The Plexus Channel Strategy Framework
At Plexus we can deliver all of your IT channel marketing needs, but unlike many agencies we have an in depth knowledge of IT channel go-to-market strategy, so we can help you with everything from business development, partner selection and on-boarding through to sector specific campaigns.
In our last IT channel article, we looked at the challenges for a new or growing IT vendor in gaining mindshare within the traditional 2-tier channel model, which is so heavily dominated by the technology giants. This time we are switching gears to give you an overview of The Plexus Channel Strategy Framework which is a model designed to guide vendors to success in the channel based on our decades of practical experience.
The IT Channel can provide the ultimate extended sales force, but for many vendors the experience can be a frustrating one
Unless you are planning to hire a huge global direct sales team the IT channel is the obvious route to gain an army of sales people across the geographic regions and markets that you wish to serve. When the channel is working well it can provide the perfect vehicle to grow your business, however for many vendors the path to channel success can be a rocky one with many never reaching the business outcomes they had hoped for. In adopting the IT channel as a route to market you are essentially having to align your business model and modes of operation with that of an external organisiation, who may have very different business practices and objectives which could be in conflict to your own business goals.
In order to navigate the complexities of channel engagement we developed the Plexus Channel Strategy Framework which focuses on 5 key areas of channel engagement with the intention of surfacing any barriers to channel success. Our framework can be applied to any route to market whether that be a distributor, reseller partner or an OEM customer. Like any business strategy framework its usefulness will rely on the accuracy of the information gathered regarding the business environment, with regular reassessments being a key to continued success. No strategy framework offers all the answers to a complex engagement but our model sets out to challenge assumptions and set in place points of reference that are so easily overlooked in many IT channel partnerships.
Let us now look at the 5 keys areas of the Plexus Channel Strategy Framework and some of the questions that need to be answered to give your channel strategy the best chance of success.
1. Internal Business Alignment Factors critical to Go-To-Market Success
The starting point and core of The Plexus Channel Strategy Framework looks at alignment of key sales leadership and business management functions to ensure that outcomes such as revenue goals, compensation plans, training requirements and target markets are agreed and facilitated at the highest level. We have seen many examples where a channel engagement has failed to meet revenue expectations simply because the distribution or reseller sales team were operating under a compensation scheme that did not recognise product sales from the vendor. Having the correct incentives to sell is paramount for channel success and it is often overlooked. We see this regularly when a smaller vendor attempts to form an alliance plan with a tier one manufacturer only to find that the channel sales team are not incentivised in any way for products included in a sale that are outside of the tier 1 vendor’s price list. This is just one type of barrier we regularly surface during the Internal Alignment assessment, other key actions and areas for consideration include
- Performing stakeholder analysis and mapping
- Identify product champions
- Establish peer-to-peer executive alignments
- Establish and agree revenue targets
- Determine structure of sales force compensation plans to gauge motivation to sell
- Surface tensions that may hinder proactive selling
- Identify training needs and plan delivery
- Develop trust through demonstrating commitment to joint initiatives
- Regularly review the relationship trust cycle through peer-to-peer engagements and proactive communications
2. External Competition
Within this section of the framework we focus on the competitive solutions addressing the markets that our go-to-market partners are planning to sell into. The outcome of this analysis should determine if we need to do anything to improve our product messaging to ensure our channel partners can demonstrate a competitive advantage by offering our products to their customers. There are several parts to this. Firstly, we need to understand who the purchase decision makers are likely to be for our products and what each of these personas will be trying to solve through our solutions, more on this later. In addition, we need to analyse our competition and in particular the alternative vendors that our channel partners do not carry within their line card. We must ensure we have provided the best competitive sales tools to help them win with our solutions. Branding can play a very big part here, especially for a relatively new vendor who has not yet set in place an effective end user demand generation plan. Branding is a massively important area that many new vendors fail to address sufficiently. Even if we are looking at an OEM agreement rather than a pure channel play we still need to articulate ways in which our products can strengthen the core values of an OEM partners brand. Some key actions and areas for consideration within this section of the framework include
- Identify the partners market segment(s) and their key competitors
- Develop messaging and sales tools to assist the partner in establishing competitive advantage through our product offerings
- Continuously monitor the competitive environment with the partner to determine necessary changes to positioning strategy
- If the partner has branded our product determine the core values behind their brand identity
- Look for synergies that will enable our offering to further strengthen their brand values and co-develop appropriate messaging
- Perform brand contact audits with customers
- Create joint marketing communications plans based on brand audit results
3. Internal Competition
