home > news > outsourcing

Are You Outsourcing Channel Marketing To The Wrong People?

Marketers love to work on sexy brand-building campaigns. The thrill of creating something that your friends and family will be exposed to via national television, radio, well-known magazines and newspapers, or through the myriad of exciting outdoor marketing vehicles can be nearly impossible to resist.

This excitement -- coupled with the importance of brand awareness and preference -- has encouraged most IT vendors to create heavily funded internal marketing departments. These entities work side-by-side with a multitude of external marketing specialists such as advertising agencies, public relations firms, direct marketers, CRM vendors, event organizers and novelty suppliers.

In contrast to the sexy brand-building campaigns, vendors normally assign the boring, below-the-line activities and tedious in-your-face gorilla channel marketing programs that nobody seems to care about, to juniors. These juniors are tasked with supporting channel sales people responsible for managing distributor relationships so they can earn their place on the branding team. Normally, the juniors are isolated from the external marketing specialists the vendor works with because they have little time or channel experience.

This lack of focus on channel marketing is a serious oversight. In 53 percent of all IT hardware, software and service purchases, the channel determines which brand is selected. Essentially, ignoring or giving insufficient attention to the channel is akin to committing marketing suicide.

Bottom line and marketing is an adjunct to the sales department. Through a process of generating awareness and creating interest and desire, marketing's role is to enhance brand awareness and preference, thereby helping to generate sales and increase market share. Somewhere along the way, many vendors have lost sight of this because their marketing departments have become obsessed with creating beautiful works of art, and campaigns that impress their business peers, friends and family.

Who Are The Right People?

Channel marketing is a process of identifying suitable channel partners and engaging them through education, motivation and rewards so that they will recommend and/or sell your product offerings.

About 60 percent ($16 billion of the $27 billion) of IT vendors' marketing budgets go toward channel marketing, which is being managed by junior employees. Less than 8 percent of their marketing staff focuses on channel marketing, even though the channel is usually the key to their success or failure.

Technically, the marketing department owns the channel marketing budget. Yet, they have essentially relinquished the control to multiple distributors, and to a lesser extent, resellers. This has created an ineffective pseudo-outsourcing arrangement that is NOT in line with their branding strategy, objectives, market share objectives or long-term sales goals.

Further separating themselves from the channel marketing budgets, marketing departments have allowed sales reps to control how the distributors spend the budget and frequently even allow them to provide the approvals on the marketing materials produced approvals --they are rarely qualified to make. These sales reps are rewarded for sales made to distributors. As such, they tend to use channel marketing dollars as a tool for buying sales.

Typical outsourcing relationships are entered into so that the host company can reduce costs while enjoying the benefits of engaging experts in the specific area being outsourced. This arrangement allows the host company to concentrate on what they do best. Based on their current requirements, the host company now acquires the flexibility to quickly and inexpensively increase or decrease staff, without the responsibilities, hassles, and expenses of hiring, laying off, training, or managing. Meanwhile, the host company benefits from the expertise and dedication of their outsourced specialists.

Outsourcing your channel marketing to multiple distributors is wrought with inherent problems. This begins with conflicting objectives as the distributors also act as an outsourcing partner for many of your direct competitors. Add to this a lack of sufficient senior marketers to enable them to develop and implement customized programs, and you end up with an abundance of mass-produced programs in which your sales rep decides, somewhat arbitrarily, that you should participate in.

The history of this strange relationship is based on:

• Vendors needing distributors for warehousing and logistics - picking products, breaking down order sizes, repacking and shipping.
• Distributors facilitating sales by providing credit facilitation, financing, first level of service and support for channel members.
• Two decades ago, the vendors changed the rules of engagement when they decided to drive down distributors' margins and increase their back-end rebates and marketing dollars. To survive, distributors were forced to develop profitable marketing departments.
• Distributors need to earn a minimum of 30 percent on channel marketing dollars.

Reasons NOT to use Distributors as Outsourcers - Vendors and Distributors have different goals:

• Vendors Objectives:
  • Generating net new business.
  • Vendor centric branding
  • Marketing Key requirement: delivering specific product, service, support or solution messages to targeted segments of the channel.
  • Strategy: Encourage channel members to by their products.
  • Objective: To encourage channel members to recommend/sell their products, services and/or solutions.
  • Requires synergies, cost savings and power of integrated marketing communications programs.
• Distributors Objectives:
  • Taking business away from other distributors.
  • Distributor centric branding
  • Key strength: delivering product information to mass segments of the channel.
  • Strategy: Encourage channel members to buy from them.
  • Objective: To maximize revenue earned from MDF, COOP and discretionary funds.
  • Result: Disjointed marketing activities that are rarely integrated with vendor's end-user marketing activities.

