Wednesday, June 30, 2004

Issue: Unmanaged Conflict Can Kill Momentum

Apple is facing a set of tough decisions. Check out the Business Week article about Apple's channel conflict, "Apple, Respect Your Resellers." It opened company-owned retail stores that are conflicting with small retail Apple resellers. Critics of the move predicted that Apple stores would be a failure. Now that they are profitable, critics contend that it is hurting small resellers. Several small resellers in California have sued Apple. One has closed his five store chain.

What should Apple do? Closing its profitable, popular stores to be pure channel is not the answer. Neither is hamstringing its stores to provide inferior service so small resellers can compete. If Apple is serious about growing its market share, it has to have stronger company stores. However, that does not mean that it has to abandon the channel as a whole. It can still have a viable relationship with individual channel members. Heck, if Dell can work with some channel partners, surely Apple can too.

Scott Karren, The Channel Pro


Wednesday, June 16, 2004

Strategy: Focus Channel Program Around Profits

Forbes magazine has a great channel article this week, The Lexus Nexus. In it they explain why Lexus' has the best channel in the automotive industry: "They make their dealers very rich." Hear is my favorite quote from the article. "It's a license to mint money. When you and I die, we should hope to come back as Lexus dealers."

Lexus dealers sell more vehicles for more gross margin. They then reinvest in their dealerships fueling a virtuous cycle that puts them even further in front of competitors. Look at the numbers cited in the Forbes article:
Sales are up 21% through April, while Cadillac's have grown 5%, BMW's are up 2% and Mercedes-Benz's have shrunk 3%.
Lexus vehicles an average of 21 days to be sold off dealer lots. Mercedes-Benzes have sat around 44 days, BMWs 47 days and Cadillacs 58 days.
Lexus dealers sell for six times earnings before interest, depreciation and taxes (EBITDA)--in a good market, $25 million to $30 million. Other brands of dealerships sell for between two and five times EBITDA.
OK, so the dealers get rich, what has that done for Lexus? It made them number one. Not only would they win the channel popularity contest awards, but Lexus also out sells its competition, increasing its revenue and market share.

This is required reading for anyone serious about their channels. How will you address "The Lexus Nexus" in your channel?

Scott Karren, The Channel Pro


Friday, June 11, 2004

Trend: Using the Web to Cover Unmanaged Accounts

Typically, companies have used a three tiered model for account coverage: managed, tele-managed and unmanaged accounts. The reach of managed accounts is limited by the number of accounts a Channel Account manager (CAM) can cover. Because tele-managed accounts can extend field rep coverage by 500% (assuming 100 accounts per inside rep) this has been the focus over the last few years. Companies such as MarketStar lower the cost of coverage even further by allowing vendors to outsource these positions. With Executive Conversation, I successfully taught these young sales people in Utah the same concepts used by leading vendors with their direct and channel account managers.

The next step is to touch the unmanaged account in a meaningful way. Most vendors call these accounts more palatable names (e.g. broad channel members or authorized channels) but they still ignore them. Admit it, recruiting a channel provider into the base program and sending them direct mail via distribution is not even managing mindshare let alone managing the account.

Databases and CRM SW for tracking Point of Sale (POS) and direct mail contacts are just the ante. The real action will be using blogs and interactive tools to create a community among the massive number of unmanaged providers and unaffiliated influencers. Instead of unmanaged accounts imagine web-managed accounts. The opportunity is 10 to 20 times bigger than what has been achieved with tele-managed accounts.

The first vendor to figure it out will set the direction and standards of channel management for the next 10 years.

Scott Karren, The Channel Pro


Monday, June 07, 2004

Do Channels Matter?

According to Nicholas Carr, IT Doesn't Matter. Since IT is ubiquitous, it has no strategic value or competitive advantage, only high cost and potential downside. Carr's assumption is that scarcity is the essence strategic value. "You only gain an edge over rivals by having or doing something they can't have or do." To use Carr's logic, since everyone has channels and sales people, channels must be strategically insignificant. After all, the idea of channels is as old as Satan using Eve to sell Adam a bite of the apple.

Carr's recommendation of a defensive posture in IT spending is more a reflection of the pessimistic, market killing attitudes than real business opportunity. For simplicity, I will call this attitude Carrism and its supporters Carrists. This attitude is the opposite of the optimistic attitude Robert Scoble has used at Microsoft.

It is how you use IT, not whether it is a commodity that makes it valuable as a strategic asset. Take a look at my upcoming ChannelZone column, "IT and the Channels Do Matter" to see just how far off course Carr's advice is.

If you are taking a defensive posture on channels, you are on the wrong course.

Scott Karren, The Channel Pro


Tuesday, June 01, 2004

Trend: Channel Programs Are Changing

I am surprised at the number of vendors who are going through the process of channel program refresh and realignment right now. Even more surprising is how many are doing much more than tweaking benefits. In fact several of the vendors are attempting to fundamentally change the way they interact with their channels. Some of the favorite things we have noticed is how well Cisco is doing in communicating that its programs are new and improved. Microsoft has a very interesting point system that ties benefits to its corporate objectives and away from merely rewarding companies for trained headcount. Intel is creating trusted advisors out of its sales reps.

It is not that these types of things have not been tried before, but that these companies are succeeding that is interesting. Companies such as Microsoft and Cisco are setting the bar for channel management.

What's happening in your company? What are the best practices you have identified in the channel?

Scott Karren, The Channel Pro


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