Well, I hope this helps you in your decision process and remember in all marketing, segmentation if one of the first critical step in any successful marketing activity!
RHL 9/9/10

 Five major direct marketing misconceptions:

 1-      Given today’s technologies, direct marketing is the only way to go and it is the least costly. Well, technology is changing the way we do things, but technology alone is not always the key driver for change. Remember that your potential customers are humans and thus they vary on how they “gather” information and interact with technology. Secondly, some products and services are not very well oriented towards today’s technology. As for cost,  the “web 2.0” process is far from free; take a complete look at the cost to do direct marketing. In some cases you may have to add resources to manage the multiple divergent activities.

 2-      Everyone has email, so I can send our emails and the orders will start coming in.  This plan of action may be in violation of the CANSPAM act, and may alienate potential customers.  Just like traditional telemarketing, one needs a compelling offer, an approved targeted list, a call to action, and supporting activities such as case studies, blogging for creditability, and must importantly a well thought out email program, because one mailing alone will not cause potential customers to react.

 3-      Social marketing has no proven results, so I do not need too use any of these new tools! Understand that the vendor to consumer model has changed. The consumer is in the driver seat and consumers can and are talking about enterprises and about enterprises’ products and services. So as a minimum, one should at a minimum, monitor what is being said so you can react. Secondly, many end users are using media tools like blogs, twitter postings and Facebook to become informed before they make a decision, so it stands to reason that if they don’t see anything about your services or products, you will not be considered.

 4-      Hard copy (print) mailings are no longer used because they are not effective. Again, it is not a question of what to use, but your mix.  Hard mailings are and can be very effective.  A good example is a mailing to “new” customers, those who may not know about you. Hard mailings add personalization and get around potential filtering by the corporate IT email structure.  Hard mailings can also precede or follow up as part of planned social media programs.

 5-      The web site is nice to have but once I get it launched I can focus on other marketing programs. As I noted in item number three, the consumer is in control. Their major source of information is the internet, starting with your web site. If your web site is not user friendly, up to-date, contains real information and provides “give a ways” such as papers, case studies, white papers; and then you have just lost another potential customer.

 In summary, as I have always stated, look at your strategy and goals and see how direct marketing as a sales channel will support them.  In reality, your sales model will probably be a mix.  So the real question is how much direct marketing and what percentages of its components will be used. Also like other marketing programs, know your audience and know what they are thinking and saying about you.

 Do you know how your web site compares to your competition?

 RHL 01/19/10

 Five major indirect channel misconceptions:

 1-      Partners, resellers, etc. are all alike. Nothing could be further from the truth! The major impression is that most indirect channels carry vendor’s products, do some form of telemarketing and just take orders. In reality resellers come in thousands of kinds and types.  From pure distributors, to value added resellers, to system integrators.  Many resellers not only know the products and/or services better then the vendor; they usually have very knowledgeable sales people with solid long-lasting relationships with their customers.

 2-      The indirect channel is only interested in pricing for products and /or services. While everyone is in business to make a profit; the indirect channel is equally interested in areas such as marketing programs, territory alignment, training, technical support and LEADS!  And like all good businessmen, they recognize the positive nature of continuing relationships with key customers.

 3-      Your channel programs can be applied to all resellers/partners equally.  If you believe this then you are in for some very rough times with your resellers. Again resellers come in different forms. Some are product oriented, others specialize in services, while others focus on certain type of industry applications.  Therefore one needs to tune each program   for each different type of partner (reseller, distributor, etc.).

 4-      Indirect channel partners only know how to sell. Just like myth number 2, channel partners can and do have many capabilities. Again usually each has one or two major strength capabilities, so make sure you know what they are when selecting a indirect channel partner such that their strengths matches with your distribution strategy.

 5-      Indirect channels do not need much care and feeding after the initial start up. This is like the myth of the direct sales force that “loves them and then leaves them” but coming from the other direction.  Probably the worst thing you can do is to ignore your indirect channel. Take this approach and see how long your partners last with you. Make sure you have sales people who know how to manage and support your indirect channel.  The most successful companies have channel partners who have been with them for years.

