BEST PRACTICE GUIDE How to Increase Channel Partner Sales Making the best products on the market is only the first step to sales success. Manufacturers generally market their products one (or both) of two ways: direct sales, using their own sales teams and interacting directly with the end customers; or indirect sales, partnering with a network of dealers, distributors, and value-added resellers (VARs). Both the indirect and direct sales models are sales channels, but generally, when businesspeople talk about channel sales or channel management they re referring to a company s indirect sales network. Why Choose Indirect Sales? Companies choose to implement an indirect sales model either alongside or instead of a direct model for several reasons. Partnering with established distributors is a quick way for a company to enter a market without expending the resources required to develop an internal sales force. For similar reasons, it s simpler for a company to expand its reach geographically through the indirect sales channel. In certain situations, the right channel partners have the infrastructure, reputation, and expertise already in place to sell your products more effectively than your internal team could. That means a higher return on investment (ROI) for your company. Channel Challenges Those are the benefits of a well-developed indirect sales channel but, with the opportunity for increased sales success, an indirect sales channel can bring a multitude of challenges. Strategic agendas are often not aligned. Sales channel partners do not answer directly to your company. You can t dismiss an underperforming salesperson who works for a channel partner, nor can you reward him or her with a salary increase (although you can target incentives at individuals). Your channel partners most likely sell brands other than yours. They probably sell products from your direct competitors. It s clear you cannot manage your indirect sales channel the same way you would manage an internal sales team. Channel partners can t be controlled but you can nurture them into positive and mutually-beneficial relationships. For these reasons companies that rely on the indirect
sales channel as a major source of revenue need a channel management strategy. If your company has an indirect sales channel in place but sales are lagging behind expectations or you feel there is untapped potential for increased revenue through the channel, this guide is for you. You will also find it helpful if you are part of a team responsible for setting up a new indirect sales channel. This guide is for the vice president of sales, sales director, sales channel manager, or anyone else interested in learning: The keys to generating profitable channel relationships. Six focus areas for sales channel success. Why and how to integrate channel management best practices into a single partner relationship management system (PRM). How the latest cloud-based PRM software is a cost-effective solution for increasing channel sales. Engagement: The Key to Increased Partner Mindshare and Increased Sales Your channel partners have only so much time, energy, and thought to dedicate to the manufacturers whose brands they sell and service. In channel management terms, this is often called mindshare. If your goal is to increase sales through the indirect channel, your mission should be to grab as much of your partners mindshare or brand alignment as possible and steer it towards selling your products and generating valuable relationships with the customers who buy your products. The formula is simple: gain mindshare and your channel sales will increase. How do you gain mindshare? Several recent studies have shown that employees who feel supported and personally connected to the company for which they work or its products deliver better results. An oft-cited 2010 Gallup study reported finding a strong relationship between a company s business performance and the level of engagement among its employees. The same principle of engagement can be applied to the indirect sales channel. Channel partners that feel engaged with your brand sell your products better and more often. When channel partners are fully engaged with a manufacturer, they understand its products and way of doing business, feel supported in their selling efforts, and feel empowered to communicate with the manufacturer and collaborate on improved sales processes. Engagement can be thought of simply as how easy or hard it is for dealers to do business with a manufacturer. A dealer will naturally choose to dedicate more mindshare to the manufacturer that is easy to work with than the one that gives him problems. Quality engagement = greater mindshare = increased sales The following are six areas to focus on to improve the quality of your company s engagement with its channel partners. Six Focus Areas for Sales Channel Partner Engagement #1 Collaboration Your channel partners are just that: your partners. An effective partnership is a two-way street. Each partner should be enabled to contribute their thoughts, expertise, and experience for generating new ideas and better processes and solving problems. In the indirect sales channel, that also means enabling your partners to collaborate with each other as well as with your company in situations where that type of collaboration is appropriate and beneficial. If one channel partner develops a particularly effective sales tool, for example, it ought to be able to share that tool with the other partners in the system, so long as those partners aren t competitors. Similarly, if a re-seller is routinely experiencing negative customer feedback on a certain product feature, that partner should have the ability to pass that feedback on to the manufacturer and feel that the manufacturer will take it seriously in the next redesign. Collaboration enables both sides of the partnership the manufacturer and the channel partners to tap into a global knowledge network by drawing on and sharing information and expertise to create improvements and in turn generate more sales. Collaboration is proving to be as important as any channel management process today because the dissemination of best practices
throughout the channel can create an organic process of constant improvement. #2 Efficient Onboarding Like any relationship, there is a limited honeymoon period with your channel partners. Especially if your company is looking for increased sales immediately, when you bring on a new channel partner, you need it up and running as quickly as possible with knowledge of your products and the best practices for selling them. Failure will result in missed revenue targets and relationship tension. Here s what new indirect sales partners need to know about business processes for working with your organization so that they are properly prepared to maximize revenue and profitability: Is there a formal on-boarding process? Is there a process for managing channel conflict? How are leads managed and distributed? How is training and certification handled? What system is in place for Market Development Funds? Are there incentives and rebates for meeting sales targets? How is reporting handled between the partners and the enterprise? What type of service levels and support systems are in place? How do the two organizations communicate? How do the partner and the enterprise align on strategic goals? Here s what they need to know about your products that they re selling: What problem does the product or service address for a potential customer? What is the buying process like? What sales tools are in place? Who are the buyers at the target companies? How does your product/service compare to the competition and how is your product/service positioned in the market? An effective onboarding process that will lead to immediate sales success will arm your channel partners with the answers to all those questions before they start selling your