What’s important to your indirect channel?
It’s an all-too-common question from IT vendors: “How can I get my resellers to sell more of my stuff?”
OK, it’s usually put in more business-like terms such as “wallet-share”, “percentage of business” or “partner penetration”; but it’s always the same question.
In my opinion it’s also, always, the wrong question.
So, how can you increase sales through IT resellers?
In the mid-80s, IBM introduced the first Intel x86 PC, called the PC-AT. I won’t go into the awesome performance characteristics of the box because everyone under 40 will fall off their chair laughing. The key thing to know is that it was sold through IBM’s reseller network, and in Australia each one sold for about $11,000.
In the mid-80s, that was roughly the price of a small car.
Back then IBM called its resellers “dealers” and its channel sales team “dealer marketing representatives”. I was a young, naïve IBMer in my first sales job as a dealer marketing rep.
Reseller networks were still a new world for IBM, in fact for the IT industry, and we were struggling to understand the dynamics of working with an indirect sales channel. Then suddenly we had a high-priced, premium product, the PC-AT, on our books: it made the sales landscape very difficult for a dealer rep to navigate. We needed help.
At the time General Motors Holden (GMH) was a major IBM client, and one of our team pointed out that GMH was very familiar with doing business through a dealer channel; maybe we could ask them for advice.
The GMH sales manager who came to talk to us was a mine of information on how to develop joint business plans, set dealer quotas, drive sales, sell optional features, support dealer marketing and, critically, how to manage sales and product forecasting. We were inspired.
Then we had a GMH dealer principal come to talk to us about his view of the relationship, and what was important to him. I remember his opening sentences as if they were spoken yesterday:
“The biggest problem GMH has,” he said, “is that it thinks we’re in business to sell Holdens.”
“And we’re not. We’re in business to make money. If we can make money selling Holdens, we will. If we can make money doing something else, we’ll do something else.”
This fundamental business truth should pervade every part of every vendors’ engagement with its indirect channel. Yet, more than 30 years later, I still find myself in conversations with vendors who, like poor old GMH, think their resellers are in business just to sell that vendor’s stuff. As long as that’s the attitude, almost nothing will drive the reseller to sell more of that stuff.
If, however, vendors work on what it is that makes the channel money, then the whole formula changes. The conversation instead focuses on increasing the reseller’s profitability by reducing cost of sales; or by improving the attach rate of high-profit extras such as services; or by better managing cash flow; or by driving higher on sales through more holistic customer engagement; or by … well, you get the idea.
What does that mean for your channel sales strategy?
A successful vendor channel manager must be able to clearly enunciate the various business models in his or her reseller network, and therefore clearly identify the money-making levers for each type of reselling channel. And then execute on that knowledge, of course, not simply revert to discussions of feature-function-benefit. Focusing on growing mutual business results is what makes a vendor an essential partner to its resellers.
And then they’ll sell more of the vendor’s stuff.
Want to find out more about preparing your product for the channel sales market? Join Kit Craig for our breakfast seminar on what every IT company needs to know to successfully launch their products and services to the indirect channel.