 In summary, noting that the indirect channels are actually more complicated then the direct channel, one should make absolutely certain that the partners/resellers you select match your strategy. Next, depending on why you selected the appropriate partner, make sure that your partner programs meet your and your partner’s needs. Lastly make it a partnership relationship not just a business relationship!

  Have you thanked your channel partners today?

RHL 01/12/10

When the best doesn’t come, everyone wonders why goals are not being met, why the sales force is confused and why the partners are underperforming?

I call this approach the “ready, fire, aim” method. The answer to the confusion above is that there is no well thought out, formal partner reseller program.

The following are the major activities that best-in-class partner programs have in common:

1-Strategy- If you have read any of my other blogs regarding sales or sales channels, you know the first consideration already. Any good program must have a strategy. What is the company’s strategy and how will the partners contribute to the strategy? Some of the questions you must answer are: are you developing a partner program to get new customers, new territories, or to augment your direct sales force? Whatever the reason, the program must support these strategies, if not the path will be filled with potholes!

2-A Partner Program: This may seem obvious, but you would be amazed how many companies see an opportunity, but do not plan a program and thus cause a false start and, in some cases, bad will in the reseller community.

Fundamentally a program outlines the why, the who’s and how’s of doing partner business. A partner program is like a business case, it contains items such as goals, objectives, forecasts, roles and responsibilities, partner programs, partner manuals, partner collateral, leads program, training, promotional activities, support guidelines, benefits, procedures/processes, measurements/metrics, engagement procedures, customer service an escalation policy, and much more.

3- What type of partners will you be recruiting? Will they augment your sales force, or a technology, or a skill set, or a region, or help you expand into a new market(s)? Will there be synergy with your sales force or will there be a huge overlap (and potential conflict)? Note that this decision ties back to your strategy.

4- Partner selection: Your program must have documented information on the selection criteria for partners. The criteria should cover among other things: business requirements, certification, capabilities, partner’s responsibilities, partner’s benefits from the program, and sales coverage requirements.

5-Financials: How will the partners be compensated, is there a special discount rate for the selected partners? Will the partners be measured on volume, revenues, or just new business?

6-Targeted Markets- Assuming you have targeted markets for your direct sales force, what will be the targeted market(s) for the reseller(s)? Will they be the same as for the direct sales but with different products, or different markets with the same products or different products and pricing?

7-Measurements- How will you measure success of the partnerships? This will depend on the “stage” that your company is in and the overall goals of the company. As an example if you are in a start-up mode, the measurement for the reseller might just be new business (profitability is secondary), but if you are seeking product revenue expansion, the measurement might be net new revenues.

Well these are some of the major activities that one must consider is developing partnerships. Again, like my blogs that discuss channel selection, things are never black and white and unfortunately they tend to be very gray and complex. Don’t let this scare you away; start with a very well thought out and tested strategy. If you do this step well and involve potential partners, you will be amazed how the well the other activities move ahead.

Till then happy partnering!

RHL 11/23/09

This is the seventh in a series regarding Sales Channels

One reader, who felt that the scorecard was a good guideline in defining the appropriate channels for many enterprises, wanted some insight on what should be considered in changing/ adding another channel, as her current channel is underperforming.  Well when the reader asks, we deliver, so let’s start with the following scenario of a company having direct sales only and wanting to add an indirect channel.

Again, make sure you have a sales strategy or that your sales strategy is updated.  Many times enterprises are locked into a strategy and don’t realize they have changed, the environment has changed or both have changed and thus the strategy is no longer valid.  But let’s assume your sales strategy is still valid;  here are five key considerations for switching or adding an indirect channel of distribution.

1-Product selection for the potential resellers

Do the products within your portfolio meet the following criteria?

            - Have margin-sharing room?

- Not complex, lending themselves to easy (low cost) training?

