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| Aug 31, 2005 2:20 am |
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re: Channel Compensation Plans |
Dan Lorenz
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Hi Christine:
You're question is a little short on respondents so I thought I would weigh in. My experience is not in the print media industry so my opinion may not be well informed however I have been on both ends of the channel sales model in the computer networking industry so here are some generalities to consider:
As a vendor you want channel partners who know the target customer's business. It's helpful if they know software too but what you really want from them is their contacts and feet on the street. You can teach them the software.
Channel partners will want a few key things from you. First is margin. If they can't make a profit, they won't bother. Find out how much they make selling other products and offer them enough to get their attention. It's usually done through their discount but it is also done via minimal channel conflict. In other words, if everyone is selling it, everyone will discount to sell it, margin will get squeezed, nobody makes money, everyone stops selling it.
Another thing a channel partner will want is exclusivity or at least a limited number of partners. Again, channel conflict is the concern here but you want to balance their needs with your need of market penetration. Too few partners and they're not getting it to all of the prospects. It's also helpful to prospects if they're hearing about your product from multiple partners. Must be something to it if everybody is talking about it.
Also key to this channel strategy is that you do not compete with your channel. If you are taking orders direct they will drop you in a nanosecond. Invariably it will be some prospect that they courted for six months and then you got the order direct. If you commit to a channel program then you must have religion for it. No direct orders at all. If you must handle some accounts direct then name them up front, before the channel partners invest any time on that account.
Finally, don't give up your other marketing. Don't think that signing up a bunch of partners is going to bring in a huge surge in sales. It takes time. You still need your advertising, direct mail or telemarketing to drive demand. Your pull-through marketing.
Channel sales brings more salespeople to the fight, more buzz, and more prospects than direct selling can but you give up a lot of direct contact with customers, profit margin and control in how your product is sold. It's great for some products, not great for others plus you need a salesforce that is geared to sell to salespeople, not endusers. It's a different way of moving product.
I'm getting long winded here. I'd be happy to talk with you further. Please PM me if you'd like to talk and good luck with your program.
DanPrivate Reply to Dan Lorenz (new win) |
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