productive faster.
Most of our clients want 10 times ROI on a 12-month period, and with an outsourcing organization, that’s a reasonable expectation. The outsourcer’s task is to be the best at providing integrated outsourced sales and marketing services so the client company can focus its resources on being the best at fulfilling customer demand.