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Channel marketing is a process that Vendors go through to identify suitable channel partners and then recruit, engage, enable, motivate and reward them for recommending and/or selling their product offerings. In the $750 billion North American IT industry, Vendors spend US $23 billion per year (52% of their marketing budget) on channel marketing. While Vendors take painstaking care to ensure the quality and success of their end-user marketing campaigns, these same Vendors typically assign channel marketing to juniors to work with channel sales people, isolated from in-house marketing resources and external marketing specialists. Furthermore, although the marketing department technically owns the channel marketing budget, they tend to informally relinquish control to channel sales managers, multiple distributors, and to a lesser extent, VARs. This has created an ineffective psuedo-outsourcing arrangement that is NOT in line with their branding strategy, goals, market share objectives or long-term sales goals. Moreover, they cannot track results. Not surprising, most C-level Vendor executives, who have very little understanding of the value that the channel brings to them, feel like they are being forced to purchase very expensive channel marketing programs that don't work. The North American IT Channel Marketing Landscape Like many industries, the bulk of computers and related products are sold through a channel whereby the manufacturer sells their wares to channel member who in turn sell them to end users. However, the computer industry has its own unique set of problems. The industry is beset with proprietary technologies, conflicting operating systems, far too many SKUs, rapid product obsolescence, unsatisfied customers, low margins and a growing shortage of qualified people who can sell, service, educate and support the growing end-user demands for business solutions. A significant part of the challenge is finding a way to bridge the gap between a channel that consists of techies who are expected to be salespeople. Despite the challenges, the IT channel continues to grow its annual sales into the business community. The Mass Market: Under 10 Seats Most of these companies are owner-managed who look at technology as a necessary evil. They tend to purchase products from the mass retail outlets or online stores and then look for family or friends to help them set-up and maintain their computers. Their product solution process is closely tied in with lowest price. The Elusive SMB Market: 10 - 500 Seats With much smaller IT budgets, they lack the buying power that their larger counterparts have. As such, they represent a large market place that allows for higher margins. This has resulted in a strong focus by Vendors in this SMB marketplace, which has led to a strong push by Vendors to create SMB solutions. Typically, these SMBs don't have a true IT department. They purchase about 80% of all products through VARs. They trust their VARs and have very strong relations with them. When they ask their VAR what products/brands they should purchase, 90% of the time they accept their suggestions verbatim. Currently considered the most difficult to reach, yet most lucrative segment of the IT marketplace, every Vendor is trying to find the golden key that will unlock the doors. The Forgotten Mid-Market: 501 - 1,000 Seats Most of these companies have an in house IT Team that focuses on: customer support (users within company); break-fix; upgrades; installs; data protection; security; hardware purchases; compatibility; training; etc. However, the CIOs are overworked, under staffed and being pushed to show contribution/justification of purchases via ROI (IT as a business tool). Technology as a showcase is gone. Although on average they have a $45 million IT budget, only about 20% of their purchases go though VARs. They look for VARs who have a specific skill set/knowledge from other clients they have worked with. Most are more interested in keeping existing technology working then in finding and implementing new solutions. They tend to be too big to use VARs and too small to attract the attention of the big Vendors. The Portfolio Enterprise Market: Over 1,000 Seats With average annual IT budgets of close to $400 million, the "Enterprise" market has traditionally been the bright spot in the marketplace. However, with the new focus on accountability, solutions and ROI, enterprise CIOs tend to work directly with Vendors and negotiate price, service, etc. leveraging their brand name that Vendors still want to show in their portfolios. The Paradigm Shift Traditional Method Most channel marketing programs are not in line with what VARs require. Vendors promise high margins but do not protect prices at the street level. They promise leads but the leads are not qualified and they do not take the time and effort to provide VARs with the necessary product and sales training. They offer marketing tools but the VARs do not use them as they don't trust the Vendors and are afraid to let these Vendors near their databases. The New Model Vendors sell products. SMBs want to purchase solutions specific to their business. VARs are not the sales people... but rather, they provide the conduit. They help remove the FUD Factor (fear, uncertainty and doubt) from SMBs by assisting in the determination of what solutions are available, sourcing the necessary products, configuring and integrating these products, training staff on how to use the solutions, providing on-going service and support and acting as an on-going trusted business advisors to SMBs. Simply put, they bring together the various products and make them work harmoniously as a solution for the SMB. Then, they stay around to assist with problems, updates, etc. The North American IT industry's go-to-market model is inefficient and ineffective. It is based on a flawed strategy whereby Vendors rely on technology focused VARs to act as their sales team. Most VARs lack the business knowledge and selling skills necessary for survival. Meanwhile, Vendors ignore the core problem and continue to train them on their technology. For the channel to survive and thrive, it needs to change. The paradigm shift is already starting as Vendors are pushing their marketing and sales people to show measurable ROI on channel marketing expenditures. Distributors are cutting services in order to turn positive net profits. VARs are leaving the industry in record numbers as they cannot survive on the margins they are earning and do not understand how to change their business model. The change coupled with declining profits and mixed go-to-market messages has created a state of distrust within an industry that is out of control. The VAR's Role In The New Paradigm In the new paradigm the industry's human resources need to be realigned so that strengths are being leveraged and weaknesses are being complemented. Integrated mar.com has assumed a leadership role in this area, educating the industry on the basic notions of what VARs are capable of doing extremely well and where their shortcomings are. Integrated mar.com has then gone one step further by building tools and providing education for VARs that will help compliment these shortcomings.
As Vendors are looking more and more downstream into the SMB marketplace for sales, they are quickly realizing that it is a daunting task to reach, sell solutions to, service and support these businesses without the assistance of the VAR community. Robert Cohen, a passionate and enthusiastic channel advocate, is the founder of the ChannelLine Advisory Council as well as president and business editor of Integrated mar.com, publishers of Channel Advisor, eChannelLine and ConnectIT. Since 1980 he has worked with 300 IT vendors, distributors and resellers in developing and implementing strategic go-to-market programs, using a variety of direct, channel and hybrid models. Integrated mar.com, in its role as publisher, channel marketer and founder of the ChannelLine Advisory Council is proud to be a leader in orchestrating the paradigm shift. To find out how the Channel Sales Cycle Workshop Series (a CLAC initiative) can assist you in growing your channel sales, call Robert at 1-800-465-2059 or by email at rcohen@integratedmar.com.
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