Crisis calls for efficient channel management

Software Industry not an Exception

software channel managementIndeed, the current crisis calls for efficient planning, production, spending, selling, cost cutting, efficient everything and the software industry is not an exception. We are not attempting to address all of these issues here, but focus specifically on channel management.

Why? Because the distribution channel is a significant revenue source and, managed right, can get products to the market in a more profitable way than through a direct approach. In line with the “using IT to add value to the business” strategy, we’ll explain how a Partner Relationship Management (PRM) system can increase channel management efficiency (read help tackle the crisis) by reducing channel management costs and boosting sales opportunities.

First of all, a quick look at the channel itself – why is it so important, especially in these times of trouble? Distributors and resellers help you grow your market share by providing access to larger customer pools, marketing resources, technical expertise and customer service. This is valid for any kind of product/sale, and especially so for complex ones. A key factor is that distributors are your external sales force. Big emphasis here on external. That means considerably less overheads for you, essential when there is pressure to reduce headcount or freeze hiring.

So, now is the time to make the most of your partner network. Build and grow your channel in countries or regions which are most profitable for you, or less hit by the economic crisis. Likewise, concentrate less in areas where there is a clear downturn and a lot of effort brings little in return. It’s true that you cannot terminate contracts with long-term partners overnight, but you can at least redirect part of your marketing budget elsewhere.

It is critical, as well, that your distributors/resellers are happy with selling your products. Nobody is willing to spend time and money in trying to make a difficult sale. You need to make it easy for your partners to work with you and ideally get them to prefer you over other software vendors. There is in any situation a strong competition out there for best reseller partners, today even more so.

A PRM solution can help with both these aspects: who makes your channel and how you work together for a mutually beneficial outcome. What can a PRM facilitate exactly? Read on.

Communicate with your Partners. I mean, REALLY communicate.

An easy one to overlook. Do you know all of your partners, implying here partners’ account managers, up to date contact details etc? This is not a trivial matter, as you need to communicate with your partners on a regular basis, communicate to, through and for them. Not to mention you have to hear their say, too. As any other customer database, this one is also live and kicking, changing fast and in need of constant updating.

A PRM system can help with managing a partner database (guess what, your partners themselves will keep that up-to-date) and, most importantly, with partner communication, to and from them. Communication is key, especially when you have to increase its frequency or when rapid time-to-market is crucial.

Use a PRM to instantly share promotional materials aimed at end-customers and pass on new price lists or special discounts. You can also choose to carry out promotional campaigns targeting end-users directly, driving them to your distribution channel (a “pull” strategy in marketing terms). What you want to avoid is customers not finding a distributor or getting “undeliverable” messages.

Customization and localization are also important – communicate with your distributors and resellers in their own language – at least for standard notification messages, this should be easy to accommodate with a decent PRM.

Another point worth mentioning is that, although training is important, even more important is to be able to continuously support your partners by answering promptly questions they may have on a day to day basis. Help them, teach them how to make the sale.

Automate what you can – Order Approval, Product Delivery, Invoicing, Payments and the like.

You and your partners have done the hard work, found the client, done the deal; now is delivery and paperwork time. Why waste valuable resources on order processing or disappoint customers with a delayed product delivery? Look at ways to automate these procedures as much as possible and encourage partner self-service. Again, a PRM can help.

From Avangate’s experience with the RAV Antivirus international sales, it takes four to six people to manage 60 global distributors, as well as the business development of the company, identifying new partners and assessing current performance. This means a better bottom-line as well as quality time spent to grow business instead of just maintaining it.

The key is a cost-effective PRM solution able to integrate 24x7 order processing and product license delivery, invoicing & payments, round the clock communication and an extended list of tools supporting both resellers’ and vendors’ software sales processes, preferably from a web-based interface (SaaS model). A PRM would make your sales activities more efficient, smoothen the vendor-reseller workflow, centralize information and ensure you work with standardized documents.

Where and how much do you sell? Who are your star performers?