It is time to stop blaming the distributors for not generating demand. Distributors aren't the bad guys -- they are your business partners...

Channel Marketing Begins with the End-User

Channel Marketing experts understand the rules of the game and the need to participate in distributors' channel programs. They know that the key to success is in helping the vendor take control of their marketing while applying accepted marketing principles that will dramatically increase the effectiveness of the programs they participate in with distributors.

By developing each program around the targeted end-users, and working backwards through the selling cycle, the focus will automatically be customized for the specific vendor. Common components include:

Profiling

• Customer segments to determine who they are, what products they want, what brands they currently purchase and what you have that can convince them to buy your product offerings.
• Resellers, consultants, and others involved in the purchase decision (gatekeepers and influencers) to see who currently works with these customer segments and how you can reach, educate, motivate and reward these people for recommending/selling your products and/or services.
• Distributors to determine which of them best reach the channel members that sell to the customer segments you are targeting.

Determine which customers, resellers and distributors to target

• Set clear marketing objectives for each targeted segment (end-users, resellers and distributors) that are in line with the key benefits that are of primary importance to you.
• Develop key messages for each targeted customer segment.

Engage Distributors

• Evaluate the various marketing services and programs they provide.
• Determine suitability of each based on your objectives and targeted resellers.
• Develop and recommend customized programs for each distributor that are based on your objectives, budgets, timing and targeted resellers, and with the distributor's reseller base, marketing services, programs and strengths.
• Work with each distributor to determine how you can target their reseller sets that are of most importance to you.
• Ensure that each distributor has the information and knowledge base they require to effectively market your product offerings.

Engage Resellers

• Conduct a Channel Positioning Audit Survey to determine how your targeted resellers currently perceive your company, product offering vis-à-vis your competitors, channel loyalty, channel programs, service and support. This will also determine why they do or do not, purchase your products and what would encourage them to purchase, or purchase more, of your products.
• Develop a channel partner program that takes into account the requirements of your primary targeted resellers, including hot buttons such as margins, back-end rebates, customer protection, lead generation programs, marketing material, buddy calls, service, service revenues, support and market saturation.
• Produce flow-through marketing material that resellers can quickly and easily update and customize, and send to their end-user customers and prospects. Electronic vehicles such as HTML mailers, Interactive ePostCards and eFocused Reports are ideal due to the ease of customization, speed to market, ease of response, cost to produce.
• Implement a Dialog Marketing program that will allow you to gain control of the relationships, and have on-going communications with your targeted resellers.

Measuring

• Develop objectives, budgets, strategies, and measurement criteria for evaluating all marketing activities you conduct in the channel.
• Develop an approval program that ensures programs are in line with your objectives, budgets and branding guidelines. Based on the predetermined criteria, measure the effectiveness of the programs on a regular basis and review with the appropriate channel partner (distributor or reseller).

Other Vehicles

• Evaluate other channel vehicles (publications, events, trade shows, etc.) to determine suitability and value of participation, based on your budgets and objectives.

Choose an Expert for Your Channel Marketing

Net Results-Channel marketing, provided by experienced experts, pays for itself over and over again by assisting you in regaining control and effectiveness of your channel marketing budgets while respecting your distributors' requirements to earn a minimum of 30 percent gross profit on these marketing dollars. Like all good outsourced experts, Channel Marketing consultants will reduce your overall costs while allowing you to capitalize on their experience. They should:

1. Free up your channel sales people so that they can concentrate on selling. Alter your marketing relationship with your distributors from a one-sided equation in favor of the distributor into a true partnership with well-aligned objectives and tactics.
2. Work with corporate marketing to ensure that channel marketing is both integrated and coordinated with end-user and branding marketing activities.
3. Coordinate channel-marketing programs to capitalize on synergies between end-user and channel, various distributors, and reseller partners, and thus dramatically enhance your net results.

Identify, engage and keep in continuous contact with the appropriate channel partners. Educate, motivate and reward these channel partners. Constantly monitor and evaluate results and modify programs based on the findings. A Channel Marketing consultant will work harmoniously with you to ensure that you get more than your fair share of the $281 billion of IT sales where the channel determines which brands are purchased.

go to top