Since our recent Channel Manager Summit, several vendors have been reaching out to me for some advice on what they should do to build a bigger, better and stronger channel business. Here are 2,611 words that I would like to share with vendors as well as channel partners (VARs, MSPs and ITSPs should also take note as they play a big role).
Many vendors started by telling me that they leverage marketing programs from distributors to reach the channel but they were not satisfied with the ROI. They also said that it was the price they needed to pay to be listed by distributors. In many ways it resembles a tax for doing business. If they wanted certain distributors to carry their products, then they need to pay to play.
All things considered, it is actually a reasonable business practice. Why would any distributor run the risk of stocking and selling any vendor’s products without some upfront investment? With hundreds of thousands of products offered by distributors, vendors need to stand out from the crowd.[To give you some context, ibiz10 currently maintains about 1 million SKUs in their e-commerce platform www.ibiz10.com . It is an amalgamation of product catalogs from all major IT distributors]
Without any doubt, if you want to be noticed or even carried by distributors, you will need to invest in some of their marketing activities. While distributors do offer value in channel marketing, this alone will not get you the sustainable results that you need to grow your channel business. Even distributors will tell you that they are in the business of demand fulfillment and providing credit to the channel. Essentially, their business is to pick, pack and ship stuff. Creating demand is not their forte!
This gets more complex when a vendor plays with multiple distributors as their marketing investment merely shifts market share from one distributor to another. In cases where demand is solid and multiple distributors are carrying the product, then the goal of the distributor is to get the resellers to buy from them – not necessarily to help the channel to generate net-new demand.
So, how much of the vendor marketing funds actually trickle down to the reseller partners to help them generate net-new demand?
One of our VAR Office Suite partners developed a brilliant MDF management tool. They also offer a research piece that shows about half of MDF funds never gets to the target destination. Literally millions of dollars go unclaimed meanwhile VARs, MSPs and ITSPs tell me they cannot find money to do marketing! It would also be interesting to know of other half that does trickle down, what percentage of that actually generated any demand?
The actual people buying the products are the end-users and the actual sellers are the resellers. This is something that smart channel marketing experts understand. We battle on this frontline every day so we know that channel partners can do the right job, if they get right support. They know their customers best so it makes sense for vendors to support them to prospect their end-users.
To generate net-new sales demand in the channel requires 3 basic things….
I will shine some light on each of these three areas, but the magic really happens in the on-boarding phase. Keep in mind that these three steps are never done! It has to be ongoing!
Arguably the best people to generate awareness in the channel are news media. They are the most credible and actually have a proper opted-in subscription base. That said, generating effective awareness requires more than the news media. Your message also needs amplification through integrated campaigns like social media, direct e-mailing and telemarketing. The message gets heard loud and clear when all these activities work together in a synergistic manner to reinforce the message.[TIP: Doing not enough to amplify your message will only be drowned out in the sea of noise in the market. Too little = no actionable awareness! If you cannot invest enough to sustain the right level of your awareness, then consider investing your money elsewhere. At the very least, ensure that your message is published in as many channel news organizations as possible. Thousands of channel partners use news media search engines to research vendor prospects. Test it for yourself…go to www.e-channelnews.com and search for your company name]
All channel activities can lead to the recruitment of partners, but most VARs, MSPs and ITSPs will tell you that they find their best vendor partnerships from face-to-face events (and to some degree webinars). The bottom line is that the vast majority of sustainable partnerships can only be formed when the two parties actually meet to build a relationship. Any chance to get in front of potential partners is a good thing, but always remember that meeting the right decision maker is critical for getting successful results. Today, it takes about 7 to 9 hits on a potential partner to start the recruitment process, so be patient and try not to get frustrated.
Vendors must take charge of the awareness and recruitment of their partners. The channel is being bombarded by a ton of companies looking to partner and the sales pitches are very loud – making it more difficult for them to figure out truth from hype. Vendors must also take into consideration that potential partners have be prudent as to which vendors they carry because they also need to make a significant investment in time and resources. Respect them and they will eventually respect you.
As mentioned earlier, the magic really starts to happen in this third phase of the process (on-boarding) where the courting dance between the vendor and partner is coming to an end and it is time to get down to the business of selling. This transfer of knowledge from vendor to partner is a critical step and one that is too often skimmed over. VARs, MSPs and ITSPs will tell you that getting them to sign a reseller application and sending them to the partner portal is only one small first step when it comes to on-boarding.[TIP: You may want to poll your partners or check the analytics on your partners’ portal to see who and how many are actually using your partner portal. If you are relaying too heavily on this tool for your partner development, it may shock you to see what you find!] [TIP: Automation of the on-boarding or marketing process may not be the answer either. Your partners will tell you that it is not practical for them to use the marketing automation tool of each vendor. Most partners will also be reluctant to upload their customer contacts into any such third-party system. In theory, marketing automation between vendor and partner sounds good, but in practice it has pitfalls. That said, some partners may find it useful]
Vendors that understand and invest in the on-boarding process, will easily outsmart, outplay and outlast their competition. Sustainable success is directly proportional to the level of skill that the vendor was able to transfer to their partners to market, sell and implement their products.
A key part of the on-boarding step is developing sensible marketing campaigns with partners. As mentioned earlier, the actual customer of the vendor is the end-user of the reseller. All marketing professionals understand that to sell, you must market effectively to your target customers. As such, the type of activities that vendors do to help their partners to market their products to their end-users is critical for success. This is actually where vendors should be spending most of their time, effort and money. Signing up a bunch of partners and hoping that they sell your products is wishful thinking.