All too often, a software vendor – reseller partnership results in publishers losing touch with their end-users. A PRM solves the end-user separation gap by providing both the software vendor and the distribution partner with access to customers’ registration data and transaction history. Imagine also that one of your resellers goes out of market; you cannot, as a vendor, afford to lose their end-clients. A PRM gives, on the one hand, an extra insurance on this aspect and, on the other hand, increased sales opportunities.

A PRM should allow you to generate reports in real time, giving you immediate insight into a full history of reseller data, sales volumes, payments, orders and so on. This provides a broad overview of your entire channel, so you can make informed decisions regarding where you want to push more or less, where you want to form new partnerships or pull out of.

Plus, you know how to take good care of your biggest customers, what about your key partners? The Pareto principle or the 80-20 rule works for distribution channels as well. A PRM will tell you who these partners are so you can concentrate most of your resources on them and a PRM will also help you take care of the other 80% in a more or less auto-pilot way. Your network will be more efficient overall and certainly your revenue will show that.

Give me the leads!!!

This reminds me of Glengarry Glen Ross” with Jack Lemmon, great classic. Hopefully, no one should get that desperate, not with a good lead generation & management system in place anyway.

Back to our sheep… There are two antagonist views on lead management (at least theoretically): one, the vendor’s, arguing that he’s not taking on a reseller to give him leads… “I could go direct if I had the leads”, and the other, the reseller’s, being adamant he’s not going to move an inch for someone that doesn’t give him any leads.

Reality is somewhere in the middle. A vendor has the capacity to generate leads which are transformed into sales more efficiently by a reseller (better market knowledge, higher affinity for local customers, technical support in local language, bigger salesforce, etc.). Otherwise, what would be the point of working with a channel? On the other hand, a reseller should strive to create his own leads, and not rely solely on what the vendor provides - another main reason for employing a distribution network.

Apart from lead generation, lead management also involves lead distribution – which partners do you give the leads to? Vendors can make decisions based on various criteria, such as geography, expertise, past performance and so forth. Done efficiently, lead distribution definitely increases conversion rates and ultimately revenues.

Whether for leads generated by vendors or by partners themselves, deal registration helps boost partner confidence and reduce channel conflict so it’s good to have it in place. At least do this for your best performing resellers, most likely anyway to drive complex sales and therefore in need of some sort of insurance that those particular leads will be reserved for them, for a certain period of time.

There is also the issue of lead tracking. Leads don’t come cheap, on the contrary, they are the result of hard work & financial resources spent on marketing activities and campaigns. So it’s only natural that vendors want to know what became of those leads, especially the hot ones with big revenue expectations. They also look at cold or even dead leads and see if they can take a different approach to address that part of the market.

What better than a PRM to give you an immediate overview and analysis of leads, to understand which are the most profitable lead sources, who processes leads faster and so on. Put otherwise, vendors can grasp in an efficient way how efficient their lead generation system is and how efficiently are leads turned into sales by the channel. Three times efficient! Hurray to that!

Channel conflict: you don’t need this on your plate right now!

While it’s easier and healthier to avoid channel conflict rather than solve it, conflict does happen and you cannot and should not ignore it. We have a whole other article written on this subject, on how a PRM can enhance channel protection and avoid or at least diminish conflict, do check it out.


Some Conclusions:

We’ve seen how software vendors can use IT – i.e. a Partner Relationship Management System (PRM) - to drive and manage their distribution channel activity more efficiently and more profitably, from simple things as managing a partner database to 24x7 order processing & delivery, reporting modules and lead management. Tackle the crisis head on!

We shouldn’t overlook, though, the fact that your own sales department, your online store and perhaps even an affiliate network are also part of your sales 'force' and you need to manage all of these efficiently and integrate them at some level.

Also, partner recruitment is a key starting point towards an efficient channel; the consequences of hiring the wrong partner can be significant in terms of lost revenues, high support costs, and damaged brand image, to name just a few. In addition, because there’s lots of competition for the best reseller partners, having a strong opportunity management process is critical. (Maximizing channel performance, The Miller Heiman Sales Performance Journal, Volume 2, Issue 10). A PRM can help with partner recruitment as well, at least with a brownie point on an initial discussion list.

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