Here’s an amazing statistic: nearly 70 percent of all sales are made through an indirect channel – a reseller, VAR, distributor, consultant or some other permutation of seller that is not the original vendor. That number is increasing, too – for example, the rate of indirect sales in technology increased from 53 percent in 1997 to 67 percent in 2007, according to Accenture.
There are many reasons for this: a need to match selling skills to local markets, a desire to expand sales reach without inflating head count, and the realization that solutions often require multiple products from multiple vendors. Contrary to opinion in the late 1990s and early 2000s, the Internet has not resulted in more direct sales.
Instead, it’s elevated the stature of channel partners. The channel has responded by doing what smart buyers always do: they’ve looked for options in who they buy from. The average partner company today works with eight different vendors, a recent Baptie & Company/CompTIA study revealed. A fifth of all partner companies work with 15 or more vendors – often, competitors offering similar products.
That means that you’re up against your competitors not just in direct sales situations – you’re up against them in internal contests within your partners.
How do you win? In too many channel organizations, the answer is always price – deliver a deeper discount than the competitor. That may get you the deal, but it costs you margin. You end up like the bank in the classic Saturday Night Live sketch - you generate nothing from each transaction, but you make it up in volume.
Another approach is to offer incentives – bonuses for including your products in channel deals. But incentives should be used to encourage positive behavior that lasts beyond the incentive itself. A poorly-planned incentive program fails at that. Bad sales may be bolstered by incentives, but when the incentives are taken away sales plummet. In many cases vendors end up offering perpetual rebates, co-op funds and MDF money, cutting into their margins.
Both approaches are harmful to the vendor’s bottom line and do nothing to boost business. Why? Because they’re approaches that utterly fail to take into account what B2B buyers really want from their vendors – and how a vendor can stand out from the crowd of competitors also trying to woo partners while at the same time protecting margin.
The trick is to understand what partners want in a customer relationship. They don’t want to have to spend lots of time making sure a deal gets done – they know what they want and they want to get it as soon as they can so they can make their own customers happy and maximize their own revenue. What they need is a sale made as frictionless as possible.
What does “friction” mean? It means anything you as the seller introduce to the sales process that slows things down. You may believe that you’re running like a well-oiled machine, but even the best organizations find ways to gum up channel sales:
- They take too long to deliver quotes and proposals
- Their quotes and proposals have errors and need time for revision
- Their approval process is manual and imposes a delay
- Their portals have no self-service buying capacity
- Their portals are poorly designed and fail to deliver product information easily
All of these problems can be addressed by a CPQ (configure price quote) solution – it automates many of the tasks that channel managers are doing manually and frees those managers up to work on other pressing issues (content, portal quality, partner leveling and education, etc.).
Doing this doesn’t just make life easier for your channel managers. It makes your customers’ lives better, too. They can get the products and services they need from you faster and thus deliver for their end customers faster, increasing their cash flow. They can eliminate lost deals caused by delays and process failures. They can stop competing on price and start competing on responsiveness, service and real teamwork with channel partners. And they can gain an advantage over competitors still struggling to deliver a decent partner experience without CPQ.
It also results in your partners having to spend less time to get what they need from you to run their own businesses. That’s a big deal – according to Forrester’s 2013 Customer Experience Online Survey, 71 percent of the respondents said that valuing their time is the most important thing a company can do to provide good service. If you’re a partner or reseller, you’re in the same sales boat as everyone else: you have a limited amount of time to sell because you have to handle other tasks as well. If your vendor forces you to wait and work a process to get the products you need, that vendor is robbing you of selling time. Who would you rather work with: a vendor who slows you to his speed, or vendor who’s using technology to speed up deals and take the friction out of the process? The answer should be clear. And if you take enough friction out of the process, price becomes less of an issue for the partner – he may spend more for your product, but he has more time to sell, to find new customers, and to deliver for his own customers, and ultimately comes out ahead.
Want to learn more about CPQ and the difference it can make for your bottom line? Download our brand new report “CPQ: the ROI Argument,” which spells out the enormous impact CPQ can have on your sales productivity and includes an ROI calculator so you can see the numbers in the context of your own business.