A Perfect Storm Strikes VAR Channel
3. Driving Clarity of Who Gives What and Who Gets What
Vendor and channel collaborators must understand who does what. Clarifying who gives and gets is crucial. It is important to segment collaborators with differentiated value propositions, connect them to appropriate business models, and build collaborative solutions that play to each participants strengths.
Collaborators also must craft offerings that transcend basic pricing and discount characteristics. Lower maintenance charges, enhanced warranty terms, and lower up-front costs impact revenue more than price cuts. Selling and delivering services is much more complex than selling simple products. And new profitability models must be implemented. This translates to increased collaborator appreciation, including increased compensation for collaborators who help vendors close deals; and additional rewards for deals that each joint worker closes independently. This improved clarity also helps alleviate the waste of funds on ineffective indirect channel strategies and programs.
4. Improving Channel ROI
To manage channel return on investment, it is vital to establish cost and performance transparency in all aspects of channel programs. This is achieved by understanding economic models for each channel model; integrating infrastructures that facilitate the sales and delivery process and provide access to performance information; and establishing internally integrated governance structures.
Even though this function seems straightforward, few companies understand the dollar amount of their investment and the profit they gain in return. Without proper alignment or central oversight by the vendor, a significant risk exists that collaborators will be compensated more than once for redundant functionality and activity.
As companies take a closer look at their true channel ROI, they will find opportunities to increase investment returns and improve focus of their investments. With increased and more centralized oversight, operations are sure to be more streamlined and efficient. This sharpened focus on improving channel ROI will increase the number of companies, now too few in number, who understand how much they are investing in the channel. This focus will also serve to reduce the growing list of channel relationships without commensurate growth in revenues.
5. Focusing on Strategy to Action at Speed
As all the pieces come together in building a high-efficiency indirect channel collaboration, one last element remains: speed. To be ahead of the curve, collaborators must: 1) be able to scale infrastructure, especially in emerging countries; 2) quickly test and pilot various concepts; and 3) build the automation needed to facilitate the level of collaboration required between vendors, customers, and channel partners. Combining speed and flexibility completes the picture of a successful vendor-channel collaborative engagement.
By focusing on moving faster from developing a strategy to executing it, more mature sales compensation programs will emerge for tackling the tough challenge of selling and delivering services. This emphasis on speed will also help more executives act faster on channel data they collect to improve results sooner
The indirect sales channel holds great opportunity and promise to expand the market reach and deliver high-performance for communications, electronics, and high-tech companies. But it is complicated, competitive, and often a journey into unchartered territories. The winners will be those who have the foresight to build a channel model conducive to an ever-evolving environment. The winners will also be able to increase profitability for themselves and their channel network, and have a clear voice of the customer represented in what they and their channel partners present to the market. Collaboration will move from being a buzz word to something that defines industry leading channel programs.
(Kevin Bandy, senior executive at Accenture. can be reached at firstname.lastname@example.org.)
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