Jan 2, 2007
Channel Tips:
2007 Channel Success: What You Need To Do NOW!
PART 3
By Greg Nutter
This is the last of our 3-part series on why NOW is the best time to impact your 2007 channel performance. In this column we’ll discuss excessive channel costs.
There are many reasons for initiating a partner program, including growing market share, providing a competitive response, accessing new markets, or delivering a whole product to the customer. Many vendors launch reseller programs simply to reduce their selling costs over the cost of building and managing a direct sales force. With this objective, the reseller channel becomes “expensive” when the costs to drive sales approach those of a direct sales channel.
Many factors can contribute to a poor return on channel investments, making you feel like you are just throwing good money after bad. Let’s explore a few:
- Flawed Business Model
In defining a partner program, an important element is the business model: what does the vendor do, what does the reseller do, and what compensation is paid for the reseller’s efforts. A popular misconception is that if you throw more margin at the reseller they will sell proportionally more product. While margins have to be perceived as fair and competitive to what other vendors offer, higher margins provide diminishing returns.
- Misaligned Markets
Resellers normally don’t open new markets – they take new products to their existing markets and customers. If your products don’t line up, you can throw a lot of programs and support at them and get very limited return.
- Incomplete Launch
The purpose of a Launch is to transfer all the knowledge and expertise necessary to sell and deliver your solution. If it doesn’t happen, you’ll be saddled with all kinds of extra costs, either by doing stuff the partner was supposed to do, but didn’t know how, or by fixing problems because things weren’t done right.
- Ineffective Programs
Since resellers aren’t normally good at developing new markets, you’ll need to refresh your message regularly so they can go back to customers who didn’t buy the first time – doing more of the same won’t have much impact. Also, many programs are ineffective because they’re not aligned to address gaps in the partner’s sales or marketing capabilities. If you haven’t articulated the problem, chances are good you’re spending money on the wrong things.
So what should you be doing now if you want to get a good return on your 2007 spending?
- Examine your Business Model. Do some benchmarking to find out if yours is in-line with the market. It’s very difficult to take away margin once you’ve signed a partner so it’s important to get it right upfront. If it’s flawed, fix it when signing new partners addressing different markets. Minimize spiffs unless your product is commodity-oriented with lots of market pull.
- Re-evaluate your Partner Profile. Use it to evaluate the coverage-fit of both existing and future partners and dump the partners that are just too far off.
- Review your Launch Program. Make sure it covers sales, marketing, administration, support, etc. It’s the old “pay me now or pay me later” paradigm but chances are high that it’s more costly later.
- Review your channel programs. Make a list of go-to-market deficiencies first – then cut any program that doesn’t directly address one or more of them.
- Consider getting a knowledgeable third party to perform a channel program audit. When you’re not sure where to start, a fresh set of eyes can save you time and money by zeroing-in on a few high-payoff areas.
In sales, it’s said that everyone’s a bum at the beginning of the year. Making a few key changes early might make the difference on whether you feel the same at the end of the year.
Greg Nutter is a Principal with Soloquent Inc. (www.soloquent.com) where he helps technology companies develop go-to-market strategies, programs, and tools that increase indirect and direct selling performance. He has over 20 years experience in sales, sales management, and channel development in the HVTO industry.
Got a comment, got a question, got a problem? Send Greg a note at gnutter@soloquent.com
Read other parts of 2007 Channel Success by Greg Nutter >>>>