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Opportunity Maximizers • Articles • The Channel Empowerment Solution

The typical reseller needs direction. Can you honestly say your company is providing it?

BY I. MARTIN JACKNIS

"Why aren't our resellers making their numbers? Our products are competitive, and we offer the most favorable terms in the industry. Our marketing studies show that demand is growing-so why aren't we getting our fair share?"

If you've asked yourself these questions recently, you can take some small comfort in the fact that your frustration is shared by manufacturers in numerous other industries. Despite significant investments in sales and marketing, many companies aren't getting acceptable results from their use of multiple channels of distribution. In fact, many multi-channel efforts end up failing, and these failures usually have nothing to do with discount schedules, co-op advertising allowances, or jazzy incentive programs.

There's also another reason resellers aren't more successful: Manufacturers - whether they're dealing with value-added resellers (VARs), wholesale distributors, manufacturers' reps, retailers, catalog houses, or any other avenue of distribution - would like resellers to behave like extensions of their own companies. They would like their product to be foremost in the reseller's mind - the first to be proposed and effectively communicated to potential customers. The thing is, while this type of relationship with resellers is possible, it doesn't happen that often.

IN SEARCH OF HARMONY
The real source of all these difficulties is that the manufacturer's and reseller's goals don't always match. It's not that they're pulling in opposite directions, necessarily, but they are pulling each other slightly off target.

For instance, most successful manufacturers have written vision and mission statements that are effectively communicated to their employees - particularly to their direct salespeople - but few of them share that vision with their resellers.

Naturally, employees who don't share their company's vision will look upon their employer as just another place to work and their efforts as just another job. Why, then, should we expect resellers to respond any differently in a similar situation? Resellers who haven't bought into their supplier's vision will look upon the manufacturer as one of many suppliers and consequently won't tie their long-term success to the achievement of mutual goals.

A secondary problem is that most manufacturers measure progress toward objectives in terms of market share and profitability. Since making use of other distribution channels in addition to their own sales force expands exposure, companies assume that maximizing exposure through a wide complement of distribution channels will logically increase the chances of success in achieving market share objectives.

However, this runs counter to the typical reseller's objective, which is to achieve profitability and relative share within its own market or defined niche. One way of accomplishing this is by offering multiple products from multiple suppliers. Why carry or promote one line of copiers, they reason, if carrying two or three lines increases the odds of a sale?

Viewed in this way, the conflict between these seemingly similar goals becomes clearer. Both sides share the same goal, but they're working in isolation, each one looking after its own interests - ultimately at the expense of the other. Unless the reseller becomes convinced that its success is directly related to that of the manufacturer, it won't go out of its way to promote the manufacturer's products.

Compounding all this conflict is the fact that many manufacturers tend to view resellers as the final destination for their products. They reinforce that attitude by totaling revenues and paying commissions when the products are shipped to the reseller rather than when they're sold to the end user. The manufacturer assumes that once the pallets are resting in the reseller's storage facility, the primary responsibility to move product into the hands of the customer lies with the reseller.

Resellers, on the other hand, look at the receipt of product as the beginning of the sales cycle, not the end. Their success is determined by moving goods out of their warehouse - not in. They want to know what the manufacturer is going to do to help generate new business for them - other than providing occasional lists of leads.

THE CUSTOMER IN COMMON
Most of the manufacturer's marketing energy is spent trying to understand the end user's buying criteria. What tends to be overlooked here is that it's also essential to understand the reseller's buying criteria-those factors that underlie its decision to resell your product. Again, the two sets of criteria aren't necessarily the same.

The manufacturer's research on maximizing its effectiveness in selling to end users rarely finds its way into the hands of resellers. Manufacturers assume that the reseller fully understands how best to match its product's differentiating characteristics to the end user's buying criteria. However, that's not always the case, since few resellers have the same resources and marketing know - how possessed by the manufacturer.

