| I run into many folks who try to grasp the | | | | means that not only do companies who sell |
| difference between managing a sales team that is | | | | through the channel need to understand what |
| selling direct to customers versus a team that is | | | | they have on hand, but they also have to |
| focused on selling through a partner network or | | | | understand what their partners have on hand to |
| two tier distribution model. The list below is not | | | | accurately recognize revenue. Given all the new |
| exhaustive, but it is a good place to start to | | | | reporting requirements for public companies, this is |
| understand how the models are different. | | | | no longer a "nice to have" but a must have for |
| First, the direct sales model is just as it sounds. I | | | | finance departments. |
| sell to you. You buy my product. Case closed. I | | | | Price Protection |
| manage all the inventory myself and have visibility | | | | Price Protection is another very sticky part of |
| to all stages of the sales process. | | | | channel sales management. Regularly, |
| In the indirect or channel model, I sell to a partner, | | | | manufacturers will introduce new products. As |
| who may sell to you, or I sell to a distributor, who | | | | they do, existing products will be discounted. If a |
| sells to a partner, who sells to you. In this case, | | | | distributor or reseller partner has bought the |
| the distributor or partner takes title to my goods | | | | goods at the old price, they are almost always |
| and can hold them in inventory. | | | | entitled to be "protected" against the decrease in |
| Unlike the direct sales model, I have limited or no | | | | cost. This makes understanding the inventory |
| visibility to stages in the sales process. I have | | | | situation mentioned above even more critical. |
| inventory scattered across the country and | | | | Special Pricing Requests |
| possibly the globe that I have to manage. I have | | | | Partners have the same needs and problems as |
| to sell partners on my value proposition and get | | | | direct sales team members. Many times they run |
| them to market my product over competitor's | | | | into a competitive situation or large volume deal |
| products they may carry in addition to marketing | | | | that requires some special pricing. If you have |
| to end users. | | | | 100s or 1,000s of partners, how do you manage |
| Here are just some of the complexities of | | | | this in a way that doesn't require hiring on a bunch |
| managing channel sales: | | | | of people to run pricing decisions to Sales VPs? |
| Sales Compensation | | | | Channel Spending |
| You have to pay your teams on partner sales. | | | | Good partners who support a manufacturer's |
| So, in essence, you are measuring your team on | | | | products expect support in return. Making co-op |
| how well the partners they work with are selling. | | | | or marketing development funds (MDF) available |
| There are many issues involved here, including | | | | to the very best partners is typically one way |
| getting partner sales data, getting POS data from | | | | companies show this support. Partners are |
| distributors, and making sure it is all complete and | | | | supposed to use these funds to create demand |
| accurate. Who you pay for a sale can be | | | | leads. There are two big management issues here. |
| problematic. Let's say a sale goes through a | | | | One is just getting, approving and budgeting these |
| partner in New York, but the end user customer | | | | requests. It is a huge undertaking. It never ceases |
| is in Connecticut. Inside sales worked with the end | | | | to amaze me how manual the process is for this |
| user, but the channel account manager worked | | | | in most companies, even those that are large. |
| with the partner. Who do you pay? When you | | | | The second issue here is understanding the |
| pay is also a potential problem. Do you pay on | | | | benefit of the spending. Understanding ROI by |
| sales in (God help you if you do) or sales out | | | | channel partner is critical to running effective |
| (sell-thru to end user). | | | | programs. I have yet to walk into a customer |
| Channel Conflict | | | | who has this handled properly. It is truly amazing |
| One version of channel conflict is preventing one | | | | that companies will spend hundreds of thousands |
| partner from stealing a deal another partner is | | | | or even millions per year supporting their channel |
| working. This is tough enough. If your company | | | | partners but not know whether it did any good |
| has direct sales or OEM sales teams in addition to | | | | on a partner by partner basis. Surprisingly, all it |
| indirect sales teams, this can make the potential | | | | takes is a good channel SFA/CRM solution and |
| for conflict even worse. | | | | good POS data. |
| Inventory Management | | | | For the uninitiated, hopefully this post has provided |
| Even though channel partners and distributors | | | | a primer for understanding some of the difficulties |
| take title to a company's goods, most of those | | | | in managing channel sales vs. sales in the direct |
| partners these days have the option to return | | | | model. |
| the goods within a certain amount of time. This | | | | |