In a recent blog interview, Braham Shnider from Channel Enablers makes some good points as to why running the channel is harder than direct selling —and from my own experience I couldn’t agree more. 

I’ve personally run direct sales, channel sales, and combinations of the two. With direct sales, I controlled the resources and could hire, fire, promote and most importantly, compensate as needed.  In addition, I had real-time data on how we were performing in every region and could make timely adjustments as needed (add coverage, change resources, redeploy, etc.).  Finally, I could put significant pressure on the reps to deliver at quarter-end.  Unfortunately, the channel just didn’t share the same sense of urgency.

But running the channel doesn’t have to be more difficult. As more timely and accurate data has become available, channel managers are now finding they can address some of the same challenges faced by their direct sales peers.  

Performance-based incentive programs are one of the keys to establishing more of a “direct sales” driven approach.  Another approach is peer rankings.  Ranking partners based on their performance vs. an unnamed peer group is a powerful motivator—just as comparing a sales reps performance to their peers is critical to getting the most out of a sales team.  Timely scorecards, containing metrics such as actual performance vs. peer averages and year-over-year growth vs. peers, used as part of a periodic partner performance review can significantly influence performance—just as performance ranking does for direct sales.

 Future posts will discuss more examples of direct-selling best practices being applied to the channel.

In a recent interview, Meaghan Kelly, Vice President of Channel Strategy and SMB at HP, provided a great perspective about the sheer magnitude of the SMB marketplace and why the channel is the only way to reach it: 

“Globally 95 percent of all private companies have fewer than 500 employees. Well over half of the world’s employed individuals work in the SMB sector.  In the U.S. alone, there are 12.5 million small businesses and most of them don’t have the appropriate IT knowledge, expertise or infrastructure and are looking at trusted advisors to help manage their IT… For HP products in the U.S., SMBs represent a $57 billion opportunity.  We have 20 percent market share and want to get a big slice of the other 80 percent.”

We believe the only way to find these “trusted advisors” to small business—the VARs who truly reach the SMB market—is to understand your channel partners’ actual sales history all the way through to the end-customer.  Instead of relying on what the channel partner says they do, look at what their sales history tells you. Find the partners who have been successful reaching the other 95 percent instead of recruiting the partners who are selling to the same 5 percent that your direct sales team is selling to.  You can only do this by collecting POS data that includes the end-customer data and then processing it to identify every customer that was sold to— not just the clients that are on your strategic account list.

Channel inventory is the foundation of high tech products distribution. Having the right products in the right places at the right time and price can mean sales growth, improved margins, and satisfied customers. Conversely, a channel burdened by obsolete and excess inventory, or product that is incorrectly staged to meet sales needs and promotions, prevents vendors from effectively capitalizing on market opportunities, while driving up costs across the channel. Without real-time channel inventory visibility, companies risk gray market leakage and lost revenue.

As I talk to customers, it is clear that it’s not enough to simply manage where products are currently located. The most successful of them view channel inventory as a competitive weapon.  After all, if a customer asks for your product and it’s out of stock they don’t wait for it to be replenished, they take whatever competitor’s product that is currently available.

The rub, of course, is having real-time channel inventory visibility and the tools to understand what it means.  To solve the channel inventory shell game, you must be able to:

• Collect accurate inventory information from your partners.
• Turn collected data into insight quickly.  Hours, not days, should be your target.
• Calculate expected inventory balances for each partner location and compare to reported balances.  Variances can point to gray market activity.
• Management dashboards that alert on over and under balance conditions as compared to targets and sales trends.

Best in Class channel inventory performers have a strategy, tools and processes for each of these elements.  Do you?

You’ve got to love the world of channels.

In the 2010 State of Partnering study conducted by Amazon Consulting, pay-for-performance incentive programs are the second highest investment priority for vendors behind increasing partner facing staff:

“Pay-for-performance incentives and variable cost programs rank a strong second behind people as having the highest value. These include tiered reselling discounts, deal registration program incentives and performance incentives or rebates.”  

What’s the alternative to pay for performance—paying for “non-performance” or how about paying for “the promise of performance”? Neither option sounds good but due to the limited availability of data it’s what channel leaders are often inadvertently doing.

Performance-based execution within the channel is what Channel Performance Optimization is all about—providing the channel with consistent, complete, and reliable data is the key to effectively running and measuring performance-based programs.  With timely performance data you can work with the channel, just as you do with your direct sales team, to make mid-course corrections and truly accomplish the goal of the incentive and encourage the behavior that increases sales.

You would never consider paying for something other than performance with your direct sales team.  Why would you consider it within your distribution channel?

Bill McDermott, Co-CEO at SAP, made an interesting statement at the recent Sapphire Conference:

“The volume of data in the world doubles every 18 months. The opportunity of the century is to create insights out of all this data…”

Are you prepared for a doubling of your channel data? Your sales team is already spending too much time managing data and searching for information vs. selling.  How much more can manual processes absorb?

The “opportunity of the century” is creating insights out of this data—not in managing the data.