article | August 11, 2017
Cover the Market Completely with Indirect Sales Channels
I recently interviewed John Kedzierski, an executive sales leader who knows how to drive revenue growth through channels. Today’s topic is focused on how to go to market with the right channels. John and I answered questions from the How to Make Your Number in 2018 . To review emerging best practices in the workbook, flip to the Sales Strategy section and turn to the Channel Optimization phase starting on page 364.
John Kedzierski is the Corporate Vice President, North America Services and Commercial Markets for Motorola Solutions. Motorola provides push-to-talk communication solutions across the business-to-business space. Examples include baggage handlers at an airline, to police and fire, computer-aided dispatch systems handling your 9-1-1 calls, to communications on military bases. John will demonstrate how to cover the market completely with direct and indirect sales channels.
Today’s show is focused on choosing the right channels to go to market. Business to business buyers are rapidly changing as their preferences to engage their vendors are evolving. Buyer preferences for 1-to-1 interactions are changing. Major shifts to eCommerce and SaaS are challenging the traditional paradigms. Don’t get caught flat footed with an old go-to-market model in this new world. It’s time to look at channels differently. You will benefit from John’s detailed description of the framework he uses to select the right channels.
So why this topic on this day? Selling to customers directly when they want to buy from partners, is a sure-fire way to miss the revenue goal. Selling to customers through partners, when they want a direct relationship with your company, can be equally devastating. Within the direct and indirect channel model, there are multiple sub-models to consider. Coverage model decisions have never been this complicated, for we live in the omni-channel era.
For our audience members, could you explain a little bit about what Motorola does today?
We’re focused on government and commercial business-to-business communications solutions. We provide push-to-talk solutions from everybody who’s a baggage handler at an airline, to police and fire, computer-aided dispatch systems, which are responsible for handling your 9-1-1 calls if you call in that emergency, to communications on military bases. A broad swathe of solutions across the business-to-business space.
When you think about your business at Motorola, how do you determine whether to go to market with a direct channel or an indirect channel?
That is the key question in designing channels and routes to market. I can think of nothing more important when you’re sitting down on the whiteboard than how you’re going to sell a certain product to a certain customer. There are lots of dimensions, and there isn’t one simple answer in how you bring a product or service to customers. Now, I’ll tell you about the framework that we use at Motorola Solutions.
One, the nature of the product or service itself that you’re selling. Two, the design and capability of the channel. Three, your customer preference in how they want to buy. Four, the geographic location or country that the customer is in. Now, those are four dimensions, that can be complicated enough. I will underlie all of those by your cost to serve, and what you can afford to do to bring that product to a certain customer.
I’ll elaborate on a couple of those. When I say nature or product or solution, things of simple complexity, a widget, a bolt, bring a lot of different ways to sell those, and bring those to your customer. Different aspects of them are important to your customer. How quickly you can fulfill and how easy your customer can buy and a more complicated solution or a service requires additional technical support and most likely a vendor interaction, which limits your ability to sell it through different channels.
When I look at the design and capability of the channel, that’s equally important. More complex solutions require higher technical capabilities inside your channel. You also must look at the economics of your partner. If you’re selling a box, it’s all about margin and volume. If you’re selling complex solutions, your partner is making money in a variety of ways to attach services, systems integrations, and products.
If I jump to customer preferences, I’m a big believer that the customer is always right, however you can’t always do what the customer wants. Various ways to deliver have various costs. You can’t afford to serve every single customer in the same way, not always the exact way that you want them to. They want to be served. Geographic location, different countries have different distribution requirements, different locations if you have a solution that requires geographic proximity. That’s going to make some of your decisions for you, in terms of how you sell to the customer.
Right now, across our industry in eCommerce and the business to business space, a shift of services, and SAS, are challenging the traditional paradigms and making all of us look at the channels differently.
That’s a great framework. My audience will benefit from that framework, so I appreciate you leading off with that framework.
There are different channels including examples such as OEM, the reseller channel, the value added, reseller channel, et cetera. When you think about the indirect channel and which channels to use, do you use the same framework, just applied to the indirect channel only? Or are there added dimensions that you might consider?
We use the same framework across all of it. As we look at how we get a product to a certain customer, we use a variety of channels in North America across different product lines. I would say that most of our channels fall into three buckets. We have a traditional reseller channel that makes money and economics of products, margin, and volume. We have our dealer channel. Our dealers are much more like value added resellers that sell system solutions wrapped around with services and third-party products. We have an agent channel that sells on behalf of ours. Now, we have duplicates of those channels cross various product lines, our portfolio is broad, but they typically fall into those three buckets.
