2010 18 Mar

Are Your Sales Channel Programs Costing You Share And Profit?

Manufacturers around the world, especially those in traditional, mature markets are facing a harsh reality–they are managing indirect sales channels based on outdated channel programs. When did you last review your channel programs? Market Strategy

When most manufacturers think of channel programs, the focus immediately turns to economics; the channel pricing structure and other elements of the economic relationship with your channel partners. Most manufacturers have done a good job of keeping their channel pricing current with the channel strategy. However, your channel programs go well beyond the economics—they impact virtually every element of your channel relationships.

Q. What is a channel program?

The most actionable definition of a channel program includes all the formal written and stated elements of your channel relationship. The program goes well beyond just a contract or a pricing structure—it defines all aspects of your relationship with the channel. As such, the program becomes the “recipe book” from which to manage your channel relationships.

Q. What are the components of a successful channel program?

The components of your channel program will be unique based on the needs of your target end user and the role you’d like your channels to play in meeting those needs. However, our experience shows that the most effective programs share a broad set of common elements. Envision your channel program as a series of “chapters.”

Agreement

This chapter defines, in general terms, the conditions under which you and your channel partner agree to do business together:
• The contractual agreement of a defined scope and time frame;
• The general definition of channel responsibilities;
° A statement of your distribution policy; are you going to offer your distributor exclusivity? Will you have multiple channels serving a defined geography or market segment?
• An outline of the process for review of the relationship, business planning goal setting and forecasting;
• A basis for termination of the relationship

Pricing/Economics

The purpose of this paper is not to explore the nuances of a channel pricing structure. However, a section of your channel program should outline in detail that economic relationship. All program elements that affect how money changes hands between you and the channel are captured here.

Sales/Marketing

It is critical that you tailor this chapter to the needs of your target end user. The reason you have authorized a channel partner is to help acquire and retain your customers, and this section of your program outlines in detail what you expect of your channel to do so.

Technical

This is particularly important if your channel participates in a technical selling scenario or adds technical value-add on your behalf; spelling out the technical elements of your channel relationship helps ensure the consistency of support to your end user

Operations/Logistics

This section of your channel program focuses on the efficiency of your relationship with your channel by outlining policies and procedures that allow you and your channel partner to fulfill the order at lowest possible cost. This area is the one that should be most often updated to assure your policies keep up with changing technology that allows for efficient operations.

Q. Why is it important to offer the channel a current and effective program?

In two words, “mind share” – an effective channel program can keep you “top of mind” to your channel partner by providing a range of benefits in the relationship. Sales Channel Workshops

A channel program sets the ground rules for your channel relationship; expectations are clearly spelled out across all functions of the channel’s business. Just as importantly, you set expectations for what the channel can expect of you in each of these functional areas. Obviously, this puts a spotlight on your performance, or lack thereof, in living up to these promises.

Q. How effective is your channel program today?

Frank Lynn & Associates has created a simple audit process Distribution Audit to measure the relative effectiveness of your channel programs. Based on our extensive experience in this area, the audit will provide you guidance in a number of areas:

• How effective is your program?
• What elements appear to be particularly effective? Or ineffective?
• For what elements of your program should you consider changes? And why?

To discuss this audit or to explore issues related to your channel programs in more detail, please contact Karl Edmunds at (312) 558-4866 or kedmunds@franklynn.com