Wednesday, April 27, 2005

Channel Marketing: Differentiation

During a discussion with a client in Mexico City today, it once again became clear that there is no differentiation between vendors in the Channel unless they focus on solving partner business issues.

We were discussing how to increase revenue through Ingram Micro in Mexico. The account rep proposed targeting a competitor's resellers. Why would Ingram care about one vendor's revenue versus another's, other things (e.g. Margin) being equal?

Ingram, like all channel partners cares only about the business impact of selling a product, not its technology, features, or design. Only issues that impact Ingrams business such as revenue, inventory turns, average order size, support costs, etc. matter.

What we teach is that if a sales rep rep cannot link to these financial business issues, they add no value or differentiation to the channel partner. This is the difference between channel administration and channel management.

Sent wirelessly via BlackBerry from T-Mobile from Mexico City.


Monday, April 18, 2005

Channel Strategy: Understanding the Costs of Channel Development

Launching a new channel is never cheap. Before advising partners to build channels or launching your own channel program, understand the costs of developing and operating that channel

A couple weeks ago, a channel account rep and I were analyzing the financials of his channel partner. The income statement showed a decline in gross margin (not an unusually occurrence among resellers) and operating income. While channels can be a good route to market, they most often do not yield improved gross margins. Increased discounts to create an opportunity for the partner versus the direct sales force reduces margin.

There are multiple opportunities to link the benefits of a channel to a vendor. Properly implemented, a channel can deliver improved operating profits and can create barriers to competitors and new market entrants. However, channels are not typically a magic way to increase gross margin, despite any given vendor's enthusiasm. Sales channels are about increasing coverage and reducing the cost of sales.


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