Today, more suppliers are using channels for complex sales, characterised by multiple buying influences and a high level of perceived risk on the part of the buyer.
As products and services mature, they almost always head towards reseller channels. For example, in the 1950s and '60s, almost all computer technology was sold through direct sales teams, while today, much of it is sold through channels.
According to Gartner Inc., 70 percent of Global 1000 organisations now sell through third-party channels. In fact, nearly 50 percent of the world's GNP is transacted through indirect channels and this number is expected to grow to 65 percent by 2010.
The advantages of selling through channels are well-known and include lower distribution costs, greater market coverage, and faster time to market - as well as the opportunity to access a partner's established local presence, investment, expertise and customer base.
Recognising that a successful channel is critical to continued corporate growth, many suppliers have tried to sell through channels without fully realising that it requires a management model not too different from direct selling - a model involving structured selling processes, a common language, and a well thought out approach to managing relationships.
As Albert Einstein noted, doing the same thing over and over again and expecting different results is the definition of insanity. Similarly, many suppliers try to manage their channels through a transactional buyer-seller model and struggle, year after year, to realise their expectations, without asking themselves what needs to change.
We have observed five main challenges in selling through channels:
- Reseller recruitment
For most channel initiatives, partner recruitment is the greatest point of failure, so, getting it right often means the difference between program success and a lot of wasted time and money. As the old saying goes, "If you think hiring professionals is expensive, try hiring amateurs".
Channel partnering decisions are a case in point and the consequences of "hiring" the wrong partner can be significant in terms of lost revenues, high support costs, and damaged brand image, to name just a few.
In addition, because there's lots of competition for the best reseller partners, having a strong opportunity management process is critical. Failing to manage partner recruitment as a key success factor might get you a few logos for your web site but it won't land you star performers.
- Success management
Managing a business-to-business reseller to success involves much more than product training and quarterly spiffs. It requires training, mentoring, and support on how to sell your product effectively in a complex sales environment. Many suppliers miss this key fact and assume that if the reseller knows enough about the product they'll know how to sell it.
Success management done properly will enable the reseller to become progressively more successful. Done poorly, revenue won't flow and you'll incur the cost of having to directly manage many of the deals yourself.
- Effective communications
Being able to communicate in a common language regarding the status of key opportunities and the state of the sales pipeline is critical to enable the joint development of winning deals and market development strategies.
Failure to develop a common framework for such communication results in poor resource allocation, lost deals, and inconsistent revenue performance.
- Investment prioritisation
Making decisions regarding what to, and what not to, invest in is a challenging but important component of channel management. Often, such decisions can appear unilateral or arbitrary in nature, which reduces the chances that they'll achieve their goal and can contribute significantly to partner alienation.
Without analysis and decision-making processes that encourage transparency and collaboration, the best ideas might not surface, and many channel investments won't deliver the expected return.
- Relationship management
Just as the Pareto principle suggests that 80 percent of our revenues and profits often come from 20 percent of our customers, a similar relationship exists within the channel.
In the direct selling world, significant time and energy is spent managing these key customer relationships. In the channel, however, much less attention is paid. Failing to deploy a consistent methodology and process to manage these "high performer" partners is a recipe for disaster.
Poor or inadequate methodologies and processes in any of these areas can introduce significant challenges to overall channel performance.
To overcome these challenges in today's highly competitive B2B environment, suppliers need:
- Management methodologies, processes, and tools for:
- Lead generation
- Partner selection and skills assessment
- Managing the reseller opportunity and contracting process
- Managing the on-boarding process
- Coaching on effective sales strategy
- A common selling language to facilitate:
- Joint selling
- Joint deal strategising
- Resource allocation
- Pipeline management and revenue forecasting
- True partnership orientation to:
- Ensure alignment of your long-term strategies with your partners
- Develop strategic and tactical initiatives to achieve these goals
- Gain commitment from partners for revenue goals and sales objectives
- Provide channel partners the tools and support they need to achieve their revenue targets
- Minimise competitive vulnerabilities
- Build partner loyalty
Borrowed brains
In today's competitive B2B environment, more and more complex sales will come through third-party reseller channels. And good, efficient channel management will be a critical success factor for a lot of suppliers who, just a few years ago, were engaged only in direct sales. Outstanding channel performance is a function of careful planning, thoughtful investment, and long-term thinking.
Fortunately, suppliers no longer have to rely on years of trial and error. Today there are third-party firms with proven methodologies, processes, and tools to help suppliers identify, recruit, onboard, coach, and manage channel partners so they will sell more strategically and effectively.
As Woodrow Wilson once said, "I not only use all of the brains I have, but all I can borrow."