Driving Higher Channel Revenues and Performance
The current economic climate has challenged firms to maximize revenue from all sources while at the same time reducing sales & marketing costs and improving customer service.
To accomplish this, many companies are looking to improve the performance of their reseller channel. Unfortunately, this is easier said than done. All too often, well meaning channel strategies fail to meet the Supplier’s revenue objectives and expectations around effort. In many cases, the Reseller’s strategy and culture are the culprits. In particular, the Reseller could be overly reliant on a single or small number of another company’s products to the detriment of your offering. In other cases, the Reseller may be following a sub-optimal portfolio strategy of pushing every product without regard to what generates the most profit or best delivers on end user needs. Finally, the Reseller’s culture and internal processes may favor some companies over others. For example, the personal agendas of some sales people will trump the Reseller’s formal commitments. Moreover, there is usually inertia within sales reps to take the path of least resistance and sell only what they know.
However, it is too simplistic to exclusively blame the Reseller. Most of the time, poor Reseller performance is often the result of a misaligned and dysfunctional relationship with the Supplier. This could be caused by:
- Insufficient resources – No one invests to win. The Supplier does not provide sufficient marketing, training or product assistance while the reseller devotes inadequate sales and inventory support.
- A lack of trust – Both the Supplier and Reseller often exist in different solitudes, seeing each other as necessary evils rather than partners. As a result, both parties often assume or perceive hidden agendas, communicate poorly and ignore the spirit of their commercial relationship.
- Inconsistent objectives and strategies – Both parties start off heading in the wrong direction. Each often track different metrics, follow different market strategies and face different risk profiles.
- Weak coordination between parties – The relationship is poorly implemented, characterized by low process integration, ineffective program execution and halfhearted relationship management efforts.
My experience suggests that a company can improve channel performance by shifting from a reactive, product-based relationship to a proactive, strategic partnership. To do this, companys should consider:
- Concentrating on the ‘right’ resellers – Too often, Resellers are a poor strategic and cultural fit with the Supplier. Company’s can improve channel performance by better attracting, qualifying and vetting new Resellers, sharing best practices and culling under-performing Resellers who are unwilling to change.
- Upgrading the relationship – Strong partnerships are patiently nurtured, with equal attention paid to strategy and implementation. Great relationships feature a fair revenue model with aligned incentives, have tight marketing integration and foster a barrier-free working relationship.
- Achieving buy-in from sales – At the outset, the Supplier must secure and build product & company awareness with the Reseller’s sales group while cultivating ongoing mindshare and shared objectives.
- Productizing your organization – The Supplier will need a compelling value proposition to the Reseller in order to build awareness, stimulate sales activity and sustain momentum through the challenging times.
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