I recently attended a conference for CEO’s and senior executives at which a number of learned speakers shared their experience about overcoming the economic challenges faced by their audience. In private I asked several of the delegates what role their indirect sales channels – dealers, resellers, retailers and specialists could play in helping out. I say, “in private” pointedly because in public, CEO’s always praise their indirect sales channels because that is of course the right thing to do.
Without exception, they gave me variations on the same response – “indirect sales channels just fulfill demand…right?” Of course, I was neither surprised nor disappointed to hear this response. After running channel sales and marketing organisations for leading technology and consumer electronics vendors for many years, I have become all too familiar with the boardroom ignorance of and at times the contempt expressed towards “the channel”.
Many encounters with my own CEO’s over the years led me to the conclusion that the channel and indeed I (by association) failed to get the respect that we were due given the contribution we made. So I vowed that rather than simply “managing” the indirect channel business, I would make it my mission to provide my charges with all of the information, tools and resources at my disposal to generate demand rather than simply fulfilling it and to provide tangible evidence of their contribution through incremental sales.
The origins of the myth
The problem stems, I think from the fact that CEO’s rarely rise through the ranks having worked with the channel to any great extent. They’re direct sales guys, marketers, accountants or technologists for whom the channel has often been more of an irritation than an asset. What is more, indirect sales channels became very unfashionable in the dot com era. Dell led the way in persuading us that we should “cut out the middle man”. Indirect channels were portrayed as an unnecessary cost; fat, lazy and good-for-nothing. Leading vendors clamoured to replicate Dell’s model and set up their own online stores and dreamed of the day they could wave goodbye to the channel forever. What few foresaw was that the industry was going through a cycle and was experiencing the pain suffered by many industries before – the need to rationalise its supply chain in line with falling profitability. Dell was no more than a disruptive interloper shaking up perceptions of the established, conventional business model for a while. But as ever, what goes around comes around. Dell is now as wedded to an indirect channel as its competitors but along the way, its fortunes have waned now tv 續約優惠 and other vendors have ousted it from its once indomitable position as market leader. More of them later. Nevertheless, the damage was done and a generation of senior executives emerged who had no great affection for the channel.
Why should you care about the channel?
Here’s an uncomfortable fact. Over ¾ of all businesses in the USA employ less than 1,500 employees. But vendors don’t often want to sell to them or simply can’t for reasons of logistics, reach and cost. So instead, they typically try to sell to large companies and you can see their point to an extent. A disproportionate share of fiscal output comes from large companies in spite of their relatively small numbers and hence, logically, they are inclined to spend more on the things you make. We should not ignore, however, that those companies with under 1,500 employees account for a greater slice of the economy overall than companies of 5,000 employees and above. They also buy an awful lot of what you make. Now let’s take a look at the economics and the other implications of selling to large companies:
- Where do you deploy your most expensive sales people?
- Which sales draw the most sales person commission and bonuses?
- Where do you target the largest single component of your marketing budget?
- Where is your highest cost of sale?
- Where is competitive activity greatest?
- Where do you experience your lowest average unit selling price?
- Where do you retain the lowest margins?
- Which are your costliest customers to maintain?
- Which customer segment consumes more of your resources than any other?