These publications, while valuable to “A-list” level manufacturing firms, conjure up images of ABC’s “The Bachelor”. In this dreamlike scenario, the manufacturer chooses the top 10% channel partners while the tearful losers take the limo home.
The problem with this scenario is that the relationship between most manufacturers and channel partners is Mutual. The best channel partners may not be interested in your firm’s products or services. Either their target customers have never heard of you, your product doesn’t fit with their strategy, or you’re not offering enough money to them. Not everyone goes home with the prom queen, and every manufacturer does not get the Channel Partner of their dreams.
Here are the three things Channel Partners look for in a manufacturer:
1) Market Momentum: Is your firm’s product/system/service recognized within the industry? Do your partners’ customers ask about it?
For the technology/software industry, this often means making an appearance on Gartner’s Magic Quandrants. It means your world class firm has the vision, technology, or specialization to be a value-add to specific Channel Managers.
In the telecommunications business—look at the example of Sprint. After years of holding out, Sprint finally agreed to terms with Apple to sell the iPhone, at margins (item #3) so tight that many stock analysts gasped. Why? Customers demanded it. Said Sprint’s CEO, “The number one reason customers leave Sprint, or churn, has been no iPhone, and we believe the number one reason new customers don’t try Sprint has been no iPhone”. End Users demanded the iPhone, because it was widely known to be the best phone on the market.
Key Takeaway: Build a great product and generate demand through marketing to the key customers, and the channel partners will follow.
2) Relevance to their Target Customer: Your channel partner’s primary resource is their influence and knowledge within a certain segment of customers. If your product strays too far from this audience, or is so technologically different it will require a significant investment to retrain the partner’s Salesforce, forget it. One question to ask all channel partners—What is your ideal customer profile? Make sure it aligns with your own.
Key Takeaway: If your product doesn’t appeal to their core customer base, don’t pursue them.
3) Margin: Are you offering enough to make it attractive?
Although Margin may seem like the best way to attract channel partners, this is often the third question you should ask. If your company’s product isn’t attractive to the end consumer, and it doesn’t align with your channel partners core audience, a product that pays the widest margin still has problems finding a channel. However, all things being equal, the product with the highest margin will be the one your partners put in front of their clients. Most times, products with the widest margin are trying to do one of two things—Grow market share at the expense of profitability or generate “last call” sales for a declining product. If you’re giving them a wide margin, chances are it’s at the expense of your profits.
Key Takeaway: If Margin is your primary “Value Add”, your product hasn’t stimulated enough demand. If you ignore margin altogether, Partners will find another manufacturer who hasn’t.
Channel Managers, what other methods have you used to court channel partners? Channel Partners, what other attributes do you look for in manufacturers? I’d be interested to hear your thoughts and opinions.
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