Channel partners will tell you that they want to be properly on-boarded. They do not want to receive a dump of information that they need to digest. Many tell us that a lunch and learn is a great way to fast track the process. If is not practical for the vendor to do this one partner at a time, then do group sessions. Virtual sessions could work, but they are less reliable for sustainable results. Partners need the vendors to provide the right information and support at the right time.[TIP: The more that you are engaged with the partners during the on-boarding process, the more results you will generate] [TIP: Partners also tell us that they favor vendors who have a level playing field in the channel. They do not like vendors who stack the deck against them. Never take their silence for acceptance]
Another big component of this is on-going education and management of the partners. Doing the right marketing campaigns and streamlining the marketing development funding is critical. On one hand, you cannot just give the MDF funds to the partners and have them do whatever with it. On the other hand, you cannot constrain them with silly marketing programs or have them jump through hoops to get funding. Neither of these ways will yield successful results!
Channel marketing is a complex process of getting all of the stakeholders on your side to grow business. Smart vendors understand that they must take full ownership of awareness, recruitment and on-boarding. Success flourishes when the right balance happens between these three activities.
The channel is about to get more turbulent as more Cloud vendors enter the channel. They too will need to define their go-to-market strategy with their partners. Most of these companies do not have a well-defined channel partner program. Their marketing activities seem to be focused exclusively on search engine and other digital marketing activities.[NOTE: In many ways, Cloud vendors see direct-to-partner or end-user as their future. Most see distributors as being redundant. Their products are mostly license base and delivered virtually. There is nothing physical to pick, pack or ship. It is mostly machine-to-machine delivery. In many cases, the Cloud vendors’ systems do the actual billing and payment collections. Minimal credit facilities are required and related financial risks are very low. If the end-user does not pay, the application can be easily switched off. On top of this, many Cloud vendors also tell us that they can pass-on or leverage the extra margin, destined for distribution, to their partners for marketing activities. In one example, I saw a Cloud vendor configure a live virtual server and had it up and running in under 10 minutes from a laptop. Consumption and billing was automatically managed]
As Cloud vendors ramp up their customer base with more ease-of-use and automatic recurring transactions, the power may eventually shift to them. VARs, MSPs and ITSPs need to be smart with this new reality and figure out ways to retain the ownership of their customers by doing the billing as well as offering private-label and multiple solutions so as not to put all of their eggs into one basket. The good news is that the Cloud vendors need partners because they want to reach their end-users to sell their products. As long as the partners are smart about retaining control and ownership of their customers, then these partnerships should thrive well into the future.
As the end-users continue to change the ways in which they learn and consume technology, it is obvious that the way the channel does business must also adapt, including how they do marketing. Vendors must be at the forefront of this evolution to best collaborate with their partners to market and sell their products.
Large distributors will tell you that the vast majority of their sales are done through a few hundred resellers. So what are the thousands of other VARs buying and selling? We know that the tier 2 and 3 resellers have all but given up on making money from hardware. They are mostly focused on providing IT services to their clients to keep them up and running. With Cloud, these tier 2 and 3 resellers are becoming reenergized. Cloud and Managed Services are empowering them to remain relevant.
Vendors also need to adapt their channel marketing to meet the needs of the emerging channel partners starting with the new “born in the Cloud” VARs that are entering the channel every day. They are a lean partner-machine with no traditional loyalty issues. They do not have the clunky tools and processes that plague the traditional resellers. Today, a Cloud VAR can be quickly up and running with everything that they need in the virtual world – accounting, web site, service automation, managed services, cloud apps, support, CRM, e-commerce etc. They are 100% mobile and many have no physical office. They also service a smaller number of end-users and can therefore provide much greater personal attention to their needs. Since their overhead is low, they also make higher profits (We are getting a lot of insights into this emerging group, as they are fast adopters of the tools and services of VAR Office Suite).
We are also tracking what we call “RE-born in the Cloud VARs”. These are entrepreneurs who are abandoning their traditional VAR business to start over fresh. They are leveraging SaaS tools to create a more nimble and virtual business model focused on consultation and recurring revenues services. They are also starting with a known customer base so their potential for success is greater.
Another growing trend is smaller groups of VARs and MSPs are getting together under a “mastermind” concept to share ideas and support each other. We see this happening to varying degrees as VARs and MSPs simply decide to partner with other VAR or MSP who have an expertise that they do not have. It is something that has been going on for over a decade and we are seeing this picking up new momentum. Vendors could leverage this extended marketing reach of their partners’ partners!
The IT channel is evolving and it is very exciting. The dynamics between all the stakeholders are changing. Rules are being rewritten. We have been fortunate to have a front row seat to the channel’s evolution over the past 25 years and we are still learning. One thing we know for sure is that it is not channel business as usual.
There is a tidal wave of new Cloud vendors entering the market while many traditional vendors are reinventing themselves to be part of the virtual Cloud revolution. Mobility is one obvious catalyst that has catapulted the growth in the virtual world. Big Data and Internet Of Things are poised to fuel the flame. There seems to be no turning back.
Best practices never remain best forever! Channel activities from vendors must evolve to face the new reality of the channel. While all of the pundits are busy trying to predict the future of the channel, the evolution has been quietly happening. We talk to VARs, MSPs and ITSPs every day and we see many making significant steps to remain relevant. They will eventually adjust their thinking and business models when they are good and ready. Before you label them as “laggards”, read this recent article in USA Today. It shines some interesting light on the perception of technology adoption rates Read USA Today.
The results from our recent Resellers Choice Awards sums it up nicely…Channel partners strongly value their relationships with their vendors and the level of support that they receive makes the relationship stronger. This means that vendors who invest in supporting their partners’ business will become their “favorite” vendor. This will ultimately translate into more success for the vendor and the partner. Maybe you can leverage some of the suggestions in this article to help you build stronger business relationships with your partners.