What Elements Make a Winning Formula?

Renee Yeager - September 25, 2009

We’ve been fortunate enough to work for companies on all sides of the b2b channel— technology provider, VAR and distributor. On any given day, when we ask our clients how their channel is performing, the most common response is “it needs some attention”—good for us, but concerning just the same. When you look closer, there are usually some good things going on… and then some things that are not so good. Therein lies the problem. Channel marketing programs fail when key elements are overlooked—if it doesn’t get everything it needs to thrive, it simply won’t. Over the coming weeks I’m going to write about these key elements. I hope you’ll join in the conversation and share your experiences and insight. 

Element 1: Mindful Segmentation                                                                                                                                             
Create a clear distinction between the role of your channel partners and the role of your direct sales team—align to strengths and reassess often.

This might sound basic, but you would be amazed at how many companies leave their segmentation strategy (specifically, how they will focus their channel sales efforts vs. their direct sales efforts) not clearly defined and communicated. Some might see this more as a sales strategy, but a very important role of marketing is to determine the go-to-market plan for the business and how best to create demand for sales teams—both direct and the channel. Marketers should play an integral role in determining and supporting the segmentation strategy. 

Here are a few of the more common segmentation scenarios and thoughts on each:

Scenario A:  “Our Channel Partners are focused on a Particular Market Segment” 
Here the company says that channel partners are limited to selling to defined vertical markets or to companies with revenues that fall within a certain range (i.e. the ‘mid-market’). I say ‘mid-market’ accounts because with our technology clients this is a common channel segmentation. What is a mid-market account, you ask? Bingo. There are a variety of definitions of what revenue range defines a mid-market company, depending on whom you’re speaking with. This also holds true if you limit your channel partners to certain industries. It can be very confusing and a source of conflict if not clearly defined.  When a company has a direct sales force in the market, as well as channel partners, it is important to map out target account criterion VERY carefully and make clear definitions that all parties understand and agree to.

Scenario B: “We Have a Named Accounts List”
A named accounts list is made up of companies selected by the provider for their direct sales team to focus on. While a named accounts list is more specific than what I outlined in Scenario A, it’s important to reassess this list OFTEN and communicate updates with your channel partners.  When prospect companies grow, merge or get acquired, providers may elect to move a prospective company that was previously available to channel partners to the named account list—sometimes right out from under the nose of the channel partner.  I’ve seen it happen and the result is frustration and distrust from your VARs.  The worst I’ve seen is when a VAR is in pitching a solution to a prospect and the provider determines that they should be on the named accounts list and steps in to take the sale. If you want to destroy your channel, this is how you do it.

Scenario C:  “Our Channel Partners Only Sell Certain Products”
Another channel segmentation strategy is to have channel partners sell specific products.  This too can be implemented in a variety of ways, from partners selling less expensive or complex solutions to the complete opposite—specialized resellers focused only on delivering the most complex solutions to niche markets.  This strategy falls down when a partner wants (and has the opportunity) to extend the sale beyond the products they sell.  It would benefit both the VAR and the provider to work together to make this happen, but all too often it just doesn’t.  A variety of things can occur, for example: 1) the VAR doesn’t want to bring the provider into their account, so they don’t extend the sale outside of their product offering; 2) if the VAR brings the provider into the deal, the provider takes over and creates confusion with the customer; and another worst case scenario, 3) the provider takes over the deal—maybe giving the VAR a spiff for the lead, or maybe not. Unfortunately, I’ve seen all of these things happen. That being said, I’ve also seen the model partnerships where providers support the VAR and work together to close the deal.  It varies greatly depending on the parties involved.  If the strategy is segmentation by product, you’ll want to structure the program—and the incentives—so that everyone wins and bad behavior is not endorsed.

So, What’s Your Segmentation Plan?
If you’re going to have channel partners, as well as a direct sales team, you will need to somehow segment your target market and create a go-to-market strategy that includes both. If you don’t, you’ll have your channel partners competing against your direct reps, which can create confusion in the market and resentment with your channel partners—everyone loses. Of the three scenarios I discussed, as well as the others that may be out there, there is really no preferred way to do this.  What’s important is that you understand the strengths, capabilities and potential of all channels to market and then create a strategy that leverages those abilities as effectively as possible and best meets the needs of your customers. The secret sauce to making your channel strategy work is to be mindful in how you decide to focus your channel and your direct efforts— think it through very carefully. I also tell people to reassess it often because as your VAR partners mature, your technology and solutions evolve and your market’s needs change, the strategy you have in place may no longer be what’s best for your business. If you reassess often, you can make smaller adjustments to your strategy vs. a large overhaul that not only requires more money and effort to fix, but will have negative impact on your revenues.
 
One last point: after you have carefully thought through your approach, completed your research, documented the plan and are ready to roll it out, REMEMBER that communication is critical to your success. However you decide to communicate the structure to your sales teams and channel partners, make sure the message gets through, whatever it takes. If everyone isn’t clear, you will most likely sabotage your own best effort and that can be incredibly difficult to overcome. 

NEXT POST: Who Owns Demand Generation?