How to Motivate Your Channel Partners to Contribute More to Your Bottomline

Given that China is such a large market, most companies will either rely 100% of their Chinese market sales efforts on a channel partner network (distributors, agents, resellers etc.), or have a hybrid of direct and partner sales networks. However, here are some of the channel partner challenges faced by many companies:

* Many channel partners tend to over-promise and under-deliver sales results, with some cases delivering no sales results despite the claims they made;

* Channel partners selling at the lowest possible prices, which at times may cause serious price under-cutting for your direct sales force, as well as for other partners;

* Channel partners have no loyalty towards their principals, i.e. they will only warm up to you when your products and services are well in-demand, and deliver optimal levels of profits, etc.

The actual list of challenges and complaints is much longer than this. These are but just some of the most common issues companies faced when managing a channel partner network.

To tackle the above problems, some companies in China have realised that a one-size-fits-all strategy to manage channel partners. Instead, successful companies in China have implemented Partner Relationship Management programmes to customise the ways to develop and motivate each of them to deliver the best results.

Selecting the Right Channel Partner

Traditionally, the criteria use by most companies to select channel partners is to look at their track record, i.e. does the channel partner has a good track record of delivering large volumes of sales revenue for your kind of products and services. However, using such simple metric to select channel partners will have some inherent flaws, such as:

* It is unclear if the sales revenue will translate into healthy sales margins,

* It is unclear if the same track record will be applicable to your kind of targeted customers; and

* It is unclear what strategies the potential channel partner to deliver results, and if such strategies match the way you do business

Hence, to have a clearer picture of what your potential channel partners are capable of, here are some suggestions for you to observe their sales strategies, i.e. how they sell, and if those strategies are a good fit for your products and customers. The 3 partner sales commonly identified are:

1. The Trader;

2. The "Mafia"; and

3. The Consultant

Traders are those who rely on high sales volume and high trade discounts. Besides yourself, they are also selling for a large number of other brands. They don't do much of the selling, relying on customers enquiries and quoting the relevant prices instead. Instead of advising customers what will be a better choice, they simply ask customers what brand or what budget they have. Most industrial parts, retail and travel services channel partners belong to this category.

"Mafia" here does not refer to people with organised crime background, but rather refers to channel partners who have generated lots of sales due to their very extensive personal networks. These end-customer networks in turn become loyal customers for the channel partner based on the relationship or "guanxi" they have. "Mafia" type channel partners specialise in products and services where the distinction between competitors aren't clear, BUT customers prefer to buy from someone they trust, lest something goes wrong after the sale. Channel partners who use the "mafia" sales strategy may invest substantial amount of time and resources in wining, dining and golfing as means to cultivate the relationship.

Consultants are those who help customers solve problems. Even when customers don't have problems, they'll somehow unearth one. Channel partners that are consultants tend to focus on complex products and services to solve complex problems for the customers, such as IT, infrastructure, engineering etc. There are the people who use the term "selling solutions" as their middle name. In some cases, channel partners who are pursue the consultant strategy may only carry a brand or a principal, such as some partners of SAP, Dell and Motorola.

Mapping Your Sales Strategies Accordingly

If you are a foreign company trying to penetrate a market filled with low-cost competitors like China's, chances are you'd either look for the "mafia"s with the right connections, or for the consultants who can add value that a local low-cost competitor couldn't. Unfortunately, most of the would-be channel partners you that are available in abundance are the traders, those who will let end-customers do their price shopping, and takes no effort to add value or provide good after-sales service.

Does that mean that the traders would have no value to you at all? Not really. If you are a new brand in town, or if you want to increase the market share of certain (new or strategic) products, here's what you can do:

* Give a special discount on that product that will be close or even beat the prices of low-cost competitors; AND

* Give attractive payouts to the traders who are taking on your products

Obviously, if you were to give huge discounts AND give good payouts, you are going to end-up with a loss leader. However, if you are going to make huge marketing and promotional efforts anyway, you may want to make the best use of traders to flood the news (of your promotion) to the market. Do note that for such strategies to work, you may need to have eventual access to the end-customer (via after-sales service and maintenance contracts perhaps) so as you can cross-sell higher-value items in future.

