Managing Complex Channels

Over 40 senior managers gathered at sponsor Oracle's sparkling Reading office for a series of three workshops on Managing Complex Channels. The afternoon was a chance to really get to grips with the issues, as well as to network with peers in other companies and other industries.

The afternoon generated a lot of heat and a fair amount of light! Adam Dorrell at Avaya described it as: "one of the best events I have attended. It is good to see that others are wrestling with the same issues that we face."

The first session on Influencing the influencers we cover in more detail in our feature on page 5. The next two sessions covered How to Align Sell-with and Sell-through channels and Making functional compensation work.

How to align sell with and sell through

What emerged clearly from the session was the very different ways of motivating sell-through partners, such as resellers, and sell-with partners, such as influencers.

Ann Pennell at SGI says: "In sell-through you need very clear rules of engagement. You need clear communications and predictability."

Many suppliers aired their unease about sell-through channels. One participant said: "The problem with sell-through is you have no control over what sort of experience the end-user will really have with your brand. With sell-with we feel that we do have some control."

Another headache of sell-through was raised by another participant: "Resellers just wonÕt give us any sort of transparency on deals. We have very little idea what products people are going to buy or when."

Other delegates agreed that these were big issues. One said: "All you can really hope to do is to ensure that your sell-through partners are making enough margin from you."

Leads referral to sell-through partners was another problem area. One delegate complained that he simply had no idea whether leads were actually being followed up. Another replied that, in their experience, resellers placed little or no value on leads, as they knew that many leads were simply not qualified properly.

The inevitable conclusion was that leads had to be qualified in some way, before they were dispatched to partners. RTMA director general Max Hotopf pointed out that, in any case, unless leads were qualified, you could not establish whether they had been worth purchasing through marketing. He suggested that, perhaps, one answer was to engage in different types of joint marketing with partners, such as seminar programmes and move away from leads referral as the focus.

Pennell reckons that suppliers need to have mechanisms in place to ensure some discipline: "If partners don't use their value-add to sell our products, then we have it written into the contract that we can remove their rebates, and so effectively stop the sale. We use this extremely rarely, but we do stipulate, for example, that our hardware has to be sold as part of a bigger solution. It is written into their contracts that they can only sell into certain industries."

Workshop members also looked at how to avoid conflict with direct. Ann Pennell at SGI said: "we have a scheme whereby the direct salesperson only gets rewarded for selling specific items. This encourages them to use indirect partners as much as possible."

Making functional compensation work.

The idea that a supplier can build a channel by giving extra rewards for intermediaries who train their staff, or who invest in marketing, is extremely appealing.

But such functional discount schemes are also extremely hard to control. Intermediaries who invest heavily risk being undercut by discounters, who steal the sale at the last moment. And it is very hard to build a system which provides real protection against fraud.

Pennell at SGI summed up the outcome of her workshop: "Everyone agreed that it was a great idea in theory, but those who had tried it have moved away from it, because of these problems."

Several suppliers were trying to move away from a system where functional discounts were agreed on a individual one-to-one basis to a more modular model with a menu of rewards for specific actions. But many delegates felt this would not work, and that the idea of tying rewards to specific programmes was probably a better one.

But the idea of very simple discounts for certain actions remains appealing. Partners could, for instance, be given an extra 1pc margin if they promised to only resell a particular supplier's products. Partners could also be rewarded for achieving pre-agreed sales targets.

Tony Mulligan at Oracle agrees that this approach can work, but adds: "For me, the real functional discounts revolve around things which are really quite hard to measure. Perhaps because of this, such schemes can really not be standardised and have to be agreed on an individual basis. But this leads to much higher costs."

Managing and Communicating Channel Change

Suppliers are good at formulating new strategies but less good, perhaps, at communicating them to their partners.

This event - a mix of presentations and workshops - addressed this issue and was sponsored by Microsoft. Delegates included senior managers from Orange, BT and O2 as well as a host of IT and pharmaceutical companies.

Julian Phillips, now at Orange, kicked off with a warning note. "Managers spend their lives changing things. If life is quiet we have a tendency to get fidgety and alter things which are working perfectly well." He casestudied his experiences at Dell, which spent a year transforming itself into an e-business, developing a raft of e-business services, before quietly returning to what it does best - making and selling Pcs.

Derek Brown at Schering looked at how the pharmaceutical vendor had made extensive internal changes to adapt to a new sales process in which it shared risk with the government for the introduction of expensive, new anti-MS drugs.

The workshop which followed allowed delegates to focus on how to communicate change to particular channels with examples ranging from sacking 30pc of your distributors to moving to a customer-centric subscription model.

The communication theme continued with a presentation from Tony Mulligan of Oracle on How to build log-term relationships with partners over the web. This showcased Oracle's new PRM system which we profile in detail on page 15.

Finally, Phillip Howells presented some research findings showing the true value of trust.