“Partner” has become one of the most overused buzzwords in business. What used to signify a relationship in which parties joined together in a formal contract that clearly defined the benefits and responsibilities of all, today’s “partnership” is wide open to interpretation.
IBM first created the concept of an IT sales channel back in 1981, when it first released the PC. Since the corporate rule was that “nobody but IBM can sell IBM” they needed to come up with a way to think about ComputerLand, Nynex Business Centers, Sears and the other retailers that would ultimately get these new products into consumers’ hands. They arrived at the term “resellers” to finish the “channel” that IBM “sold” to an “aggregator” or “distributor” and then to a retail location, where they were finally “resold” to customers.
Many manufacturers and software developers have entered the market since then. Some tried to reach the market with direct sales forces and ultimately realized they could not achieve critical mass without leveraging “the channel,” while others went directly to the channel from day one. For the past 34 years, the channel has established itself as the only realistic way to reach, penetrate, sell and support enough customers.
Channel Programs
Along with this structure came the concept of a channel program designed to provide these resellers with marketing, technical, sales and other support that would help them successfully resell the products.
Since IBM had a legendary direct sales force, the way they chose to lead the resellers became immediately interesting. According to an IBM channel marketing director who worked closely with the channel back then, the strategy was to introduce services at a price point most PC customers would not find attractive. This would validate the service in customers’ minds and open the opportunity to channel partners to offer the same service at a far more competitive price.
Manufacturers and software developers all come to the channel with the same goal—to get their products sold to more customers. Most recognize that, to accomplish this, their channel partners will need their support in several ways. Some put what they think the channel needs into their program. Others ask the channel what they need, and provide it.
“What we need first and foremost from vendors,” explained Stewart Lande, executive vice president of new account marketing at Maureen Data Systems in New York, “is an understanding of how their products will improve our profitability.” Most immediately think of profit margins on the sale of the vendor’s products, but this has not been the channel’s primary source of profitability for some time. “We need to know what services we will be able to provide around the vendor’s products that improve our relationship with our clients.”
Lande also mentions programs that help build his salespeople’s enthusiasm for the product.
Jay McBain, CEO of ChannelEyes, a global company focused on reinventing how vendors drive channel partner sales and loyalty, said: “Channel partners need marketing tools such as online portals, market development funds, phone support, dedicated reps, try-before-you-buy and loaner programs, and much more.” McBain also cites the importance of the relationship and clear rules of engagement between the partner and the vendor.
“Educating internal stakeholders for my benefit and driving your brand so my customers will trust you. Extending floor financing, credit terms and ensuring the appropriate recognition program is in place,” added McBain.