Most high-tech manufacturers establish channel partnerships that provide an important route-to-market for the mid-market or small-business segments. These partnerships help manufacturers reach key customers in geographies that are often difficult to cover with direct channels. Unfortunately, many manufacturers who choose this strategy are struggling with a challenge that I call “channel laziness.” Channel partners who manufacturers count on to both acquire and grow customer relationships are not achieving expected productivity levels and are reluctant to invest in new sales and marketing capabilities. This reluctance and, in some cases, ambivalence regarding high-tech manufacturers’ efforts to enable improved partner performance leads to high sales costs, missed opportunities and stagnant growth.
Channel laziness comes about when channel partners are content to capture demand created by manufacturers instead of investing to create new opportunities independently. Frustrated channel managers refer to such partners as “order takers” or “box pushers” who never seem to focus enough energy on new customer acquisition or the expansion of customer relationships through cross-selling. The partners are too comfortable selling old, legacy products to their existing customer base. They become overly dependent on high-tech companies’ support and are a perpetual drain on resources.
Here are three common causes of channel laziness:
- Over-investment in sales and marketing support: Often when high-tech manufacturers set out to build and grow an indirect channel, they invest in support (aka people) to jumpstart it. The marketing department provides qualified leads to partners, and channel sales reps support partners on sales calls. They provide this support thinking that it's temporary. They believe that eventually partners will be self-sufficient after they experience success and resources can be redirected to other endeavors. Unfortunately, too often the support becomes a permanent fixture because partners have little incentive to invest in new sales and marketing capabilities when the channel is up and running.
- Ineffective channel enablement programs: Manufacturers often invest in detailed training and certification programs for partners with the hope that by teaching partners “how to fish,” they will eventually choose to fish for themselves. They provide sales tools, such as sales and marketing collateral and demos, to partners to support their sales and marketing teams. Some manufacturers even provide funding to help partners develop their own marketing and sales tools. Unfortunately, many manufacturers are disappointed by the impact that these programs have on channel performance. They find that some channel partners don't take advantage of these investments. Some manufacturers choose to require partners to participate in training and achieve a certification to get certain program benefits.
However, when partners are required to make an investment to participate in this training, particularly when tech companies charge a fee for the training in an attempt to recoup their costs, many partners find that the ROI isn’t worth it. They don’t believe the training will actually help them sell more, and the program benefits they receive as an incentive for participation are not valued.
- Sales incentives and compensation plans that reinforce bad behaviors: Understandably, many tech manufacturers are very concerned about channel conflict when they create an indirect channel. A common approach to mitigate risk associated with this conflict is to introduce a “channel-neutral” compensation plan in which tech company sales reps receive the same credit for sales that they make directly and sales that they generate with partners. While such plans do minimize channel conflict, they can sometimes have an unfortunate consequence. Often, channel neutral compensation plans lead sales reps to cling to their direct selling instincts. There's little incentive for reps to push partners to sell autonomously, and they’re often reluctant to do so for fear of losing sales. They choose to co-sell with partners, even in situations where partners should be able to manage the sales process with little support. This mode of engagement can create a reinforcing dynamic with channel partners who choose to default to requesting support for every sales opportunity. If a manufacturer sales rep is willing to ride shotgun on every deal, why invest in sales resources to carry the load?
Now that we’ve explored the causes of channel laziness, the question remains: How do high-tech manufacturers address the issue head-on? In my next Tech Bytes blog, I’ll offer best practices for breaking the cycle.