Research and information critical to effectively selling to end users rarely makes its way in any sort of usable form to the reseller's salespeople. Frequently, in fact, the reseller is trained only on product features and not on how to match a product's or a manufacturer's differentiating advantages (i.e., quality, technical support, aftermarket service, etc.) to the customer's buying criteria. Resellers are also likely to be in the dark about a product's latest applications. The result: lost opportunity and the perpetuation of a vicious cycle.

Conversely, the uneducated reseller is unable to provide the manufacturer with valuable feedback from the marketplace about product requirements and customer preferences. This information ends up being trapped within a reseller's organization-or lost entirely because the reseller isn't trained to identify it in the first place.

In short, manufacturers may teach resellers what their product does, but they don't teach them how to proactively search out applications, position the product relative to the competition, and sell it aggressively. Without this kind of coordinated effort, your product will end up being just one more item in the reseller's catalog, lost in that great void created by a lack of communication and shared purpose.

FOCUS ON BUSINESS GENERATION
The common denominator of any successful partnership is the effective execution of a mutually established business generation process. Simply put, instead of selling to resellers, manufacturers should focus their energies on selling through resellers.

The difference isn't just semantic. Such a strategy requires harnessing the efforts of both manufacturer and reseller to generate end user business, and then using this demand to pull product through the reseller channel. Here's an example of how this can work:

When the presidents of NAPA, the auto parts retailers association, and the fledgling Echlin Corp., a manufacturer of auto and truck parts, met in the 1930s to discuss the auto aftermarket, they envisioned skyrocketing demand for quality replacement parts as America embraced the automobile. They were also convinced that these parts would need to be delivered through a locally serviced distribution network that would satisfy the needs of both independent repair shops and retail customers wishing to fix their own cars.

Today, NAPA retailers purchase more than $200 million in product from Echlin, and the business continues to grow-all based on the shared vision of a promising market and a handshake agreement that took place 60 years ago.

Of course, it's not always this easy; discovering and developing a shared vision can be a long and arduous process. Still, establishing this bond is the necessary first step in securing a reseller's buy-in of a manufacturer's goals and objectives-and vice versa. When this finally happens, both parties benefit; the manufacturer becomes an integral part of the reseller's strategy and success, and the reseller taps into the manufacturer's energy and resources to jointly pursue new business opportunities. Once this has been accomplished, the manufacturer must then link and leverage all its sales, marketing, and operational resources-through the reseller - to the end user.

MUTUAL GOALS
Provident Mutual's pension services division, which sells pension investment management services both directly and through brokers, provides a good example of how leveraging resources through the reseller can reap big rewards. When Provident decided to fine-tune its target customer profiles in 1992, the company sat down and dissected the steps in the decision-making process of both its customers and its independent brokers (who resell the services of a number of financial services companies).

For each step of the end user's decision-making process, Provident identified the contribution made by each of its internal departments (i.e., marketing, credit, accounting, etc.). From this, a plan was developed to support each step of the decision process and to see what could be done at each step to help move the prospect to the next stage. This same basic analysis was applied to the brokers who serviced Provident's target market segment.

The company then used this knowledge when it contacted selected brokers and offered to share a new, systematic approach for appealing to targeted prospects. Working in tandem, Provident salespeople and brokers contacted the mutually selected prospects, acting as a unified team with a shared strategy and approach. Within 90 days, they closed $2 million in new business and created an additional backlog of $18 million in qualified prospects. By year's end, they had increased sales by 47% over the previous year-with 80% of their salespeople showing production gains-while the rest of the industry remained flat or declined.

As you can see, linking and leveraging resources creates formidable synergy in two ways. First, it combines efforts to match the product's differentiation to the end user's buying criteria. Second, it more effectively transfers marketing and sales information to support each step in the end user's decision-making process. The aim is to provide just the right amount of information - in the right format and at the right time-to move the decision-making process forward.