- Fit within distributors/resellers portfolios?

- Minimal conflict with the products the direct sales team carries?

- Does your infrastructure support SKDs, tracking and ordering for the resellers?

If your answers are yes to at least 3 or 4 of the five then continue.  If you answer NO to most of the above, going indirect is not out of the question but more difficult.  You will need to implement the following actions items:

Action items

-You will need to compensate for the product issues by excelling on other reseller program components

-Consider repackaging some of the products or adding services to the products that are oriented just to the resellers.

-Consider resellers who could use your products to complete their portfolio and thus will be less demanding on issue such as discounts.

2- Reseller segmentation

Perform an analysis on potential resellers and see who meets these criteria:

-Are they capable of selling the selected products ?

                -Do they have the necessary infrastructure to support these products?

-Can you segment resellers to minimize conflict with other resellers and your direct sales force?  Segments can be by geography, customers or products as

 examples.

-Do the selected resellers have compelling value propositions that support your selected products?

-Do you have compelling value propositions that will motivate the reseller to sell your products?

If you cannot segment the reseller so that there is minimum conflict, then I would say this is a major issue and indirect channel will be a struggle.

Action Items

            -Segment so that there is no or minimum overlap with your direct sales force

            -Develop specific value propositions for the resellers and for their end users

3- Reseller program

Again, assuming your strategy is still sound, then it is mandatory to have a well thought- out reseller program.  As a minimum you must have the following:

-Some type of “classification” of reseller types. i.e. sliver, gold, which outlines their objectives, revenues targets, products they will handle, etc.

-For selected products, what type of support you will provide

-Discount or points off the structured program (note: if you have low margins or your discounts would cause negative margins, then like the product packaging, look at bundling with the resellers products or bundling other product or services to improve the margins and value propositions.)

-A mutually agreed upon measurement system that covers items like sales, customer satisfaction, training and leads

-Certification programs (can be optional)

-Reseller agreements

-What joint marketing will be available to the resellers

-Well defined rules of engagement for the resellers and your direct sales force.

-Financials- prepare a complete forecast analysis to understand realistic revenue targets, realistic costs and thus true margins.

If you have not developed these elements or can not have a “best-in-class” reseller program (especially the financials, classification and measurements), then I would highly caution that going into indirect distribution, as this will not be a successful venture.

Action Items

            -Develop an indirect program and test/review it with potential resellers

            -Build a complete business case that supports resellers AND your sales force

            -Educate ahead of time the sales force about the pending channel change

4- Financials

Going indirect will have a startup costs just like a product introduction, but what differs is that there are specific activities in dealing with resellers and that most people underestimate these startup costs.  So, build a complete business case just like one would do for any product introduction; but pay special attention to the following areas.

-         Joint marketing cost with the reseller(s) ( events, travel, promotions, incentives, sales support, etc)

-         You will need a portion of your current sales force or new hires to focus on the resellers

-         The revenue sharing plan must consider the direct sales force and the reseller needs

-         Support to the resellers ( training, collateral, demos, programs, technical backup, returns, trouble shooting, customer engagements, etc)

-          

Action Items

            -Related to action item in 3- develop a complete business case.

            -Have measurements and timeline with key milestones to determine progress.

5- Cultural Environment

Here is one area that is either overlooked or becomes a stumbling block in many companies.  What I am talking about is the overall attitude about resellers, starting with the company’s management and moving on through the organization.  The old adage, action speaks louder than words, is applicable here, and both have a major impact to the success of the new relationship(s).  If people within your organization say and do things differently internally  than they do externally regarding resellers, the word gets out quickly and before you know it your resellers are abandoning ship or worse, not letting you know how they actually feel.

            -

Action Items

-Educate management and key people involved in this transition on the reseller world and what the relationships are, what should be expected and why we are doing this in the first place.

-Develop roles and responsibilities for key executives regarding reseller’s involvement and support.

