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  • Best Practice Showcase: End Customer Visibility


Managing Customer Relationships in Indirect Sales Channels

May 03, 2016; By Art Smith, MarTech Advisor

Managing Customer Relationships logo

Art Smith, Managing Director of Adducia Consulting advises marketers not to completely surrender key sales opportunities to Channel Partners

The direct relationship between manufacturer and customer forms the basis of much of today's marketing, and old-school instincts have been replaced with big data and analytics. Information on who you are selling to, what their preferences may be, where they live, and what other products they may need to complement the ones you've already sold them, is what drives growth. Sophisticated CRM systems manage those customer relationships, and present tremendous volumes of data-driven reports to help build a fact-based strategy.

When a relationship with a key account is indirect, as in the case of a manufacturer that sells through a network of channel partners, the marketing path to data-driven growth becomes a little fuzzy. Rather than a simple two-level approach between manufacturer and customer, three-part relationships put distance between manufacturers and end customers by placing the channel partners in the middle, obscuring to some degree the customer data the manufacturer needs to mount a successful marketing strategy.

Marketing may also be delegated to channel partners, and the result may be a decentralized and non-strategic approach to marketing that may take into account an individual channel partner's data, but not the “big picture” data that the manufacturer could potentially access were they to have a 360-degree view of the entire channel.

Much of the customer knowledge and data is in the hands of potentially thousands of different channel partners, yet marketing strategy remains (or should remain) in the hands of the manufacturer, thus setting up an inherent inefficiency. According to Ken Edwards, a consultant for Zyme, a leader in the emerging discipline of Channel Data Management (CDM),

“Manufacturers are spending anywhere from 10 to 30 percent of their revenue on sales and marketing, with substantial budgets for sales incentives for channel partners as part of the mix,” Edwards explained. “But, without end-to-end visibility that extends beyond channel partners and down to the ultimate customer level, budgets may not be as effective as they could be. That's the function of CDM. It accurately tracks the effectiveness of distributors, retailers, reseller, and installers, and gives manufacturers’ sales teams much greater visibility and control.”

Building a channel network is a necessity for many large manufacturers – but blindly trusting that channel to deliver maximum value is a mistake. There is a tremendous amount of data moving between multiple members of the channel network, and how that data moves between those stakeholders defines what happens to products in the marketplace. The quality of that data informs decisions at the highest level.

The 80/20 rule tends to apply in channel relationships, with money, labor, and resources going to the top 20 percent of channel partners. Since sales are the responsibility of those partners, the key to success is to identify along the entire channel, which channel partners are performing better, and identify their best practices – and then propagate those practices through the long tail of the channel.

Partners Are Not Always the Best Marketers

Effective marketing often becomes decentralized and often confused in a channel environment, with the manufacturer simply sending marketing and advertising money to channel partners, and providing them with basic marketing collateral that may not be targeted to their specific audiences.

In fact, many channel partners do not actually have a marketing person on staff, especially in the IT industry, where channel partner organizations tend to be made up disproportionately of a combination of sales and engineering people. As a result, marketing tends to get lost, and often, actual marketing practice at the channel level has nothing to do with corporate strategy.

It is all too common in an environment where marketing and advertising dollars flow to channel partners, who simply spend it towards the end of the quarter so they will receive the same amount the following quarter. This leads to poor decision making and ineffective marketing spend through the whole chain of decision making, from corporate to channel. Data is how this situation can be resolved.

With the right data, it becomes possible to gather information on exactly how a deal was closed, how long it took to close it, whether a particular event or lead was leveraged, and what type of marketing investment went into the deal. That sort of information is valuable – but when it is confined to the partner level, the universe of partners can't benefit from it.

Manufacturers sit at the center of a universe of thousands of partners, and with the right vision and a rethinking of the partner relationship, these best practices and hard data that define them can be collected centrally, and used to gain more control over the channel. The proper role of manufacturers is to empower all of those partners collectively, through that data and a centralized marketing strategy that is based on data, and understanding things like incentive programs, inventory levels, the supply chain, and partner performance.

Challenges often arise when there is no central source of truth for all that partner data. Channel Data Management becomes the platform to accumulate and aggregate that data, enabling a transition from a world of making channel and marketing decisions based on intuition – to a decentralized, partner-level basis, based on a 360-degree view with a unified corporate strategy with data-driven insight rooted in practices and data from within the company and from deep within its channels.

Channel Data Protects the Brand

Once the right data is flowing from the right places, what does the manufacturer do with that information? That single view of the channel ensures that everyone is working towards the same goal, and guides decisions about marketing, targeting, and what products to put where. More importantly, having the right data allows the manufacturer to better reinforce and to even define its brand.

Preserving and reinforcing a corporate brand image is especially challenging when selling through an indirect sales channel. The traditional, but mostly ineffective process is to create a brand guide and collateral, provide channel partners with a marketing budget, and leave the rest to them.

“Branding is more than creating an image and identity,” said Bobby Marhamat, CRO of Revel Systems. “To be successful, you also have to retain control over that brand, and in an indirect channel environment that requires the manufacturer to closely guide and monitor the marketing efforts and individual successes of each channel partner.”

Channel Data Management, therefore, takes a big role in channel marketing, giving the manufacturer the tools and framework needed to gain valuable feedback on what channel partners are doing, how successful they are, and how they are achieving those successes.

“To be successful in branding, you need to understand the needs and wants of your customers and prospects,” said Marhamat. “Customer data needs to flow from the customer, through the channel partners and back to the manufacturer, and this data can be used to craft the perfect branding strategy that closely aligns with the end user's desires.”

Channel Marketing Done Right

The two most important factors in marketing in an indirect channel environment are gathering data from the channel down to the customer level, and then retaining control over how that data is used for strategic marketing.

Best practice includes determining which partners are the best ones – and big volume partners are not necessarily going to be the most profitable ones, and those larger partners may demand more control over operations and marketing than a manufacturer should be willing to give.

Besides selecting the right distribution partners, a data-driven marketing strategy that puts the manufacturer firmly in control will result in more sales, more accuracy and a marketing strategy based on complete information. Further, the information gained from data-driven marketing and Channel Data Management allows the manufacturer to have a more efficient spend of marketing dollars.

Using data-driven methodologies like CDM resolves all of the challenges, and allows manufacturers to maintain control over marketing and operations, to gain the channel intelligence needed to ensure that marketing dollars are spent in the best ways possible, optimizing revenues and sales up and down the channel.