The other type of potential channel partners that you will bump into quite a fair bit will be those people who claim to have lots of contacts and connections in your target markets. Sometimes, they will even want to charge upfront fees so that you can tap into their "inner circle" of contacts.

The thing you have to be aware is that there are the real "mafia"s, and there are those who simply make empty claims. Here are some simple tips when selecting the right "mafia":

* If possible, get the channel partner to purchase upfront inventory at very attractive prices. If their connections are so good as claimed, they will make money in no time;

* If the above is not possible, invite the potential "mafia" to bring along some potential end-customers to some wining, dining or golfing. There key isn't about whether there will be people turning up (in some cases, people just turn-up to get a free meal), but to allow you to gauge if those end-customers are the people you want to sell to

Generally, successful "mafia"s are very protective of their contacts, and will jump instantly if you are being perceived to poach their customers. To them, the customers belong to, and only to them. These are the contacts they have taken years to cultivate, and they will protect them with their lives. Hence, whether you are providing pre-sales technical support, or post-sale maintenance contracts, be sure to communicate the benefits clearly, and put the "mafia"s at ease. Also, be sure that your product and service quality is up to par when selling to customers of the "mafia", because you will lose the partner and all of their contacts if there are customer complaints.

Consultants are the rarest of breeds, and are largely found only in the IT industry. Even in the consulting or engineering industries where partners with the consultant sales strategies are badly needed, they are still extremely hard to find. Channel partners who are using the consultant sales strategies tend to be ex-technical people who are sick and tired of being technical people. They also believe that they can deliver better value and service than their previous employer, and that's why they are in business themselves.

While consultants can add a lot of value to customers, they lack what the traders and "mafia"s have, i.e. they don't have the resources to prospect for a lot of customers, and they may lack the connections too. Some companies have helped these consultant partners to get a head-start by providing leads and other means of market-access, and just let them deliver what the customer wants.

Committing Time and Resources on your Partners

Many companies equate spending time with channel partners with holding an annual partner/ reseller/ distributor convention, where there will be lots of food and drinks, some announcements and some pep talks disguised as sales training.

The problem with that is, all the other brands that these partners are representing will also be holding such conventions as well, and to them, such events are nothing more than having free food and drinks in a 5-star hotel. The partner convention is NOT going to give you additional "mindshare" from each channel partner, and it is unlikely that they will be motivated to sell more of your products as such. This is not to say that the partner convention is unimportant. Rather, if you want to get better results, more needs to be done. Furthermore, the more engaged your channel partners are, the less likely they will be under-cutting prices or engaging in other vicious competition with you (or other partners).

The things you can provide for channel partners may include:

* Providing periodical promotions or new product launches for the traders;

* Providing product benefit workshops for "mafia"s so that they appear more professional in front of their contacts;

* Providing training on how to sell complex solutions for the consultants

Obviously, not all channel partners, be they traders, "mafia"s or consultants, are equal, or deserve equal attention from you. Just like defining and managing key accounts, you will have to prioritise which are those whom will more add value to you in the sustainable long-term, and then commit enough time and resources on them.

Successful Distributor Plans-How to Motivate Sales Channel Partners With a Formal Planning Process

In an ideal world, your key distributors would develop annual business plans for your product line and work closely with your distributor account managers to get the plans implemented. In reality, many manufacturers skip this planning effort altogether. Those that require distributor plans often struggle--either to convince distributors to create high-quality plans or to assure that the plans are followed.

To understand a typical distributor planning process, Smart Business spoke with Bob Segal, a Principal at Frank Lynn & Associates.

Why should a manufacturer require its distributors to create written plans?

The success of many manufacturers hinges on the actions of tens or even hundreds of independent, mostly small, distributors. However, each distributor has different customer targets, different product mixes, and different sales and technical skills. Many lack strategic planning skills and marketing departments. As independent businesses, they're free to do what they want.

A manufacturer can hope for the best or use distributor plans to gain greater control over its distribution destiny.

Is it realistic to expect or require plans from each distributor?

No. Most manufacturers don't have the capacity to handle hundreds of individual plans. Furthermore, most manufacturers experience the 80:20 rule, where 80 percent of their revenue comes from 20 percent of their channel partners. At a minimum, suppliers should require plans from key partners.