In conclusion, one can see that adding or converting to another channel is not just looking at which products to distribute, but require execution of what I call the “surround components” which are the real keys for entering into the indirect channel world.

Next time we will discuss direct sales and converting or adding direct marketing.  Till then, happy selling

RHL 9/24/09

A number of you have asked, “Who does sales channels well?” after reading my series about different sales distribution models.  (www.firealarmmarketing.com/blog).

The Direct Model:

            Some of the major insurance companies demonstrate outstanding customer segmentation by their marketing campaigns.  They are focused, know their key messages and develop “packages” that address customer attributes along with time sensitive pricing.  The sales team is given very specific directions regarding the characterization of the customers they are to pursue.  The best parts of their marketing and sales program are the easy to remember, catchy messages. 

            On the flip side, there is a manufacturer of communication products and services north of me who should be written up as a business case for graduate schools.  They did most things wrong.  First and foremost, they really didn’t have a strategy.  Not only did they seem to change their strategy, but they also changed their targeted customers and what solutions that they were selling to them.  These actions (actually lack of actions) resulted in many issues.  Some of the major impacts were loss of sales force support and moral, customers losing confidence in them as a trusted vendor, fewer purchases and confusion on what the vendor actually offered.

The Indirect Model:

            A dominant vendor in the telecommunication industry is writing the book on how to work with distributors and reseller.  While they have some direct sales, they predominantly depend on resellers.  Their great relationship is created on a few good practices; first, the vendor is doing a wonderful job in the selection of the resellers, second there is a very clear distinction on who sells what, who is paid for what and what territories each one should cover.  Another unique feature is that the resellers are measured on customer satisfaction!

            A vendor, who is struggling with indirect model, is an East Coast manufacturer.  They started with the direct model but not only did they change which products to sell, they also changed their compensation plan, all of which demotivated the sales force.  Believing that the indirect model would be less costly, they changed to an indirect model, signing up hundreds of resellers.  There was one problem they had no strategy, which resulted in confusion among the direct sales force and the resellers.  We all know the expression; burn me once, burn me twice, well the resellers got burned a number of times, thus resulting in lost of creditability with the vendor and vendor sales.  Their next misstep was to develop a strategy (you are saying that is what you are supposed to do first).  Multiple strategies for the resellers were developed, not one general one.  These multiple strategies also resulted in confusion everywhere and thus continued lost of credibility and sales.

The Direct Marketing model:

            A major PC vendor probably wrote the book on best practices for the direct marketing model.  Their key strategy is reducing costs on the supply side and the end user side.  The other key element is their direct marketing functions.  They know, to the greatest detail, their customer’s attributes and segmentation.  The vendor also has a well-defined customer satisfaction program, which keeps them in touch to their customers and thus the ability to look forward and meet user’s future needs.

            If one looks at the dot com era, then we can see many examples of poorly handled direct marketing.  There are two common mistakes among the failed dot coms.  First is their business plan/strategy; they were not real at all (forecast were ridiculous).  Second, they really did not know their potential customers.  An example of this is the pricing of their products.  Vendors were totally mismatched with what they thought they could charge and what the price consumers were willing to pay.

If we learn anything from both the good examples and not-so-good enterprises examples, strategy was the key for both directions these companies undertook.  With no strategy, everything else is time wasted!

Is your distribution strategy clear and well understood by all?

RHL 9/17/09

Noting that generalization is always dangerous, I will ignore it and state that if one had to list just one  key consideration for the three models it would be the following:

Direct model – Leads. Leads, leads – thus marketing is a key functions

Indirect model – Selection of the partner (who sells what, where and their value proposition)

Direct marketing – awareness and compelling messages (marketing again)

NOTE: each model has its issues and as I stated, you must start first with knowing your overall strategy and goals before you even consider which channel(s) to consider. AND if you decide on more then one model, things get very complex very quickly.

In any case, here is a score card that will as a minimum give you some direction on what distribution model(s) you might want to consider.

Score yourself 10 (closest to your needs/goals) to 1(least needed or relevant) for each category.