Apart from these fundamental applications, working in concert with resellers should also involve two other projects: 1) the creation of mutually sponsored business generation opportunities and events, and 2) the use of training to facilitate a joint business approach.

In terms of opportunities and events, jointly hosted seminars, position papers on topics of interest to potential clients, articles for regional trade publications, and speaking engagements aimed at targeted prospect groups can all help competitively differentiate the joint effort to reach end users. The reseller gains the weight and momentum of the manufacturer's prestige and expertise, while the manufacturer gains the active attention of prospects more qualified than those who respond to "bingo card" ads in industry trade journals.

As for training, manufacturers should provide the same training program for the reseller's sales force that they provide for their own. Beyond product features, resellers need to know how to identify applications for your product, capitalize on its differentiation, and focus on the target market. In other words, they need to be taught how to effectively manage opportunities for your targeted marketplace.

A manufacturer of hi-tech office products did just this when it used office products dealers to market its products in smaller cities not covered by its own direct sales force.

The manufacturer conducted the same training classes for its dealers' sales and support staff as it did for its own sales force. Much of the training focused on understanding how to identify and sell specific applications aimed at a clearly defined set of prospects. The manufacturer's product engineering, marketing, and support staffs were charged with supporting dealers with the same all-encompassing zeal normally reserved for their own direct salespeople. And because respective markets had already been clearly defined, there was little conflict between the manufacturer's direct sales force and the dealer's sales force.

The truth is, most resellers will be delighted to participate in a joint effort like this - and even defray the expense-if they've genuinely bought into the vision and objectives of your organization.

CHANNEL EMPOWERMENT
Is your company doing everything it should to help resellers in your various distribution channels? Are you giving them the training and tools they need to differentiate your organization and your company's products? And most important of all: Do they share your company's strategic vision?

Perhaps a reassessment of your current strategies, allocation of resources, and approach to distribution channels is in order. Now is as good a time as any to reexamine and challenge the assumptions underlying this function. Naturally, you'll need to figure out how you're going to ensure reseller buy-in to your organization's vision. But before you do that, ask yourself whether you have one they'll buy into.

Where do you start? The checklist below will give you an indication of the current state of health of your reseller channel(s). If your responses are more negative than positive, immediate attention is required. Even if your organization scores well, a reanalysis of your channel strategies, tactics, and operations is probably a good idea if you want to sustain momentum. The checklist will point out the problem areas. The next step is yours.

A CHANNEN EMPOWERMENT CHECKLIST
Ask yourself the following questions concerning your own organization:
  1. Do I have a clear and factual assessment of how my organization and products are viewed by current and proposed channels?
  2. Do I know the optimum mix of channels and the reseller candidates in each channel?
  3. Does my incentive and reward system reinforce a common vision and objectives with my resellers?
  4. Do my organization and product line have competitive differences that will motivate resellers to make selling my products a top priority?
  5. Does my organization make a conscious effort to avoid competition between channels and/or with my direct sales force?
  6. Does my organization have a well-researched and effective business generation plan addressing the top priorities of resellers?
  7. Does my sales and marketing staff have the skills necessary to successfully execute that business generation plan?
  8. Is my organization working in concert with my resellers to mutually gain and maintain competitive advantage?
  9. Does my sales and marketing team have a clear understanding of the reseller's buying priorities and decision-making process?
  10. Am I successfully retaining/growing my top producing resellers?
  11. Are current marginal resellers costing me too much to support?
  12. Am I able to attract the new resellers I'd like to do business with?
Then ask yourself the following questions about your resellers:
  1. Do the resellers' sales and marketing teams possess a clearly defined profile of their market and a clear picture of their customers' decisionmaking process?
  2. Do my resellers have a sales and marketing team trained to effectively address customer needs?
  3. Do my resellers have an effective business generation plan clearly focused on their clients' high priority needs and wants for my products?


© Opportunity Maximizers