Channel Strategy & Management

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Addresses issues to consider when developing an effective channel strategy & program. Lecture delivered by Craig Justice at University of San Diego to graduate students in the MSEL (Masters of Science in Executive Leadership) program, March 12, 2011.

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Channel Strategy & Management

  1. 1. Effective Channel Management<br />Craig Justice, Alliance International<br />Lecture to Master of Science in Executive Leadership University of San Diego,<br />March 12, 2010<br />
  2. 2. Channel experience from a number of industries.<br />
  3. 3. Definitions<br />“Channel Sales” is the use of well-defined distributors, resellers, VARs, websites and other sales outlets to transact sales of your branded product/service<br />“Business Development” involves creating partnerships with companies to take advantage of their channels and customer base and includes OEM, Private Label, M&A<br />A “Reseller” , “Dealer”, and “VAR” sell direct to end-users. A “Distributor” sells to resellers and does not sell direct to end-users.<br />
  4. 4. Why Use Channels?<br />Reach important buyers or segments not adequately served online or by your sales reps<br />Extend sales reach & accelerate growth<br />Make it convenient (remove obstacles) for customers to buy<br />Penetrate international markets<br />
  5. 5. Channel Fundamentals 101<br />It’s all about the incentives/motivation you provide ….<br />
  6. 6. Channel Fundamentals 101<br /> With the exception of VARs….<br /> distributors & resellers don’t sell your product. <br /> (Your marketing & your sales team do that.)<br />
  7. 7. Distributor & Reseller Landscape<br />Courtesy of :<br />ChannelSources<br />
  8. 8.
  9. 9. Multi-Channel Model<br />
  10. 10. Considerations Before Starting<br />Executive management: growth objectives, margin, price control, resource allocation priorities, support, credit policies, cash flow<br />Operations: channel manager, sales support, marketing support, resource allocation, budget, compensation policy inside sales, lead allocation<br />What is your value proposition?<br /> For channel partner? For channel sales rep?<br />Ideal profile of your channel partner?<br />Ideal program for your offering? Talk to potential partners before finalizing program.<br />Your Goals, Objectives & Plan<br />
  11. 11. Comprehensive Program Pieces<br />Pricing Considerations:<br />Does your pricing reward partners who promote /recommend/demo your product? Order Makers vs. Order Takers<br />“Deal Registration” Special Pricing to encourage hunting<br />Retail price maintenance<br />MAP (Minimum Advertised Price)<br />MSP (Minimum Sales Price)<br />Channel Sales Team<br />In-house<br />Independent sales reps in field (5% - 10% commission)<br />Recruitment Strategy<br />Develop profile, trade shows, telesales, in person calls, reseller sales sheets & resources (price lists, contract), eval program<br />Contract: key business issues: territory, exclusivity, price level, return policies, stock rotation, payment terms<br />
  12. 12. You’ve Recruited Partners, What Next?<br />In House Resources<br />Who will provide training, answer questions, provide sales assistance, manage account?<br />Out of sight, out of mind. 90% of life is showing up.<br />Training: KISS<br />Recorded webinars, videos, screen cast with incentive<br />Training sheets, tests to become certified<br />Live training over web, in person<br />Develop Territory Sales & Marketing Plan With VAR partners with goals & planned activities. Manage it!<br />
  13. 13. Channel Marketing<br />Marketing “kit” for partners containing resources (on line)<br />Special demo pricing. Friends & family special. If reseller rep uses your product they will recommend<br />Provide leads to channel partners or sell direct?<br />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?<br />Pay to Play. How effective?<br />Pay to be in their print catalog<br />Pay to be on their website<br />Pay to participate in lunch & learn<br />Pay to participate in their vendor summit<br />Pay to participate in their show case to end users<br />Pay to do direct mailing to their list<br />Pay to participate in their trade shows<br />Pay to support a funded head<br />
  14. 14. SPIFFs & Rebates<br />SPIFFs can be useful to stand out from crowd where there is competition<br />But….<br />Rebate program to reward VAR owners<br />Rebate program (through distribution) for specific resellers as part of a marketing program<br />
  15. 15. International Channels<br />Planning, prioritizing. Where is low hanging fruit? <br />Which are largest, strategic markets?<br />Regulatory requirements? Electrical, safety, power?<br />Piracy, patent infringement considerations<br />Localization<br />Exclusivity<br />Pricing: should you price higher, lower, the same?<br />
  16. 16. What They Don’t Teach You in School<br />Channel sales reps respond to enthusiasm & opportunity to make money.<br />Channel reps appreciate when you make money for them (give them leads, support, joint sales calls)<br />Channel reps/partners appreciate honesty. Screw them, loose them.<br />Taking an account direct<br />Mislead / Lie<br />
  17. 17. Case Studies: Risks of Foregoing Channel<br />Interactive Whiteboard Industry<br />U.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. <br />Software Industry<br />Internet sales focused company ignores channel & remains small. Other companies starting at similar size built channels & grew 5 X larger.<br />
  18. 18. Tips for Channel Managers<br />It’s not about: “It’s the end of the month and you need to order.” It is about making money for valued partners<br />Develop good relationship with accounting dept<br />Avoid end of month, end of quarter “specials”<br />Be wary of large, stocking order “deals” – low priced product may show up where you don’t expect <br />Avoid exclusive contracts. If you must, draft & monitor goals. Require opening stocking order to demonstrate commitment<br />If you’re trying to build a VAR channel, be careful about over distributing<br />Be responsive. Be straight-forward.<br />

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