Companies choosing when and how to enter a new market or grow their share in an existing market require a well-thought-out plan to ensure that the right partners are recruited and retained; and that they will get the desired return on their investment.
There are a number of factors that have to be taken into consideration before making this investment. First, you cannot assume that what is working in one market will work in another. Second, you need to know if the partner you invest in is open to a cooperative and collaborative relationship. Additionally, with existing markets and territories it is essential to stay close to the end users to understand their on-going and future needs.
Most channel partners have limited capability in marketing. They are often pretty good at selling and responding to leads provided by the vendor, but they fall short when it comes to marketing their businesses, creating a presence in the market, and building a sales funnel.
The vendor who helps their channel partners grow their businesses wins. By identifying specific strengths of the channel partner, vendors can allocate Market Development Funds (MDF) in the most effective way to leverage this to a mutually beneficial effect.
Combating Fraud and MDF Misuse
There are many channel partners who “feed off” vendors and apply the MDF to their bottom line, which offers no value to the vendor. In most cases channel partners are now required to demonstrate how the MDF is to be applied, and often, the vendor will directly fund the activity rather than just provide the channel partner with a sum of money. This has significantly changed the behavior of channel partners to be more proactive, and it has helped vendors identify those partners who are truly looking for a collaborative partnership. Today, most vendors review how they allocate their MDF to ensure it is used to grow mutual business.
An example of this is where a major IT provider identified that one of its mid-size channel partners had a very effective new business sales team performing way above expectations. The IT company decided to reallocate MDF from other similar, less effective partners to improving the people, processes and technology in the high-performing partner. The latter became one of its largest partners in Europe and “brand loyal” to the vendor, so it was very much Win-Win.
Many vendors now outsource this part of their business to companies who specialize in providing intelligence around the allocation of MDF and offer services to manage this on the vendor’s behalf.
Improve Marketing Efforts for Channel Partners
Marketing is one area where the vendor, as the subject matter expert, can shine when it comes to helping partners grow their businesses.
Effective channel strategies are those that enable your partners to succeed. They include:
- Identifying best practices. What’s working well and what is not. Vendors should be sharing this with their partners and replicating this throughout the channel.
- Consistent messaging. Provide the content either in raw format that they can incorporate into their delivery mechanism, or as finished co-branded pieces.
- Content Delivery Infrastructure. Enable your partners with comprehensive programs, based on your best practices and their local or market knowledge, which take your content to their customers and prospects.
When moving into new markets it is essential to evaluate the market potential. Look at factors such as size and growth, competitive landscape, your ability to succeed, and potential partners. Also, consider some key questions such as:
- What’s the size of the market today?
- How fast is it growing?
- Who are the competitors?
- Who are the major players from a vendor or channel perspective?
- How can we differentiate?
- What type of partners do we need to succeed?
By carrying out a gap analysis, you can identify areas where you require:
- More coverage
- Product expertise
- Vertical market expertise
- Geographic presence
Selecting the right partner is essential based on the type of channel you want to operate. Miller Heiman’s Channel Success Essentials program includes templates and processes to guide partner selection based on the ‘ideal partner’
It may be that you need a specific type of channel partner or a mix of channel partner types based on your portfolio. For example, if you have a mix of high value and commodity solutions, you may require some “joint venture” partners who can add real value and help complete the “whole-product” of high value solutions” as well as some more operational partners to fulfil the demand at the commodity end.
Source: Miller Heiman’s Channel Partner ManagementSM program
- Create a mutually agreed upon plan.
- Focus activities on achieving your mutually agreed upon plan.
- Share knowledge and best practices with the partners and help them focus on success.
- Make sure partners focus maximum effort on being successful.
- Agree on clear timelines for investment programs.
- Develop programs to support your partner in selling through their Sales Funnel.
- Measure ROI in terms of contribution to the plan.
- Map consequences of marketing activities through the process.
By adopting this approach you can have an effective investment strategy that delivers results to both you and the partner. With that in mind it’s important that you measure return on investment (ROI). This in itself can be challenging and many vendors outsource their whole MDF programs.
It is important that vendors understand the partner’s sales process and can offer support and investment programs to support partner activities at each stage of the sales funnel.
Author: Mike Whittaker
Mike is CEO-Owner of Perspective Change – a UK based specialist sales consulting and training firm and Miller Heiman partner. Mike has experience working both within the vendor managing a channel and also as the SVP of a company working as a channel partner for a number of major ICT vendors where he revamped and refocused the solution portfolio to address their changing market.On becoming CEO of their web services company, Mike set up partnerships with a number of major software vendors to leverage the expertise of his company to help the vendors grow market share in specific vertical sectors.