Written by Daniel Tautges @danieltautges
CEO – Pinpoint Worldwide
“If you save your breath I feel a man like you can manage it. And if you don’t manage it, you’ll die. Only slowly, very slowly old friend.”
I started my career working in the channel, in sales and management at mega-large industrial distributors. Later in my career I succeeding in creating global OEM and Reseller agreements that led to 10’s of millions of dollars in new business and dream exits for early stage technology businesses. This experience set a foundation in how I think about the channel and how I have been able to build the good, while managing the bad, and avoiding the ugly.
“There are two kinds of people in the world those with guns and those that dig. You dig?
Whether OEM, Distribution, VAR, or Representative Sales, Channels and Partners should be part of the total selling strategy. I have created channel relationships with some of the largest technology companies in the world, brand names like HP, IBM, BMC, Cisco, CA, Ericsson, BT, AT&T and NTT. The good is that the channel can be a huge contributor your business and provide scalable revenue growth.
Good OEM relationships are characterized by the OEM owning the end customer relationship, Cx, and 1st and 2nd level support. In OEM deals, typically your product becomes a component of a much larger solution. OEM relationships can be a great way to build technology while building revenue. OEM’s providing a funding source for your R&D. OEM’s are also a direct source to market, to gain insight into customer personas, and without the direct sales overhead expense.
Good Distribution/VAR relationships are typically not white label, like OEM, and require more pull through marketing to build channel demand. Examples of VAR/Distributors are companies like Avnet, Arrow, Gaybar, and Anixter. They expect you to drive market demand and the VAR’s to deliver your product by attaching their service or compliment products. A great VAR relationship can greatly reduce the cost of sales and provide access to global and vertical markets without building out local facilities. Global Distributors are now hybrids that provide VAR like services while maintaining their traditional value, maintaining inventory, and providing credit.
Good Selling Representative channels are typically successful when there are individual’s or groups of people who are highly connected with your target customer. I have been the most successful with these when opening international or geographic markets. The Rep is independent and maintains the selling relationship with the customer. The company supports the product and provides the terms of the sale and finance.
“..but you know the pity is when I’m paid, I always follow my job through. You know that.”
The bad part about building a channel strategy is getting started and then executing. Building the right channel model, legal contracts, selling tools/CRM and branded marketing collateral is time consuming and can be costly. Pricing models, localization, product support, sales overlays, and supporting assigned teams all require resources.
There are several bad challenges that can delay or derail a channel plan. Including:
- Building enough interest in the market so that there is demand.
- Developing the right relationships that will deliver results is often difficult to predict.
- Going global through channels before penetrating the domestic market can dilute cash resources.
Understanding how best to channel the product requires experience. Make sure that the effort doesn’t turn ugly.
“If you want to shoot, shoot, don’t talk…
The ugly is when the channel strategy goes wrong. The OEM’s are not interested. The VAR’s and Reps commit to penetration and account exposure but are not delivering. Tools, Marketing, and Ops expenses have been spent but there is little revenue to show for the time and cost.
I have been in these situations as part of my consulting practice and was able to move from ugly back to good by refocusing. What is typically wrong is that the channel partners picked the company vs. the company picking the channel partners. The partners were either easy to access by the company (came to them) or friends and associates that the leadership team supported. The most important thing to do to stay out of the ugly is to understand your market and focus your efforts on the channel partners (OEM’s Resellers, Reps) that will deliver value. Measure the effort, incentivize the results, and support their success. All huge factors in a good channel strategy.
So a sales channel can be good (it can be great), it can be bad (hard to do) or downright ugly. The lessons I have learned in building global channels are that like any approach there needs to be a solid plan, an understanding of the value of the product to the channel, measurements, structure to support, and the committed financial resources necessary to be successful.
If you would like to learn more about how I have built over $100M in channel business for technology companies while leading or consulting for global business’, please contact me at email@example.com or visit our website at http://www.pinpointworldwide.com.