Here is where it gets tricky!  If you scored 80 points plus or minus 5, then you should consider the direct model.  If your scored 40 + or – points, then the indirect is your most likely model, but if you got 8 points + or – then the direct marketing model is the most likely choice.  But if you are like most and scored in the “grey areas” like 65 points then, sit down, gets lots of paper, block out your calendar and start analyzing the multiple model approach.

Again, thanks for your comments, if we can be of any help regarding channel selection or any marketing or business development issues; give us a call or email us www.firealarmmarketing.com/contact-us/

RHL 9/14/09

Account control: If your don’t currently have a sales force or and do not have a branded name in the market place then partnering with a well know reseller(s) and or a major distributor(s) is a very viable option.  This allows you to enter the market place quickly and potentially at an optimized cost.

Product environment: If the product is relatively straightforward or the features are fairly well understood, then indirect is a logical choice.  For clarity, the indirect model can support complex products but it requires very experienced resellers/ISVs along with a well-staffed infrastructure, in your organization, to augment the indirect sales force.  Additional considerations are first, the product must be compelling and get the attention of the indirect sales force, and second, your cost structure has to be such that there can be adequate “margin sharing.”

Services – If you have a service that you are considering for a reseller to handle, then make sure that the service does not conflict with any of the reseller’s existing services.  If there is no conflict, make sure they are capable of handling the service(s).  The last thing you need is for poor service delivery, because it will reflect on you, NOT the reseller.

Customer Segmentation: One must understand that reseller(s) are usually selling other vendors (even your competitors) products; thus, you need to be very focused and selective on who your reseller/ISV/partners are going to be.  The selection criteria can be by geography, customer type, and industry or value proposition.  In any case make sure the selection(s) chosen separate the reselling partners so there is no overlap (in reality minimum overlap) coverage.

Marketing support: Your marketing organization needs to provide the following key functions for the indirect sales model (again, there are other functions, but I have listed the key ones):

1-     Probably the most critical item is to fully understand the reseller’s strengths and what drives them.  This is critical when it comes to developing and maintaining the supporting documents, presentation, collateral etc. for the resellers.

a.       Thus, the marketing material needs to be structured so that it can “modified “and presented as the resellers.

2-     Articulate the benefits and value propositions of the products for the reseller AND the customer.  The reseller (just like the direct sales force) needs to be “sold” on the product, and must clearly understand where and when to sell it.

3-     Competitive analysis – the reseller not only needs to know the competitive information, BUT also why your product is better for the reseller to promote than your competitor’s.

4-     Testimonials and reference customers – just like the direct sales force, the reseller wants to know that others have had good experiences with your product, because bad news travels fast…

Financial considerations:  How will you compensate the reseller(s)?  Most resellers or/ and distributors require a list price discount or volume scaled prices for the products you want them to sell.  This obviously reduces your margin, adding to the other expenses in the indirect model.  Items such as promotion, training, returns, tradeshows/events, reseller’s activities, and marketing collateral are just a few areas that should be factored into your overall financials to determine the real profitability.

Below is a high-level pros and cons regarding the indirect model.

Indirect Model

Functions                                Pros                                             Cons

Sales force                               Established/branded                No real loyalty

                                                   partner            

                                                  Good segmentation                   Potential conflicts

Product                                    Established markets                  No product loyalty

                                                  Established programs               One of many sold by the reseller

Services                                   Proven experience                        Account control

                                                                                                       Potential costly support

Marketing                                 Shared marketing                      Multiple marketing support

                                                   expenses                                 

Financials                                 Potentially expense                   Margin issues   

                                                  Sharing

In summary, as with the direct model, do your due diligence relative to your strategy and weighing whether, the pros outweigh the cons relative to your overall strategy.  However, understand that the indirect model can be very complicated, and if not thought out properly, disaster lays in the wings.

Next time, we will look at the direct marketing model in more detail.  Until then, you can start looking at your customer segmentation.

RHL 8/13/09