Successful marketing through channels and alliances
|Insights - Channel Management|
We don’t market through intermediaries, we market despite them," quipped one delegate at the February Routes to Market Association conference, Successful Marketing through Channels and Alliances. All too often, suppliers find the process of going to market with partners, whether sell-through partners or influencers, wasteful and ineffective.
What emerged very clearly from the day was that better, brighter marketing development fund programmes do not work, unless the supplier had really thought through the underlying strategy. This essential strategy spade-work is too often left out.
So what do you need to do to achieve successful marketing? The day presented several answers. For the first time, the Routes to Market Association ran a separate alliance stream (see Why Alliances Fail, page 14).
Do the strategy spadework
Most suppliers run channels tactically, with the aim of hitting this quarter’s sales targets. This approach militates against long-term success, argued Guy Swarbrick, a director at VIA International.
He said that often how companies work with intermediaries is based on an unspoken history, an accretion of past experiences. No one has sat down and thought the process through properly. Swarbrick argued that it was therefore important to go back to basics. He mapped out how companies can build winning channel strategies starting at ground zero (see Building the right channel marketing strategy, facing).
Identify and leverage your strengths
When strategising, it is vital to remember your heritage and your current strengths, rather than simply looking to the future. Andy Tallian, head of consultancy group MarketFrames, and formerly in charge of marketing at HP’s $20 billion consumer division, argued that often companies fail to do this: "They forget why they are in business. At HP we went through a period when we forgot how strong we were in printers. It took time for us to come up with a programme which allowed us to reassert that strength and to use it to win market share in adjoining product sectors."
Manage the go-to-market process
Tallian also argued that failure to effectively manage go-to-market processes scuppers many channel marketing initiatives. This happens particularly when strategy has not been thought through: "Often channel marketing lapses into day-to-day tactical programmes. Internally, people become myopic in their silos."
He says that usually 6 or 7 departments are involved in a successful channel push and, all too often, they operate independently. "Planning, marketing communications, product marketing and channel marketing all have to be co-ordinated." If they are not, then the supplier fails to achieve the full benefits of working with an extended business network. (See Win by Reconnecting, page 13).
Use major product launches to redefine yourself
Tallian went through a case study based on Big Bang, the simultaneous launch by HP of 15 printers and a range of other allied products, which saw HP massively increase sales and profitability and build its strength in areas such as digital cameras.
He argues that large product launches provide a unique opportunity to seize the strategic initiative and to gain mindshare with consumers and intermediaries. Many suppliers ignore these opportunities.
Clearly define the role played by you and your partners
It is vital to mesh together both the supplier and the intermediaries’ roles in the go-to-market process. This means having a clear understanding of your partners’ business models, argued Bruce Hall, distribution marketing manager, global strategic marketing at BP Lubricants and Georges Millet, EMEA channels director at CAD software vendor Autodesk.
Hall showed the way in which BP worked with its 2,000 distributors depends upon how their model varies. Millet looked at how selective distribution, a legal framework which gives Autodesk the right to specify resellers, has allowed it to develop particularly strong ties with its resellers.
Respond to partners’ business models
BP varies how it behaves according to the business model adopted by the distributor, said Hall. At BP, channels are defined as being either sell-through, sell-with or sell-to. Hall says: "In the case of sell-through, we, typically, are using the BP brand to pull in the customer and the distributor simply fulfils the sale for us. The customer relationship is owned by BP." This model is normally used to make sales to consumers.
In sell-with, the distributor is out there creating demand and BP works closely with the channel to develop the relationship. These tend to be business-to-business sales.
In the case of wholesalers, who are selling products on to other third parties, Hall feels that BP is operating a sell-to model. "The distributor usually owns the intermediary and there is no real partnership. Here our task is to persuade the wholesaler to sell our product, rather than a competitor’s. So our marketing here is focused on the wholesaler."
He feels it is also vital to know what role BP plays within the distributor’s business model. "Are we bit players or are our products responsible for a massive chunk of his sales? It is around questions like this that you have to frame your channel value proposition."
Finally, Hall suggested that it was vital to understand how the distributor measures his performance. "Is he still looking at overall sales levels? Or has he moved onto profitability or even return on investment? Behaviour varies dramatically according to the key performance indicator used by the distributor."
Millet agreed. Autodesk has spent a lot of time understanding how its partners make their money and would never launch a marketing initiative without taking this into account.
Think of their benefits
All too often channel programmes are launched without proper consultation with intermediaries. Millet explained how everything Autodesk did was first discussed with the reseller advisory board. "We have found their input to be absolutely critical to everything we do," he added.
Autodesk also considers the financial impact of every programme that is co-funded with its partners. "You need to answer key questions such as: ‘How much will partners invest?’ ‘How long will it take before they hit breakeven?’ ‘What is the long-term result likely to be?’"
By building close cooperation with its channel, Autodesk has been able to implement complete closed loop marketing – meaning that Millet knows the precise return generated from all the inquiries from a particular advertisement or direct mailshot.
All this is built upon a framework of regular meetings with partners, all of whom have yearly business plans and quarterly marketing plans.
Building the right channel marketing strategy
Few companies ever get the chance to build channel strategy afresh from the ground up. But it is an exercise that brings huge value, argued Guy Swarbrick at VIA International. He walked through the main steps in the process (see diagram).