Not all manufacturers have the clout to demand distributors create a plan. A small company selling through Wal-Mart might face an uphill battle to get a detailed, written plan. Still, vendors should "think big" and not retreat unless facing a true negotiating mismatch. Even in those cases, scale back the scope of the planning request instead of giving up altogether.

What should be included in a distributor's plan?
Obviously, these plans should have highly customized content. However, the typical items a manufacturer should expect, or even require, in a distributor plan might include:


Business background - a short strategy statement, review of market conditions, a competitive summary and a list of the distributor's key financial, sales and technical objectives

Product/services summary - a list of (existing/future) services the distributor provides and complementary product lines carried

Customer mix - sales by market segment; a list of key/major accounts

Marketing plan - a listing of specific marketing activities including start and end dates, people assigned and resources required (of the distributor and of your company), covering trade shows, seminars, mailings, Web site, publications, advertising, etc.

Training/personnel plan - a schedule of which distributor personnel will attend what training sessions (yours or third party) over the next year; hiring plans that will affect your product line

Sales plan - major/key account activities, joint sales expectations, telemarketing plans

Logistics plan - warehouse/technology investments

Financial plan - agreement on sales targets, forecasting frequency, etc.

How big do these plans get?

First, it's often helpful for the manufacturer to create a template. It's a lot easier for a distributor to fill in a formatted form than to create a plan from scratch. Furthermore, this assures the manufacturer it will get the type of information it seeks (in a consistent format).

For a major supplier, distributors often want to dedicate significant time to create a comprehensive plan. Sometimes, the document becomes the overall strategic plan for the distributor. Regardless, most plans consist of two to three pages of text with five or six pages of tables or forms. Distributors often attach appendices with sales spreadsheets, forecasts, trade show listings, etc.

What is the role of the manufacturer's channel sales team in the planning process?

The channel managers should establish an annual planning calendar with annual account plans completed in December; formal, two-way reviews each quarter and informal updates monthly.

Provided with a template, distributors--not the account managers--should write the business plans. The account managers can add commitments from their company to the plan during the annual planning meeting.

The annual meeting should take place between the account manager and the owner or senior executive from the distributor. The actual meeting, to review last year's results and revise the plan for next year, will likely require two to four hours. In preparation, the account manager should review, in detail, the distributor's sales history, local market trends/conditions, the manufacturers' fulfillment of past commitments, new product plans, etc.

Channel Partner Strategy - Return the Favor and Increase Your Partners' Traffic

A channel partner strategy is an effective way for a parent company to boost the profitability of its channel distribution network. The partners' role is so important to the channel, but parent companies often forget to return the favor. By using organic strategies for an online search as party of a channel partner strategy, they can allow partners to benefit from increased traffic.

The reason why people emphasize the importance of sales strategies is because the staggering competition of today's marketplace requires companies to gain tactical advantage. In the past, products alone can keep channels afloat. But now, it's not about what goods and services you sell, but rather the method by which you sell them. This is where an effective strategy comes in. It provides companies with a blueprint of getting things done. It is a marketing guide that will lead them towards making the right decisions that will allow them to realize their set business goals and objectives successfully. Usually, these goals are centered on increased profitability, and selling is one of the biggest generators of revenue for any business.

Partners play an important role in the selling and marketing of parent company products. In channel distribution network, they are the ones who greatly contribute to profit generation by selling goods and services down a pipeline towards the end consumers. Heavily versed in consumer needs and demands, they know how to deal with the target market effectively. This makes them indispensable to a channel and companies are usually dependent on their activities. Parent companies usually repay the favor by providing them with the support, programs, tools and resources they need to function well. However, they lack more effort in driving traffic to them. But how will a manufacturer increase the traffic of their partners? They can accomplish this through the optimization and enhancement of partner Google Map locations and websites.

• Partner Page Optimization

Parent companies should create landing pages so that they can help drive more traffic to their channel member websites. This is particularly useful for organic searches that are specific to geographic location. If there is increased traffic, then partners can take advantage of selling more products so that they can realize their own specific business goals, and at the same time help the parent company accomplish its own. The bottom line is that this kind of business relationship should always be mutually beneficial for increased motivation and better results.

• Partner Location Information Availability via Google

The location information of partners should be made available through the Local Business Center of the top search engine, Google. Uploading such essential details will help customers find partners who conduct business in specific, preferred locations. This will help boost sales and increase customer interaction. End consumers will become more aware of whom to approach in case they have needs for a certain product or service.

