Odds are that your indirect channel underperforms
And there's nothing you're going to do to change it!
Philosophy and expectations for the role are often fundamentally different - and no number of excel spreadsheets and rah rah meetings are going to overcome the differences.
But you talk frequently you say? Great, but these problems are structural. They often see each other and themselves differently than the other - and even a bit disconnected from reality.
The original function of industrial sales channel
When we talk about the situation today it's easy to forget how, when and why indirect sales channel came to be.
Manufacturers going to market had to find prospects, share information, close deals, manage projects, implement solutions and service them. It all had to be done locally - belly button to belly button - across a huge expanse of time and space.
Indirect sales channel had relationships with local buyers. They were the conduit for uncovering need, creating projects, selling deals, putting solutions in place and servicing buyers over the long-term. They were a proxy for manufacturers when there was no way for manufacturers to interact directly with buyers at scale.
Is now largely irrelevant
Of course that has changed. It's almost absurd to even note the fact. Today buyers research globally, working to understand their challenges and searching for solutions. Then they often interact with manufacturers directly.
As the cost of distance falls, distributing products quickly to even remote locations is logistically feasible.
Technology for remote monitoring, diagnostics and repair - combined with video conferencing have made remote support eminently feasible while the reliability and durability of products has increased diminishing the frequency of need.
So many of the premises for industrial sales channel are now obsolete.
What's not, however, is the truth that people do business with people. And everyone who has access to voluminous information still craves critical insights. These are opportunities for sales channel, but are often squandered by folks who distribute line cards and rely on manufacturers to create leads.
If you want a deeper dive into who wins in this scenario, I provide one in this video. Spoiler alert - it's not solved by position in the distribution supply chain, but rather by savvy!)
But you sell through channel
Most companies can't simply abandon their existing structure. In many cases indirect channel accounts for a large portion of their revenue; they may have contracts in place; and they have loyalty to firms that have helped them grow.
Nothing says you have to simply throw all that away. However, you need to adapt it.
There are a number of important steps which include technology (such as PRM or Partner Relationship Management software and others that I discuss in this video), but philosophical alignment with a gradually upgraded channel is the foundation. And achieving that means looking more comprehensively at what you expect channel to provide - and what you offer in exchange.
Only this will allow you to create the ideal channel profile against which you measure current and potential partners for long term fit and the business plan which will drive mutual success.
Business functions - which are up to channel?
I've spent enough years in all phases of industrial channel (distribution, manufacturer, agent, consultant) to know that the default perceptions are consistent. Manufacturers generally views channel as opportunistic - eager to collect commission for as little work as possible. Channel views manufacturers as aloof, disconnected, and inadequately supportive.
But in few cases are expectations outlined beyond revenue targets! How could they possibly be aligned? Assumptions torpedo most indirect sales efforts.
For example, how many manufacturer/channel relationships are built on business plans? Few. Often there's only a multi-page legal agreement. And how many reflect today's market realities?
Consider the steps in revenue growth. How many of these are discussed, much less planned, between manufacturers and channel?
- Demand generation - awareness, new applications
- Insight creation and publication
- Lead generation
- Lead management
- Project management
- Reporting, analytics, technology and improvement
- Sales process
- Sales methodology
- Sales transaction and credit risk
- Implementation/installation/commissioning
- Warranty
- Training
- Service
- Loyalty and repeat orders
In my experience in the industrial manufacturing space there's a bit of discussion around:
- lead gen when the manufacturer passes some along
- lead management when there's no feedback
- reporting on quarterly or annual sales forecasts
- installation & training when something is sold
- service when there's a problem
These are almost always ad hoc discussions as opposed to part of an overall framework. Expectations of both parties are almost always based on assumptions rather than explicit discussion and agreement based on mutual business goals. What kind of productive relationship is built on assumptions?
It starts with the manufacturer
There are great sales channel partners out there. And some of the best are new firms with a more customer aligned focus and comfort with technology.
They're looking for top manufacturers with whom they can partner (or in some cases weak ones where they can basically run free.) That's a problem for many traditional industrial manufacturers who have not only fully explored the list of functions above with their sales channel - but in many cases haven't fully developed it themselves!
The bottom line is that indirect sales channel can and should be very effective. The relationship between channel and manufacturers should be strong and mutually beneficial. That only happens, however, when it's viewed in a large strategic context, explicitly designed and then updated.
Most prefer to just keep it as is and complain about it...
I'll be digging into this deeper today (8 May, 2018) at the Industry Week Manufacturing and Technology Show in Raleigh, NC where I'll be presenting a workshop with the team from LogicBay - a PRM SaaS tool which companies use to optimize their sales channel operations.
