As we meet with potential clients to discuss their businesses, we frequently hear one or another variation of the following lament: "we've signed up a bunch of channel partners but they haven't sold a damn thing!" Unfortunately, this "sign them up and they will sell" mindset is the channel sales equivalent to the "build it and they will come" brand of wishful thinking. Typically it takes only a limited series of diagnostic questions to zero-in on the root cause: absence of "mindshare." Put differently, these "partners" may carry their products but rarely think of those products, if at all, when speaking with customers.
When we suspect that weak "mindshare" may be a problem, we pose a series of diagnostic questions. We begin by asking our prospective clients to describe the business profiles of several of their channel partners. Typical questions we may ask about the partners include:
- Who are their target customers?
- Who do their salespeople call on within those target companies?
- What are the partner's primary products and/or service lines?
- Where do your products fit into their mix? Are you a primary product or a secondary or tertiary product that is sold as part of a broader sale?
- Why is your product valuable to your partner?
- What is their sales capacity and geographic coverage?
- How are the partner's salespeople compensated?
- Do they have visibility into the partner's sales pipeline?
Although our prospective clients may not be able to answer all of the above questions, we make a mental check mark if it becomes apparent that there isn't a great deal of intimacy or knowledge. We often encounter companies that are extremely sophisticated in their understanding of end users yet uninformed about how their partners -- who actually interact with these end users -- run their businesses. In some circumstances this lack of understanding leads to channel programs that are ineffectual and fail to excite partners. In other circumstances, the lack of understanding results in partnerships with companies that don't even serve the correct markets and target the right customers!
After gauging partner intimacy, our next round of questions seek to gather information on our prospective client's channel programs. Typical questions include:
- Do they have a formal channel program that outlines marketing programs and support, sales training and support, technical training and support? Or, have they simply provided a cut-sheet and price list and said "go get 'em!"? (Posed more diplomatically, of course!)
- Do they segment their partners into Gold, Silver, Bronze-like tiers and offer varying levels of service and support based on such tiers?
- How many people are dedicated to their channel sales and support organization?
- How often do they visit their partners and participate in joint sales calls?
- Do they provide dedicated technical support or service support resources? Are these resources available to go into the field?
- Do they undertake joint business planning and goal setting with their customers?
- Do they share sales leads with their customers?
- Do they have a formalized process for communicating with their partners? i.e., issuing technical bulletins, advising on new product features, and highlighting important company developments that are relevant to the partner?
People often assume that pricing and discount structures are all that matters. However, surveys of VARs, resellers, distributors, agents and reps working across a variety of industries consistently evidence that channel programs and channel support rank above pricing considerations when deciding which products to emphasize. Whenever we interview channel participants about why they prefer one product over the other, the answer is invariably that the company is "easy to do business with."
Some clients will argue that their channels only care about having exclusive rights to a product within a geographic territory. While it is true that undercutting your channels with factory direct sales can be highly damaging and that an excessive amount of channel conflict among partners is bad, the demands for territory exclusivity are usually more smoke than fire. During initial negotiations, prospective channel partners will always demand exclusivity. However, these same partners will pale when asked to commit to performance targets in return for such exclusivity. Once valid data is presented to highlight the size of the available market within the geography, and care is taken to explain how channel conflict is prevented, the territory exclusivity issue usually fades to black and conversations shift to making money.
Finally, throughout these conversations we pay particular attention to clues about how our prospective clients think about channel relationships. Often it is apparent that the company views their channels as essential business partners and wishes to closely collaborate with them. Sometimes, however, companies will voice extremely negative and cynical opinions, viewing the channel as a necessary evil or an adversary that gets in the way of the money. As you can imagine, it is very difficult to help build a successful indirect sales engine with companies that embrace the latter, parochial mindset.
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