In her excellent e-book “Channel Strategy & Marketing . . . for the Rest of Us” Jacqueline Franklin makes the observation, “A thriving channel is a business imperative for any company that wants to scale. In fact, I’m hard-pressed to name one billion dollar company that doesn’t use indirect channels.
“Many companies in the B2B technology market … with a formidable direct sales force (Oracle, EMC, etc.) … [concede] that they needed additional logistical and services capacity, especially if they wanted to reach the mid-market. Indirect channels, in other words, are critical to growth and are here to stay.”
Of course, I strongly agree and, as a channel professional, I’m pleased to see so many Australian IT companies actively embracing indirect channels. Worryingly, though, I’m increasingly hearing about vendor sales managers, with excellent track records managing direct sales teams, who treat their reselling channels as if they’re just a bigger bunch of reps. For those managers, here are some thought starters on why the indirect channel must be managed differently.
- They’re in business to make money, not to sell your stuff
Your reselling channel partners are in business because they want to make money, not because of some enthusiasm for your company’s products or services. Enable them to make money with you and they’ll support you; otherwise you’re wasting your time and theirs. For more detail see my earlier post “The one big trick for channel success – what’s important to your indirect channel.”
- Their revenue isn’t your revenue, and vice versa
The revenue your resellers measure is what they bill their customers in total. That probably includes some of your products and/or services, but your resellers have a bigger picture. Except when they’re qualifying for rebates, they aren’t interested in your revenue. Focus on the attach-rate of their other revenue streams to your product or services, because that’s what they want to maximise.
- Their success doesn’t always lead to your success, and vice versa
Your resellers have their own business objectives, and they’re largely indifferent to yours. They’re not dependent on your revenue growth or profitability and will only celebrate your successful week/month/quarter/year if it’s successful for them too. For most resellers, their own products and services are usually more profitable for them compared to yours: so that’s what interests them most. Find common ground between the two and you’re on a winner.
- They mostly don’t care about your reporting requirements
If you work for a listed American company, you’ll have strict quarterly reporting requirements; however, in most cases, your resellers won’t. Just because you need to make an end-of-month target doesn’t mean they do. Respect that and they’ll help you whenever they can; try to enforce your reporting and you’re inviting problems.
- They don’t work for you, so you can’t tell them what to do
They’re independent companies and your relationship with them is almost certainly governed by the Competition and Consumer Act, and various state-wide trade practices laws. You can’t dictate which customers they should or shouldn’t sell to; nor can you dictate your products’ or services’ prices. If you give them a discount, they’re not obliged to automatically pass it on to their customers. On the plus side, their independence gives them levels of flexibility that most vendors lack.
- They can sell your competitors’ stuff
They’re not obliged to sell your products or services, and if your key competitor has given them a lead don’t expect them to unhook your competitor and sell your offering instead. At the same time, if you’ve given them a lead, expect them to promote your brand first. Don’t get upset if they’re also selling a competing product or service – use it as a competitive learning opportunity.
- They compete with each other
Often your resellers’ biggest competitors are each other. Don’t expect them to bring their key customers to events where your other resellers will be; or to share account information in an open forum. However, channel competition isn’t the same as channel conflict. Channel competition is business-as-usual; but channel conflict is a serious problem – it’s a sign that your routes-to-market plan is faulty.
- They don’t want your managed services owning their customers
Resellers will happily discuss selling your packaged managed services, especially if they can rebrand them as their own. But don’t position your managed services to take over your resellers’ customers: retaining their installed-base is essential for resellers.
- Their cash flow critical to them
Most resellers are small or low-end mid-market businesses. At that enterprise size cash is king. Your resellers can’t afford long-term business development investments or to carry extended payment terms, and you shouldn’t expect them to. If, however, you can cover those things for them to improve their cash flow, you will win their hearts.
- Vendor channel reps may come and go, but the channel is still here
All your long-term resellers have seen multiple channel reps from your company and have heard lots of strategic and tactical promises. They don’t forget and they know the facts. Check with them before you say: “This is the first time we…” or “We’ve never been better at…” etc.
Just remember, your resellers are a sales channel, but they aren’t your sales force. You’ll be successful with your channel if you treat your resellers well, respect their independence and always strive for mutually beneficial relationships with them.