Selling Services Through Channels


Published on

This award willing article was published twice intenationally. The article presents important considerations (with examples) that are needed to create and optimize channel sales of services .

  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Selling Services Through Channels

  1. 1. services sales and marketing w w wSelling Servicesthrough the ChannelNot a Rut for Manufacturers by Jim Payne w A s technology advances for hardware and software products, manufacturers’ sales models increasingly have migrated towardJim Payne is president of S-Market Strategies selling exclusively or partially throughof Rochester, New York. He has more than 25years’ experience in all aspects of services man- channels. The potential to reduce salesagement and marketing. Jim’s innovative strat-egies, programs, and tactics have provided in- costs while increasing exposure in the marketplace makescreased market penetration, growth, revenue, channel sales a very attractive model during times of increasedand profits for businesses such as IT, healthcare,entertainment, graphics, and government mar- pressure to grow revenues while reducing costs.kets for both direct and channel sales. He is However, on the services side of the business, marketing and selling servicescurrently the AFSMI Finger Lakes Chapter presi- through the channel certainly can be more challenging than our tangibledent and the International Awards Task Force counterpart’s experience. The intangible nature of services necessitates carefulmarketing chairperson. For more information, consideration in deciding how to convey the marketing message effectively. Sell-you may reach Jim at 585-368-0567 or ing services through single or multitier channels can feel like playing the “ To obtain an phone game” with your marketing. The services message that you are trying toexpanded white paper on this important ar- convey may be eroded by the time it is passed to a distributor, through one orticle topic, visit more tiers of resellers, and ultimately, to the end user.92 AFSM International
  2. 2. With business models migrating toward stronger reli- sidering services as an obligation that requires too much ofance on services as a means of differentiation and increas- their resources to become a significant part of their businessing profit potential, it can be difficult and often risky to rely strategy. The channel can be segmented as follows:on others to communicate the message that represents your • The full services channel. The full services segment ofbrand value. However, if done well, the channel can provide the channel truly understands the value that services bringan extension of your message, achieving the intended ben- to its revenue stream, stability, and customer loyalty. In gen-efits of using an indirect sales model. eral, this channel segment has invested in the people, pro- cesses, and training needed to position services in all of theirChannel Structures sales effectively. They maintain dedicated contract admin-In recent years, I have spent a considerable amount of time istration staff, a Level One call center, and a depot facilityworking with thousands of resellers and distributorsand talking with them about how they viewservices in their marketing and sales mod-els. Based on this research, I have beenable to develop and implement im-proved channel programs for manu-facturers and independent servicesproviders. Although resellers anddistributors manage their businessesusing many different strategies andmethods, when you dig deeplyenough, they all have certainthings in common. They generallyfall into a small number of seg-ments that can be identified andconsidered in marketing strategydevelopment for channel sales ofservices. Whether the channel is amultitier distributor/reseller model,sales brokers, integrators, ormultivendor manufacturers’ reps,they usually have defined their ser-vices strategy as it fits into a model thatwas developed originally to positionhardware, software, or solutions. Theirservices segment generally lacks adequatestrategic intent and design to take full ad-vantage of the opportunities in the market-place. However, some of the most progressive dis-tributors and resellers truly understand the valueof selling services and have made it a strategic partof their business model. At the same time, much ofthe channel still treats services as an afterthought, con- July/August 2005 Sbusiness 93
  3. 3. selling services through the channelSelling services through single or multitierchannels can feel like playing the “telephonegame” with your marketing. The services this segment would seem environment where a few large dis-message that you are trying to convey may to be a lost cause for sell- tributors that sell a controlling sharebe eroded by the time it is passed to a ing manufacturers’ ser- of the products in your markets could vices, with proper consid- challenge your control of pricing anddistributor, through one or more tiers of eration, they may be will- ultimately impact your profit potential.resellers, and ultimately, to the end user. ing to take advantage of Although there is no magic num- the revenue and customer ber that is appropriate for all markets,to optimize customer relationships and loyalty opportunities that services pro- keep in mind that there is a balancerevenue opportunities. Some in this vide. The key to this segment is to be between too many and too few distribu-segment have developed their own field sure that you are fitting your services tors to be effective. Consider how manyforce, but many outsource some or all products into their model rather than you can manage effectively and theof this function, as it can add consid- trying to force them into your model. minimum number you need to main-erable cost to develop adequate geo- Following are some additional im- tain control with adequate market cov-graphic coverage using their own staff portant considerations for channel mar- erage and balance.exclusively. The full services channel keting and selling services.also is capable of handling more com- Competitorsplex services offerings. They have ra- Talk to Your Channel Understanding your competitors’ chan-tionalized that there is adequate rev- First and foremost, you must develop nel models and their relationships withenue potential in a full portfolio of ser- effective communications with your the channel can be an important factorvices options that may include profes- channel partners so that you can un- in your effectiveness. In today’s timessional services. derstand their real needs and so that of products with similar features and• The part-time services channel. they can understand your intentions. It performance, you must be able to dif-These channel partners will position is important to find out what makes ferentiate your offerings with the chan-services if the subject comes up, but them tick—do not make assumptions nel. Certainly, the channel wants tofind it challenging and would rather not about what they need or want. Many make as much money as possible. How-complicate the sale of the hardware and distributors, brokers, and resellers have ever, this does not necessarily meansoftware with extra costs that might common needs, but each market has that the channel will sell only the prod-make them less competitive. They tend its own unique dynamics that you need ucts and services that offer the biggestto develop shorter-term customer rela- to understand. Investing the time to de- discount. Surprisingly enough, ease oftionships and move on to the next op- velop relationships with your