The great pool player is never shooting the shot that sits before him on the table; he is thinking five to ten shots down the table. In much the same way, the most effective channel organizations are those who have longer gestation periods for success.
Indian vendors and channel partners are constantly redefining their markets and business models — one such major shift occurred when the market moved from a volume to a value model a few years ago.
Channel partners were keen to move up from the box pushing role and vendors began investing a fair amount in training initiatives. While attempting to reinvent the role of the channel partner however, the benchmark of success still seemed to be the number of unit sales notched up per quarter. "And why not?" most vendors would say at this juncture — isn't the end objective of training a channel partner to finally increase the bottom line?
Yes of course, but what most vendors tend to lose sight of in a bid to realize near term gains, is the more strategic objective of developing a value model in the first place.
The value model was a natural progression of a maturing market. In an era of diminishing margins, it appeared to be the next driver of growth – the model allowed channel partners to move up the value chain. However, since it was more of an evolutionary approach, most vendor-channel partners did not get the overhaul they actually required.
It has been said that the best channel organizations plot channel strategy the way a great pool player plays pool. The great pool player is never shooting the shot that sits before him on the table; he is thinking five to ten shots down the table. In much the same way, the most effective channel organizations are those who have longer gestation periods for success. Vendors should be prepared for making decisions and investments today that will only pay off two to three years down the line.
Adopt a customer-focused strategy, rather than a product limited one. The essence of a value model and its core difference from that of a volume model is the fact that the customer drives the former and the business drives the latter.
And while most vendors would readily agree to a value model in theory, most find it difficult to translate it into practice. One perceives customer centricity as an ideal – a state of utopia that is always far from reach, or is it?
Most may find this hard to believe, but some premium partners of the best run channel organizations in the world don't even sell any products. These partners simply consult with customers and help in the planning of the network.
Their partnership is critical to the vendor's business but is nowhere measured by the number of units sold.
Most vendors today are increasingly looking to expand their addressable market; the key here is the small and medium business market which has evolved into a potential gold mine. To effectively tap the around seven million small and medium businesses in India today (source: AMI Partners), vendors need armies of sales personnel – enter the relationships they have with existing channel partners.
When vendors turn to their partners to prospect upcoming commercial opportunities, this automatically encourages channel partners to grow the market by adopting a more customer-focused strategy, rather than a product limited one. And, while a customer orientation will not necessarily translate into easy and immediate gains, such an approach has longer and deeper rewards. Partners, who are motivated to focus on the overall sales efforts, end up generating limitless new market opportunities.
Customer Segmentation is one thing, but what about channel partner segmentation?
A proactive segmentation of potential channel partners, with identification of the partner segments most closely aligned with customer needs, is no less important than the segmentation of the companies they serve. Most vendors tend to take a reactive approach to segmenting their partners. More often than not, they are categorized as "system integrator", "value added reseller", etc. However, there is actually a science to the process; the most effective channel partner segmentation involves a data-driven analysis that links partners' ability to meet customer needs to identifiable demographic elements of individual channel partner companies. Such classification may yield attributes such as "technology sophisticated partners", "high maintenance bundlers", "box pushers", etc. This detailing helps create personality clusters within and across channel partner categories, thus resulting in increasingly productive vendor-channel-customer relationships.
Vendors need to determine early on the services they would provide directly and the one's their partners will provide. This will thus, ensure no overlap and a smooth handling of the customer. The worst mistake a vendor can make is to infringe upon the customer relationship that his channel partner has developed or else the partner will look upon the principal as a looming threat and will soon find ways to exit the situation, and in all likelihood take the customer with him.
The last tenet is trust. This might seem a no-brainer but all the same it cannot be emphasized enough. Especially, in the case of an ever-expanding base of channel partners, vendors need to ensure that each relationship is nurtured to the fullest extent possible. A vendor's channel is an extendable part of the organization and likewise should be treated with the highest levels of trust and mutual respect.
When you're finished reading the corresponding mini-lecture, summarize your observations of what is important when developing a value model for channel partners.