It is important for various companies to remember that partners are not employees. They are individual businesses that have their own strategies, goals, objectives, mission and vision. This means that they can act entirely on their own accord. It implies that parent companies should give them a reason to perform at their best, because they will not expend unnecessary energy on something that will not benefit them significantly.

Table Manners - Using the Roundtable to Connect With Your Channel Partners

In this tough economy, one of the greatest challenges Value Added Resllers (VARs) are facing is finding an effective way to work with their channel partners. The link between partners needs to be strong so that both sides benefit but, too often, each side does its own thing. There IS strength in numbers but you need to make the connection. And this doesn't mean "connecting" by sending out a few e-newsletters, picking up the phone and making a couple of calls or "staying in touch" via email.

How do you strengthen your channel partner relationship so that it grows based on experience and trust? Building strong connections with your channel partners means you must focus together on the needs of today and those that are looming on the horizon. Neither of you can successfully do it alone. Together you can leverage your expertise to support each other as you work toward a common goal - success!

You are likely spending valuable time seeking out and evaluating new partners. How will each one help you grow your business? And what will they expect in return? What is the ideal relationship between the two of you? How much time will be required for both of you to realize the results you desire?

Take the time to evaluate your partner relationships Create a scoring system. For example, how much time do you dedicate to your partner? How strong is the communication? What about responsiveness to your inquiries? Do you have to wait around for input and ideas or do you have a proactive vendor who is clearly interested in helping you succeed? Do you have a channel partner who seems to have potential for better results if you cultivate the relationship? Are you randomly working with your partners or do you develop concrete strategies for brainstorming and developing programs and ideas? Whether you are a channel partner or a vendor serving channel partners, you must develop ways to plan and grow your relationships.

One of the most effective ways to build partner relations is to hold a roundtable, which is a gathering of business leaders both from within the industry and sometimes from outside of your genre, to discuss a particular topic in depth. These meetings can be held monthly or quarterly, depending on the group's interest and availability. The roundtable discussion is led by a moderator and often welcomes a guest speaker who will draw a crowd and spur on discussion. As a host, you are creating a networking source for your partners but are also positioning yourself at the heart of the leadership circle. You will hear their issues first and show that you understand and can help them be successful - ultimately becoming a trust advisor. While there is no immediate ROI or sales output, over the long term, these techniques will certainly help to grow your business. Here are a few ways to create your own unique roundtables to build those relationships that are critical to success:

1. Library Discussions - The one aspect we know about libraries is that using them in most capacities is usually free. Contact your local library to see what space that you can utilize for free. Then create a network support group that meets monthly to brainstorm and discuss important topics of the month. Not only are you positioning yourself as the resource, but those in the group may begin to start doing business - new business - with each other. Ask local business resources to come in and speak to the group on a particular idea. The whole group gains greater access to information and resources as a group than an individual would.

2. CEO Breakfasts - Invite the CEOs of your key partners and various other local businesses to come together for a breakfast brainstorm. This affords you the opportunity to hear concerns and issues from other business leaders in order to understand and then solve their problems (and yours, presumably) better. It provides a way for CEOs to network with each other as well - as service that they will thank you for by hopefully partnering with you. As you develop the breakfast concept, you can also place an ad or use word-of-mouth reminders to get people to join the group. Ultimately, you want YOUR breakfast to become the place business leaders "want to be seen."

3. Virtual Roundtables. There is no rule that says you have to physically meet somewhere to have a great discussion. Gather a group of like minded partners and create your own group, with you as its leader. Then, to give the group even more credibility and a broader information base, add in someone who is an influencer. For example, if 8-10 resellers came together to discussion similar situations and solutions, a local magazine or business news editor might be a good addition to the discussion group. The editor can offer a voice to help get attention and push their views and ideas into the world a bit more. You can do this by simple email exchange and as the group grows, considering setting up a profile specifically for the group on Facebook or LinkedIn for even more partner development.

Traditional roundtables also provide an opportunity for guest speakers to lead a discussion on one particular topic or focus. A moderator is helpful to keep discussions on track. Whatever format you choose, remember to focus the discussion on something that is extremely topical for the group - and provide solutions and answers so that members walk away with a new idea - and the desire to come back for more.