In many cases we will find that our channel partner does carry one or more of our competitors on their line card. In this instance we need to be strategic in our approach to ensure that we fully understand the history, current status and future direction of our channel partner’s relationship with our competitors. For example, if the channel partner has a long established and healthy ongoing relationship with a competitor and we have been taken on-board to simply provide a second source for their customers, then we probably do not want to run a sales floor day handing out damning leaflets and attempting to upstage any SPIFF programs our competitors may be running. Competitor relationships need to be discussed within stage one of our framework to avoid misunderstandings and internal conflict. The best strategy will invariably be to focus on training the partner in a value selling approach for your products to position them where they will provide greater value to the customer’s solution. If you are a smaller vendor with what appears at first glance to be a like-for-like solution you will most likely lose a price match against that larger incumbent vendor. However, you may find you have been taken on-board as the new golden child to displace an incumbent who are failing to meet expectations, in which case the gloves can come off. Key actions during this analysis will include:
- Identification of incumbent line card competitors
- Determine the channel partners long term strategy in relation to incumbent competitors and their current/future expected % contribution to overall revenue
- Develop sales tools and training to educate sales teams of your solution value positioning against incumbents and longer term ROI for end users
- Build trust through demonstrated commitment to joint initiatives. Start small, deliver, and build towards seamless relationship marketing
- For incumbents that form part the of the customers ongoing strategy develop covert messaging that presents superior values without creating conflict
- Ensure sales teams are compensated correctly to sell your products
- Use MDF as required to create incentive programs
4. Vendor Alliances
Forming a technology alliance can be an excellent way to gain pull through for your products, especially if you are aligning with a well-established market leader who contribute a major portion of your channel partner’s revenue. However, vendor alliances are a complex area worthy of a dedicated article as many of the Internal Alignment factors listed in section 1 come into play, there is always a high risk that you will expend a lot of resources into an alliance project for very little return. It comes as no surprise then that many vendors invest in an alliances management team. For the best chance of alliance success your product needs to offer a unique and valuable customer solution that provides your alliance partner with incremental sales opportunities. This could be achieved in several ways such as allowing entrance into new vertical markets, providing cross sell and up sell opportunities, or enabling the solution to integrate with additional technologies. Again the key to success is having a unique proposition that provides value to the end customer. If your solution merely provides the same add-on functionality as can be found from several other vendors, then you could very well spend months if not years trying to convince a technology partner to use their internal resources to add you to their qualified solutions matrix. Even if the certification process appears to be a trivial undertaking you may struggle to gain any executive level buy-in to commit their stretched resources to complete your certification. Vendor alliances is a broad topic but initial actions should include the following:
- Identify all external suppliers, ISV, IHV and also customer in-house product developments
- Look for synergies to create added value through supplier collaboration relevant to end user needs
- Look for suppliers who contribute significantly to the partners % of revenue who we may utilise to facilitate pull-through for our products
- Consider joint messaging and collaborative sales tools with partners
5. End Customer Focus
In our earlier article we spoke about the importance of gaining brand recognition and driving end user demand as a new vendor who does not yet have the clout of a tier 1 vendor in the IT channel. In order to deliver an effective message that will drive end users to seek out a way to evaluate and hopefully purchase your solution, a wide range of things need to align. Firstly, you need to ensure that your product or service provides a solution to a problem which they recognise as being strategically important to their business. We see so many vendors who have developed a wonderful solution to a problem very few people have. Next you need to identify what job functions will form part of the decision making unit (DMU) responsible for selecting the type of technology solution you are offering. Each member of the DMU will have different needs so your messaging needs to cover all bases. With Cloud based and as-a-service models, technology is no longer the exclusive realm of the IT department, so you will need an in depth understanding of the customer’s market environment, the DMU personas and the problems they are each trying to solve. Even if you are not an expert in a particular vertical market with a little research you can start to develop content that uses the ‘language’ of that sector, and if you then start to reference industry events that have specific relevance to the solutions you provide, or quote from relevant analyst reports you will start to gain recognition for your brand as a very viable provider for that vertical market. Of course, if you can align with a channel partner that has expertise within a specific vertical sector all the better, but in most cases you will need to do the heavy lifting yourself at the beginning.
- Identify vertical markets addressed by your channel partners, or markets where you believe you solutions can offer great value
- For each market identify buyer personas and their needs and any recent compelling events in that sector
- Consider how your product can address the needs of identified buyer personas in a differentiated way that will reset their thinking and bring your brand to the table as a new and very viable solution provider
- Determine opportunities for collaborative end user messaging with your channel partner
- Brainstorm possibilities for vendor alliances to create unique value and competitive advantage in solving end user risks
This article is longer than we would typically set out for our blog section but hopefully if you have reached this far you have a vested interest in the IT channel. If any of the issues highlighted above resonate with your recent or current IT channel experience, then please get in touch. Hopefully we can offer some ideas or resources to keep you on the right track to IT channel success.