The Plexus Channel Strategy Framework
At Plexus, we can deliver all of your IT channel marketing needs. Still, unlike many agencies, we have an in-depth knowledge of IT channel go-to-market strategy so that we can help you with everything from business development, partner selection and onboarding to sector-specific campaigns.
In our last IT channel article, we looked at the challenges for a new or growing IT vendor in gaining mindshare within the traditional 2-tier channel model, which the technology giants so heavily dominate. This time, we are switching gears to give you an overview of The Plexus Channel Strategy Framework, a model designed to guide vendors to success in the channel based on our decades of practical experience.
The IT Channel can provide the ultimate extended sales force, but the experience can be frustrating for many vendors.
Unless you plan to hire a vast global direct sales team, the IT channel is the obvious route to gain an army of salespeople across the geographic regions and markets you wish to serve. When the channel works well, it can provide the perfect vehicle to grow your business; however, for many vendors, the path to channel success can be rocky, with many failing to reach the business outcomes they had hoped for. In adopting the IT channel as a marketing route, you must align your business model and modes of operation with an external organisation, which may have very different business practices and objectives that could conflict with your business goals.
To navigate the complexities of channel engagement, we developed the Plexus Channel Strategy Framework, which focuses on five critical areas of channel engagement to surface any barriers to channel success. Our framework can be applied to any route to market, whether that be a distributor, reseller partner or OEM customer. Like any business strategy framework, its usefulness will rely on the accuracy of the information gathered regarding the business environment, with regular reassessments being a key to continued success. Strategy framework offers only some of the answers to a complex engagement. Still, our model sets out to challenge assumptions and set in place points of reference that are so easily overlooked in many IT channel partnerships.
Let us now look at the five critical areas of the Plexus Channel Strategy Framework and some of the questions that need to be answered to give your channel strategy the best chance of success.
Internal Business Alignment Factors Critical to Go-To-Market Success
The starting point and core of The Plexus Channel Strategy Framework looks at the alignment of critical sales leadership and business management functions to ensure that outcomes such as revenue goals, compensation plans, training requirements and target markets are agreed and facilitated at the highest level. We have seen many examples where a channel engagement still needs to meet revenue expectations simply because the distribution or reseller sales team were operating under a compensation scheme that needed to recognise product sales from the vendor.
The correct sales incentives are paramount for channel success and should be noticed. We see this regularly when a more minor vendor attempts to form an alliance plan with a tier-one manufacturer only to find that the channel sales team are not incentivised in any way for products included in a sale outside the tier-one vendor’s price list. This is just one type of barrier we regularly surface during the Internal Alignment assessment; other key actions and areas for consideration include
- Performing stakeholder analysis and mapping
- Identify product champions
- Establish peer-to-peer executive alignments
- Establish and agree on revenue targets
- Determine the structure of sales force compensation plans to gauge motivation to sell
- Surface tensions that may hinder proactive selling
- Identify training needs and plan delivery
- Develop trust by demonstrating commitment to joint initiatives
- Regularly review the relationship trust cycle through peer-to-peer engagements and proactive communications
This framework section focuses on the competitive solutions addressing the markets our go-to-market partners plan to sell into. The outcome of this analysis is to determine if we need to do anything to improve our product messaging to ensure our channel partners can demonstrate a competitive advantage by offering our products to their customers. There are several parts to this. Firstly, we need to understand who the purchase decision makers will likely be for our products and what each persona will try to solve through our solutions; more on this later. In addition, we need to analyse our competition, particularly the alternative vendors our channel partners do not carry within their line card. We must ensure we have provided the best competitive sales tools to help them win with our solutions. Branding can play a huge part here, especially for a relatively new vendor without an effective end-user demand generation plan. Branding is a massively important area many new vendors must address sufficiently. Even if we are looking at an OEM agreement rather than a pure channel play, we still need to articulate ways our products can strengthen the core values of an OEM partner’s brand. Some key actions and areas for consideration within this section of the framework include
- Identify the partners’ market segment(s) and their key competitors.
- Develop messaging and sales tools to assist the partner in establishing competitive advantage through our product offerings.
- Continuously monitor the competitive environment with the partner to determine necessary changes to positioning strategy.
- If the partner has branded our product, determine the core values behind their brand identity.
- Look for synergies that will enable our offering to strengthen its brand values further and co-develop appropriate messaging.
- Perform brand contact audits with customers.
- Create joint marketing communications plans based on brand audit results.
- Internal Competition
In many cases, we will find that our channel partner does carry one or more of our competitors on their line cards. In this instance, we must be strategic to fully understand the history, current status and future direction of our channel partner’s relationship with our competitors. For example, suppose the channel partner has a long-established and healthy ongoing relationship with a competitor, and we have been taken on board to provide a second source for their customers. In that case, we probably do not want to run a sales floor day handing out damning leaflets and attempting to upstage any SPIFF programs our competitors may be running.