channel sale is just as important to the channelportunity with less reliance on the full will pay a return with improved effec- as profit margin. Products and servicesrevenue potential of customers. This tiveness and success. that are easier to position allow thetype of channel partner often can be channel to sell more with a shorterconverted to a more effective seller of The Right Number learning curve and ultimately with lessservices if you help them to make ser- At first glace, it may be tempting to effort on their part.vices sales an uncomplicated activity. sell to one or two key distributors in Evaluating your competition• The no-sell channel. This chan- order to minimize your interfaces in a should not be done with the objectivenel segment does not sell services and multitier channel model. However, in- of simply creating parity with them.does not want to sell services. It is not creasing the number of distributors in Finding your competitors’ weaknesseseven on their radar screen. They would the first tier that you sell directly to in their channel relationships can pro-prefer to sell boxes and prepackaged can help ensure that your markets are vide additional opportunities for dif-or simple solutions, and they have no broad enough to take advantage of a ferentiating your relationship withinternal infrastructure for managing wide range of vertical markets. In ad- channel partners. However, anticipateservices sales. Their products tend to dition, relying on a small number of that your competition will do the same,be priced lower, and they rely on vol- distributors can put you in a position and benchmark your practices. Theyume rather than longer sales cycles where you have minimal competition ultimately will duplicate the goodwith larger revenue potential. Although in your channel. This can result in an things you do, but they also will dis-94 AFSM International
  4. 4. cover and learn from your weaknesses. all programs and create a more stable able to them, it is difficult to learnBe proactive by evaluating your own relationship. in-depth details of any one manufac-effectiveness regularly so that you can turer or product. Consequently, theevolve ahead of your competition and Keep It Simple channel often migrates to the prod-maintain distinct differentiation. “Simple” is the key to success in mar- ucts that are the easiest to learn, mar- keting and selling services through the ket, and sell. This could mean that itNeeds vs. Wants channel. When you consider that many is easy to position, configure, use,If you ask the channel what they want, resellers and distributors offer product price, or distribute. In the case of ser-you most likely will be told that they lines that include dozens or hundreds vices, it is often outside of what theywant improved financial opportunities of manufacturers and possibly thou- consider simple, because they feel itsuch as increased discounts, drop-ship- sands of different product models, their takes more complex marketing andping, and other features that can im- business can be very complex. With the selling strategies to position the in-prove their profitability immediately vast number of product options avail- visible product.without necessarily increasing theirsales volume. Offering increased dis-counts likely will create price compe- Simplified Services Exampletition with the other manufacturers whothen will react to your changes in an In evaluating one product with poor channel sales of service, it was dis-effort to maintain their own share. covered that the channel just couldn’t figure out how to price the service However, if you take the time to and consequently sold it without maintenance agreements. When all oftruly understand the channel business the accessories and options were factored in, the product had 27 possiblemodel and what keeps them up at night, configurations that could be purchased. The 27 hardware configurationsyou can develop programs that respond were enough of a problem, but when you considered all of the optionsto their real needs. By creating offer- available for maintenance agreements on the product, the services offer-ings that will allow them to increase ings more than tripled the hardware list of catalog numbers. With thissales volumes and promote upsell of level of complexity in the service component of the sale, it made theother products and services, they can service for the product too difficult for the channel to position.increase sales and ultimately improve In an effort to get the service sales for the product back on track,revenue on each sale. the pricing structures were evaluated and modified to simplify sales Be sure to let the channel know through the channel. The new service pricing structure for the productthat you are listening, and provide feed- reduced the service catalog numbers from nearly 100 to only one. Withback on what you have learned from the redesigned pricing structure, all configurations used the same main-them. Dialogue and feedback is truly tenance agreement catalog number with one configured price no mattercritical to a manufacturer’s short- and what accessories were purchased. Because the cost to service the differ-long-term relationship with its chan- ent hardware configurations were actually very similar, there was nonel. Developing and promoting oppor- real need to price them differently. A configured price was determinedtunities for allowing the channel to by taking into account the total projected revenue using the traditionalcommunicate with the manufacturer on pricing structure and creating a configured price that produced the samean ongoing basis develops trust and total revenue potential.loyalty between the channel and the The launch of the simplified pricing structure was communicated tomanufacturer. When using traditional the channel in a way that conveyed it as an improvement in response tocommunication tools such as channel their desire for less complicated pricing. When the channel realized hownewsletters, the message should con- easy it was to price the service for the product, they responded with sig-vey your desire to help the channel nificantly improved service sales. Before long, the channel was requestingachieve success. The relationship similar configured pricing structures on other products as they realized theshould take on a tone of a team effort added benefit to their sales model. wthat can improve the effectiveness of July/August 2005 Sbusiness 95
  5. 5. selling services through the channel However, effectively conveyingthe value of services doesn’t have tobe complex. In order to be channel-friendly, manufacturers must make aconscience and significant effort tomake their products and services“simple” in the eyes of the channel.However, it will not always simplifythe life of the manufacturer when ser-vices are made to be channel-friendly;depending on the situation, it actu-ally may increase the internal infra-structure that is required to create asimplified service product for thechannel. But the investment can bewell worth the effort with increasedsales volume and loyalty.Simple, Simple, SimpleWhen it comes to making it simplefor the channel, it should not stop atpricing structures. Consider simpli-fying the entire chain, including themarketing, sales, quoting, ordering,and distribution processes. Imple-menting package services along withpricing, marketing, and sales tools canimprove effectiveness, channelfriendliness, and channel stability. w This article originally appeared in the July/August 2005 issue of Sbusiness, a publication of AFSM International, Fort Myers, Florida.96 AFSM International