Firstly, he argues that the debate has to start with the customer and the experience that they want. This involves understanding how the product is used, how it is purchased and where it is in the customer life cycle. How is the market changing? What are the fundamental trends? What does the future look like? Finally, markets need to be segmented. Here it is important not to come up with something too complex, but to identify the few sectors to focus on.
Swarbrick says that often the information needed for this crucial first stage resides in different parts of the company. Bringing the data together creates a vital foundation which has to be built before considering channels.
The second stage is to map out the customer value proposition and look at which channels can best deliver this. Swarbrick suggests mapping out all the activities needed to deliver the experience to the customer. "You can then ask which of these should be done in-house and which devolved to the channel and also which channel is best able to handle them?"
The channel eco system can now be mapped out. Which partners are capable of handling the task and how many of them are there?
In the third stage you need to drill down to better understand the capabilities of different channel partners, and what they want. Swarbrick warns that you can not trust the labels that intermediaries want to stick on themselves. "You need to look at what they can really deliver. Many distributors offer a lot of services which you would not associate with the wholesaler label."
It is here that suppliers should be developing a channel value proposition: in other words an answer to the question: "Why should I sell your product?" This has to latch into the channel partner’s business model in order to have real power.
Finally, the company needs to look in upon itself and ask "how should we organise to enable all this?"
Oddly enough, many suppliers who perceive themselves as channel-centric, fail to do this, contends Swarbrick. Often marketing programmes focus entirely on the end-user and ignore the existence of intermediaries altogether. Suppliers may fail to measure channel profitability properly.
He adds: "in many industries channels are measured by their sales levels and their receptiveness to taking dumped inventory at the end of the quarter. However, they should be measured on how profitable they are to sell through, and how much value they add for the customer".
Here companies should also formulate clear rules of engagement. These should include rules on when business will be taken direct. "Guess what? Companies who take all the biggest opportunities direct, always end up complaining about how hard it is to build a channel," he commented.
Companies should also be looking at how much direct actually costs, compared to channels. "Few companies do this. Usually you find that the costs of selling direct are far higher than are realised," he added.
Swarbrick reckons that companies are most unlikely to develop successful and sustainable marketing programmes through channels, unless they go through this process. The good news is that most companies do have most of the information they need to complete the exercise – it is just a question of finding out who has it! "In most companies you can do a reasonably effective, quick and dirty channel strategy plan".
The key is to document it. "By putting your plan, how you intend to execute it and with whom, on paper, you immediately move the conversation, internally and externally, to a new level".
Win by reconnecting: Big Bang
Successful channel strategy depends upon a properly connected business network which leverages the strengths of intermediaries and the supplier’s marketing power, argued Andrew Tallian at MarketFrames, drawing on Big Bang, a case study of a major HP product launch.
All too often, this business network becomes disconnected along one or more of three axes: history, strategy and tactics and cooperation with intermediaries.
There are many symptoms of this. Internal departments start to converge and end up competing to do the same thing. Marketing relapses into a series of tactical exercises with no clear goals. And the dialogue with channel players becomes long-winded and inefficient.
Firstly, Tallian places an almost mystical faith in the need to reconnect the past with the future: "History has an amazing power which can be redeployed." However, because many technology companies are forward looking, they fail to use their past strengths. By asking, and answering, basic questions about the company’s business focus and its credentials, HP was able to comprehend just how powerful its position in printers was and build on that strength with Big Bang.
Second, he argues that companies need to reconnect strategy and tactics to ensure the one follows from the other, rather than operating in a void. Again, the trick was to ask questions centred on the customer. What symptoms and problems are they seeing, what is our offer and what are the benefits to the customer?
Tallian argues that often the planning process doesn’t fit with, or isn’t feasible in, the outside world. At this point, the business network – the partnership between the supplier’s different internal divisions and its channel partners – fragments (see diagram). Most of the benefits, that could accrue, evaporate.
As strategy fails and the business network breaks down, so companies fall back on unimaginative, irrelevant programmes. "With one retailer HP was giving away several pounds of ground beef with every printer sold. This was a straight discount. This is the mentality which has to be avoided."
For Tallian the way to avoid this is to rethink goals and to ensure that everyone in the organisation shares the vision. "Before the network will work properly, it has to be reconnected."
Here the goal was to revitalise HP’s position in retail and to help the retailers to refresh and build their offering. This led to much closer product category planning and development with the retailers. "Once the retailers saw the range and scope of what we were offering, they were very happy to cooperate." The size of the Big Bang product launch proved a good way to win mindshare with the retailers.
Thirdly, he argues that companies have to reconnect the business system. Here again the secret was to ask the right questions internally. What is the particular contribution? How does the company use its entire marketing network to win? How will it sustain its advantage? This led to new store layouts, shelf runs, presentations and promotions.
Tallian argues that, for all this to work, it is vital that the internal departments have their roles carefully defined. "If you aren’t careful, they all tend to converge, leading to duplication. Like kids playing soccer, they all want to be on the ball. They have to be taught to play as a team."
Above all, he feels it is vital that there should not be a strategic vacuum at the centre. "If managers, partners and consumers feel that there is a vacuum, then everything slows down. For instance, the dialogue with retailers almost grinds to a halt. How big should your logo be on a display sign? That could take four months to decide. How much MDF should you contribute to a weekend store flyer? Four months. But once you actually start talking at a strategic level about retail layouts, and how we can best change in-store formats to sell more product, then you get immediate attention and decisions, because you are helping them address the urgent business problems that they face. Decisions are made in days. You have reconnected!"
Last Updated (Thursday, 02 June 2011 08:59)