Competitor relationships must be discussed within stage one of our framework to avoid misunderstandings and internal conflict. The best strategy is to train the partner in a value-selling approach for your products to position them where they will provide more excellent value to the customer’s solution. If you are a smaller vendor with what appears to be a like-for-like solution at first glance, you will most likely lose a price match against that more significant incumbent vendor. However, you may have been taken on board as the new golden child to displace an incumbent who fails to meet expectations, in which case the gloves can come off. Key actions during this analysis will include:
- Identification of incumbent line card competitors
- Determine the channel partner’s long-term strategy concerning incumbent competitors and their current/future expected % contribution to overall revenue.
- Develop sales tools and training to educate sales teams on your solution value positioning against incumbents and longer-term ROI for end users.
- Build trust through demonstrated commitment to joint initiatives. Start small, deliver, and build towards seamless relationship marketing.
- For incumbents that form part of the customer’s ongoing strategy, develop covert messaging that presents superior values without creating conflict.
- Ensure sales teams are compensated correctly to sell your products.
- Use MDF as required to create incentive programs.
Forming a technology alliance can be an excellent way to gain pull-through for your products, especially if you align with a well-established market leader who contributes a significant portion of your channel partner’s revenue. However, vendor alliances are a complex area worthy of a dedicated article as many of the Internal Alignment factors listed in section 1 come into play.
There is always a high risk that you will expend many resources into an alliance project for very little return. It is no surprise that many vendors invest in an alliance management team. For the best chance of alliance success, your product must offer a unique and valuable customer solution that provides your alliance partner incremental sales opportunities. This could be achieved in several ways, such as allowing entrance into new vertical markets, providing cross-sell and up-sell opportunities, or enabling the solution to integrate with additional technologies. Again, the key to success is having a unique proposition that gives value to the end customer.
If your solution merely provides the same add-on functionality as from several other vendors, you could spend months, if not years, trying to convince a technology partner to use their internal resources to add you to their qualified solutions matrix. Even if the certification process appears trivial, you may need help to gain any executive-level buy-in to commit their stretched resources to complete your certification. Vendor alliances are a broad topic, but initial actions should include the following:
- Identify all external suppliers, ISV, IHV and also customer in-house product developments.
- Look for synergies to create value through supplier collaboration relevant to end-user needs.
- Look for suppliers who contribute significantly to the partners’ % of revenue whom we may utilise to facilitate pull-through for our products.
- Consider joint messaging and collaborative sales tools with partners.
End Customer Focus
In our earlier article, we discussed the importance of gaining brand recognition and driving end-user demand as a new vendor who still needs to get the clout of a tier 1 vendor in the IT channel. A wide range of things need to be aligned to deliver a compelling message that will drive end users to seek a way to evaluate and purchase your solution. Firstly, you must ensure that your product or service solves a problem they recognise as strategically important to their business.
We see many vendors who have developed an excellent solution to a problem that only some people have. Next, you need to identify what job functions will form part of the decision-making unit (DMU) responsible for selecting the technology solution you offer. Each member of the DMU will have different needs, so your messaging needs to cover all bases. With Cloud-based and as-a-service models, technology is no longer the exclusive realm of the IT department.
You will need an in-depth understanding of the customer’s market environment, the DMU personas and the problems they are each trying to solve. Even if you are not an expert in a particular vertical market, with a bit of research, you can start to develop content that uses the ‘language’ of that sector, and if you then begin to reference industry events that have specific relevance to the solutions you provide, or quote from relevant analyst reports you will start to gain recognition for your brand as a very viable provider for that vertical market. Of course, if you can align with a channel partner that has expertise within a specific vertical sector, all the better, but in most cases, you will need to do the heavy lifting yourself at the beginning.
- Identify vertical markets addressed by your channel partners or markets where you believe your solutions can offer great value.
- For each market, identify buyer personas, their needs, and any recent compelling events in that sector.
- Consider how your product can address the needs of identified buyer personas in a differentiated way that will reset their thinking and bring your brand to the table as a new and very viable solution provider.
- Determine opportunities for collaborative end-user messaging with your channel partner.
- Brainstorm possibilities for vendor alliances to create unique value and competitive advantage in solving end-user risks.
This article is longer than we would typically set out for our blog section, but if you have reached this far, you have a vested interest in the IT channel. If any of the issues highlighted above resonate with your recent or current IT channel experience, then please get in touch.
We can offer some ideas or resources to keep you on the right track to IT channel success.
Dive into the Plexus Channel Strategy Framework, a comprehensive guide for IT vendors to navigate the complexities of channel engagement for business success.