products. #3 Conflict Management When a company sells its products exclusively through its own direct sales force, the only price conflict present is with its competitors. And, there are no boundary concerns; with a direct sales model, a company s sales territory is, in theory, limitless. These issues are more complicated with an indirect sales model. Channel conflict occurs when partners compete against each other and more often when they compete against the manufacturer s own sales team. To a certain extent, channel conflict is inevitable when there s more than one sales force marketing a product. But it can be mitigated. If not managed well, channel conflict can cost a company and its indirect sales channel partners profitability when they undercut one another. It can also reduce morale within the channel, lowering partner engagement and mindshare. To minimize conflict within the sales channel, a company s channel management program should provide for: Account ownership: Clear rules for territories and accounts so partner sales forces (and the direct force) avoid fighting over the same set of customers. Lead management: A centralized system to manage the flow of leads from lead generation to sales success so partners aren t competing against each other for the same customers. Brand segmentation: Some manufacturers may offer standard products for one channel, stripped-
down versions for a discount channel, or different brand names for varying products. There should be a way to segment these similar but different products throughout the indirect sales channel. #4 Intelligent Deployment of Market Development Funds (MDFs) Market Development Funds (MDFs) are commonly used by manufacturers to distribute money to partners to help them market their products at the local level. MDFs have been used effectively for: Advertising (billboards, yellow pages, newspapers) Direct mail campaigns Extraordinary investments, for example, development of specialized support tools Exhibitions, trade shows Market development funds can be useful but they have to be deployed intelligently. No company wants to spend money on initiatives that have no hope of generating additional revenue. Companies need a way to easily measure the ROI of their MDF program. MDFs can also cause friction among the different members of your sales channel network. Your market development funds should be spent properly and effectively, aligned to your marketing initiatives, but your partners should also understand why they are being spent and should have a clear process to apply for the funds for which they qualify. Market development funds (MDFs) can be effective tools for increasing channel sales, but only when used according to data-driven analysis and when channel partners understand their purpose and how to qualify for them. #5 Effective Communications A key to developing strong relationships and therefore gaining mindshare with channel partners is effective communication. To be effective, communications can t become burdensome. Communications that are too frequent can get lost in the shuffle or leave the dealer feeling overloaded. If the communications are not seen as helpful and supportive, they become useless. Frequent communications are not necessarily effective communications. One of the key communication mistakes in channel management is sending blanket information addressed to the entire dealer network. It s then left to the individual dealers and their individual departments to sift through the information, looking for anything relevant to them. To be effective, communications must be role-based. Unclutter your channel partners inboxes and increase their positive opinion of working with your company by only sending them messages applicable to their roles. #6 Access to Training and Certification As has already been established, for your indirect sales channel partners to be successful selling your products, they have to understand your products and business practices. If they are going to represent your brand to customers, you want your channel partners and their employees to meet your corporate standards. Channel partners cannot simply begin selling and servicing your products. They must be trained. At the same time, like everything else within the sales channel, for maximum ROI, training must be done intelligently. Partners should only be receiving the training that s applicable to them and your company should have a centralized source of data on which of its dealers are already qualified (through a certification system) to sell and service your products. Partners feel more engaged with a company when they receive training support and certification and, as a consequence, sell and service your products better to the greater satisfaction of the end customers. PRM: One System For Increased Channel Sales The challenges inherent in an indirect sales model can be daunting, and the steps required to optimizing the indirect sales channel for increased revenue can be overwhelming. Above we discussed six different areas for improvement in the indirect sales channel. The discussion in each of those areas could be
expanded at great length. Taken piecemeal, the cost of implementing the systems and processes needed to address each of these areas can be prohibitive, especially from an ROI perspective. Fortunately, there is an integrated solution. A partner relationship management (PRM) system offers a set of tools that allows a manufacturer to better organize and manage its channel relationships. PRM can be looked at as both a technology solution and a business philosophy, unifying all the channel management best practices within a single framework. The best modern PRM systems are web-based, cloud-based, and scalable. All interaction between a channel partner and manufacturer occurs through a single portal, customized based on the partner s role within the channel network. This meets the needs of a company looking to increase channel sales by gaining mindshare with its partners through: Collaboration Efficient onboarding Conflict management Market development funds Effective communication Training and certification programs The LogicBay Approach: Channel 4Core LogicBay believes there are four major elements to managing channel partners effectively for maximum engagement and therefore maximum revenue through the indirect sales channel. Our web-based PRM system unifies each of these elements into a single platform using customized partner collaboration portals. LogicBay s Performance Center can capture your sales process, enforce its compliance in your channel, train and prepare your sales force for success, and measure their progress. Take a look at how a successful performance management system functions by taking our free online solutions tour. The Channel Performance Jumpstart Program If you re ready to dip your toe in the water and get started improving your company s channel sales through the 4Core best practices, LogicBay offers a free Channel Performance JumpStart Program. In this program, you ll work with us to pick a specific business initiative and then apply a PRM-based approach to improving results. LogicBay s JumpStart Program helps you test a PRM-based approach to supporting your channel partners. After you sign up for this program at NO COST to your organization, a dedicated LogicBay professional will work with you to develop a channel management program that focuses on a specific business initiative that s meaningful to you, following LogicBay s signature 4Core best practices framework. The 4Core of channel management: Collaboration Marketing/Communication Training and Certification Performance Management Corporate Headquarters: LogicBay Corporation 42 Ladd Street, Suite 217 East Greenwich, RI 02818 Phone: 1-888-301-0751 Fax: 1-888-301-0752 Email: info@logicbay.com Official correspondence/mailing address: LogicBay Corporation 68 Dorrance Street Box 382 Providence, RI 02903