Channel Tips

Defining a Winning Channel Program: The 4 Elements of Success
 

By Greg Nutter

Last month we talked about key channel activities for the slower summer months: in particular, analyzing your year-to-date performance and developing or revising your plans for the coming year.  If those plans include starting a channel program or reviving one that’s been less than successful, examining your Program Definition is an ideal place to start. In this article, we’ll overview 4 key elements you must consider if you want to put your channel initiative on a winning track.

1. Program Objectives

As the famous line from Alice in Wonderland goes, “If you don't know where you are going, any road will take you there.” Similarly, in developing your channel program, you must start by defining the overall objectives and the corresponding metrics you’ll use to evaluate the program’s success. The reason this is so important is that there are many ways to measure channel success, not all of which will align with what you really want to accomplish. By answering a few key questions up front, you eliminate a lot of ambiguity and make it much easier to make critical downstream decisions. Here are some fundamental questions to answer:

Ø      What are our main objectives in launching a reseller channel?

o        Are we focused on increasing revenues or margins;

o        Are we trying to access new markets or do we want to increase coverage or market share in our current markets;

o        Are we responding to a change in customer buying behaviors or a competitive threat.

Ø      What expectations do we have regarding timeframes?

o        Building a winning channel is not measured in days or weeks but months and years. While everyone wants success tomorrow, rapid results often require more significant investments. Laying out expectations early in the process will help you get critical alignment between those responsible for building the channel and those signing the checks.

Ø      What are you prepared to invest to make this program a success?

o        While it’s true that a reseller channel often costs less than a direct sales force, low investment doesn’t translate into no investment. In fact, the initial investment to get a channel up and running can be as high or higher than putting in place a direct program. Trying to build a channel “on the cheap” is one of the most common reasons for failure.

2. Product Profile

The next thing to do is define the products you want to sell through the channel, even if you think you only have one. This exercise is important because you may find there are some products/services you wish to exclude from the channel or you may define the channel product differently from the direct product. Here are some important product profile aspects to consider:

Ø      What products/services do we want the partner to resell?

Ø      What pricing, margin, and licensing models should we use?

Ø      What resources will we need to train and support a partner to take this product/service to market?

3. Customer Profile

In addition to defining your product, you must clearly state the profile of the target customer, or more precisely, who is most likely to buy your product from a channel. Here are some questions to ask:

Ø      What are the ideal applications and customer environments we will target?

Ø      Where are these customers likely to be in the technology adoption lifecycle for your product?

Ø      What is the whole product that these customers are looking to buy? Look beyond hardware and software to include such items as business knowledge, market credibility, or specialized technical expertise.

Ø      How do customers buy products like ours? Who do they buy them from, what process do they use, and where do they get their product information?

4. Channel Program Profile

The last step is to make fundamental decisions regarding what the channel program will look like. Ask yourself these questions:

Ø      If we’ve identified gaps between our product and the whole product our target customers want to buy, how will we address them? Should we build them, buy them, or expect the channel to provide them? Sometimes you can sell around them however this approach is much easier to do in a direct versus an indirect sales model.

Ø      How many intermediaries should there be between us and the customer? Generally, as you increase the number of intermediaries, you increase coverage and lower your costs of distribution. However, you also reduce the amount of control you have on the channel and make it more difficult to sell complex offerings.

Ø      What kind of relationship do we want to have? There are many and it mostly comes down to what will you do and what will the partner do.

Ø      What’s the revenue sharing model?

Ø      What kind of marketing support will you provide? Partners need support just like your direct reps, however directs are more likely to fill in the gaps themselves while the indirects will simply sell someone else’s product.

Sun Tzu, the famous Chinese general once said “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” Trying to build a channel without first strategically defining your program can be a very noisy indeed.

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Greg Nutter is a Principal with Soloquent Inc. (www.soloquent.com) where he helps technology companies develop go-to-market strategies, programs, and tools that increase indirect and direct selling performance. He has over 25 years experience in sales, sales management, and channel development in the HVTO industry.

Got a comment, got a question, got a problem? Send Greg a note at greg@soloquent.com