Effective Channel Management

Craig Justice, Alliance International

Lecture to Master of Science in Executive Leadership University of San Diego,

March 12, 2010

Channel experience from a number of industries.

Definitions“Channel Sales” is the use of well-defined

distributors, resellers, VARs, websites and other sales outlets to transact sales of your branded product/service

“Business Development” involves creating partnerships with companies to take advantage of their channels and customer base and includes OEM, Private Label, M&A

A “Reseller” , “Dealer”, and “VAR” sell direct to end-users. A “Distributor” sells to resellers and does not sell direct to end-users.

Why Use Channels?Reach important buyers or segments not

adequately served online or by your sales repsExtend sales reach & accelerate growthMake it convenient (remove obstacles) for

customers to buyPenetrate international markets

Channel Fundamentals 101It’s all about the incentives/motivation you

provide ….

Channel Fundamentals 101With the exception of VARs….

distributors & resellers don’t sell your product.

(Your marketing & your sales team do that.)

Distributor & Reseller Landscape

Courtesy of :ChannelSources

YourCompany Price Paid

Retail Sales Model

Aggregrator(5% - 10%) $59 - $50

Distributor(5% - 10%)

Ingram MicroNavarre (Consumer)

$64

Retailer/Reseller

(20% - 30%)

Best BuyFry's $69

End User $99

Watch Out:Consignment sales, fees, 60+ days toreceive payment, threat of returns.

Multi-Channel ModelYour

Company

InternetSales(0%)

Reseller(10%)

VAR(20%)

Premier VAR(30%)

North AmericaDistributor

(20% - 30%)

Reseller 1(10%)

Reseller 2(10%)

Reseller3, etc.

InternationalVAR

(20%)

InternationalDistributor

(35%)

Reseller 3

Reseller

Reseller 1(10% -20%)

Considerations Before Starting

Executive management: growth objectives, margin, price control, resource allocation priorities, support, credit policies, cash flow

Operations: channel manager, sales support, marketing support, resource allocation, budget, compensation policy inside sales, lead allocation

What is your value proposition? For channel partner? For channel sales rep?

Ideal profile of your channel partner?Ideal program for your offering? Talk to potential

partners before finalizing program.Your Goals, Objectives & Plan

Comprehensive Program PiecesPricing Considerations:

Does your pricing reward partners who promote /recommend/demo your product? Order Makers vs. Order Takers

“Deal Registration” Special Pricing to encourage huntingRetail price maintenanceMAP (Minimum Advertised Price)MSP (Minimum Sales Price)

Channel Sales TeamIn-houseIndependent sales reps in field (5% - 10% commission)

Recruitment StrategyDevelop profile, trade shows, telesales, in person calls, reseller

sales sheets & resources (price lists, contract), eval programContract: key business issues: territory, exclusivity, price

level, return policies, stock rotation, payment terms

You’ve Recruited Partners, What Next?In House Resources

Who will provide training, answer questions, provide sales assistance, manage account?

Out of sight, out of mind. 90% of life is showing up.

Training: KISSRecorded webinars, videos, screen cast with

incentiveTraining sheets, tests to become certifiedLive training over web, in person

Develop Territory Sales & Marketing Plan With VAR partners with goals & planned activities. Manage it!

Channel MarketingMarketing “kit” for partners containing resources (on line)Special demo pricing. Friends & family special. If reseller

rep uses your product they will recommendProvide leads to channel partners or sell direct?Market development fund (2 – 5% of sales). Will you require

partner to co-invest in activity? Will you proactively work with partners to generate leads?

Pay to Play. How effective?Pay to be in their print catalogPay to be on their websitePay to participate in lunch & learnPay to participate in their vendor summitPay to participate in their show case to end usersPay to do direct mailing to their listPay to participate in their trade showsPay to support a funded head

SPIFFs & RebatesSPIFFs can be useful to stand out from crowd

where there is competitionBut….Rebate program to reward VAR ownersRebate program (through distribution) for

specific resellers as part of a marketing program

International ChannelsPlanning, prioritizing. Where is low hanging

fruit? Which are largest, strategic markets?Regulatory requirements? Electrical, safety,

power?Piracy, patent infringement considerationsLocalizationExclusivityPricing: should you price higher, lower, the

same?

What They Don’t Teach You in School

Channel sales reps respond to enthusiasm & opportunity to make money.

Channel reps appreciate when you make money for them (give them leads, support, joint sales calls)

Channel reps/partners appreciate honesty. Screw them, loose them.Taking an account directMislead / Lie

Case Studies: Risks of Foregoing Channel

Interactive Whiteboard IndustryU.S. company cuts VAR channel program to sell

direct and stalls. UK -based IAWB company comes to U.S. sets up channels and becomes strong player.

Software IndustryInternet sales focused company ignores

channel & remains small. Other companies starting at similar size built channels & grew 5 X larger.

Tips for Channel ManagersIt’s not about: “It’s the end of the month and you

need to order.” It is about making money for valued partners

Develop good relationship with accounting deptAvoid end of month, end of quarter “specials”Be wary of large, stocking order “deals” – low priced

product may show up where you don’t expect Avoid exclusive contracts. If you must, draft &

monitor goals. Require opening stocking order to demonstrate commitment

If you’re trying to build a VAR channel, be careful about over distributing

Be responsive. Be straight-forward.