Does Your Channel Program Meet Partners' Needs?
"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.
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.
Controlling Channel Conflict
Vendors who also sell directly to customers have varying approaches to managing channel conflict. In some cases, the direct representative receives equal or even superior compensation if they work with a partner. This makes it preferable for them to do so, which is well-received by the channel.
To control conflict between partners, some vendors introduce "deal registration" programs with varying success. Partners may inform the vendor that they are working with a specific customer and enjoy some period of some level of exclusivity in support, pricing or other benefits from the vendor. These programs vary widely as do channel partner reactions to them.
What Today's Channel Partners Need Most
One channel marketer recounts a conversation with a very large vendor who asked why their channel partners were not using the marketing materials they provided. After interviewing many partners, he reported back to them, explaining, "The channel partners almost unanimously agreed that they didn't use your materials because they're all about you."
To clarify, this marketer explained that the channel partners interviewed all complained that they didn't want to be sending out the same information that their competitors were using and this vendor, like many, didn't allow for much customization. When asked why they felt they needed more customization, the response was consistent.
Today's channel partner is more about what they can do for a customer than what they can sell them—and more about their services than about products. They seek marketing support that helps them market beyond what the products are; they want to market what they can help their customers do with the products, as well as how they can improve efficiency and productivity, how they can reduce costs and increase revenues and how they can implement the vendor's products innovatively to achieve more.
Channel vendors who recognize this realize the most important element of being a partner—that it's a two-way street. If they help their channel partners increase the sale of their own services related to the products they want them to sell, everybody wins. The customer gets improved profitability, the partner gets increased sales of their services and more profitability, and the vendor's products get sold, which increases their profitability. A successful channel program is one that is mutually profitable for all involved.
Howard M. Cohen is a 30-plus-year IT industry veteran who continues his commitment to the channel as a columnist and consultant.