You talked about the economic model. How do different channel partners make money, what’s affordable, what’s not affordable for you as the manufacturer, what may the customer’s preference may be? If you think about the economic model in thinking what economic model needs to be used for each channel, how you do think through that?
When you’re designing those routes to market, you must understand how your channel partner is going to make money. That is critical. You can have the greatest plans in the world but if it’s not financially viable or attractive to a channel, they won’t invest their resources into the market products.
The reseller channels are relatively simple. It’s about product margin and volume in those cases. When you move up the ladder into more complex solutions, the answer is more complicated and has additional aspects to it. It’s not just about the margin on products and hardware. Now there are services components, both upfront capital wise as well as recurring and third-party products that those partners are adding to it. It becomes a much more complicated mix. It’s very critical to understand that. If you don’t, you could miss a line, a certain product into how you want to get it to a customer.
John, let’s talk a little bit about channel conflicts. Does conflict exist among channel partners and direct sales, and if so, where is it the most intense these days?
In my opinion, a properly designed channel there’ll always be some channel conflict across your various routes to market, not just direct and indirect, but across multiple indirect channels if you have those. You want some channel conflict, otherwise you risk having white spots in your markets or your product is too hard to buy, by end customers. However, it’s critical to manage that so that you make your product financially attractive to sell too much coverage and you’ll go to the wrong end of that pendulum. It’s a constant balance. You must work at managing it.
When it does flare up in our case, we think we do manage it well. It’s typically when we have customers that bridge across different product lines and you have overlapping channels, that they might be interacting with, but we try our best to keep that in minimum while making sure that our products are relatively easy to buy by our customers.
Just a follow up question for the audience’s clarity, if there’s no conflict, then maybe you have insufficient coverage. Is that what you’re suggesting?
That’s what we believe. If you have no conflict, there’s probably white spots or blank spaces in your market coverage.
Right. If you have just way too much conflict, then that’s another indicator that maybe the channel wasn’t designed correctly.
Absolutely. If you have too much conflict, then you got to look at the economics of your channel partners. They’re probably not able to make sufficient financial returns and selling your products and services.
How do you prevent conflict between channel partners? I guess in your case, you must manage it. How do you manage it when it comes up?
It’s all about designing your right market coverage. Whether you’re in urban or metro areas, partner density across those, understanding who the end customers are and the way they are, and doing your best to segment those customer bases across your various routes to market and all your indirect channels. You must have that map. You must have a plan to be able to manage it correctly. You also must get things constantly evaluated. It will change.
What degree does your sales team need to support the partner selling efforts? Let me tell you a little bit about why I’m asking that question. In my work, I work with the CEOs of large companies and they have a notion in their mind that says, “If I sell my product through an indirect sales channel, then I don’t need to involve my direct sales force at all.” Sometimes they make this decision to go through the channel just to save money. Often that doesn’t work because the channel partners need support from the manufacturer, so in your instance, what is the support requirements?
We believe that sales team engagement with your channel partners and your end users is critical. It’s the responsibility to manufacture to build market demand and awareness for our channel. Also, to make sure we’re constantly getting input from end users on what our products and services should be. We believe in being side by side with our channel partners, both calling on them to making sure that we’re hearing their feedback, and maintaining an ease of doing business, as well as building a demand and the credibility with the end customers, so that they feel that the manufacturer is behind that channel partner.
The next question would be, then what does the channel partner do? If you must go call on customers with the channel partner, if you must support the channel partner, what value add is the channel partner providing you? What role do they actually play?
They play a critical role. The end markets in the business to business space, especially enterprise is immense. The engagements that I discussed, they vary. That engagement could be from our marketing message, digital marketing and getting leads out to partners, to a side by side sales call. There’s no one size fits all, and we absolutely wouldn’t go side by side on every single sales call to every potential customer in North America. It varies by the type of customer, the potential opportunity. The partners are the ones that the customer sees every day, that are making sure that if you have an immediate issue, that it can be fulfilled or resolved. The geographic proximity that I discussed earlier, most of the time, they’re always closer. They’re the face to the customer and that’s who we depend on to make sure our customer is ultimately happy.
I agree. They say it takes a village, right? In this case, I think it really does.
John, how do select, recruit, and onboard the right channel partners?
In Motorola Solutions, we enjoy a stable and long-term history with much of our channel. That’s an extreme benefit and we don’t take that lightly. We cherish that relationship that we have. Change should always occur in the margins. You’ll always have some partners leaving and requiring some new market coverage, whether it’s a vertical or geography in this particular area. We count on our channel sales team to find and recruit those partners. There’s no better way than to find a new partner to represent you to a customer than seeing who that customer is going to already and finding out if there’s a fit.
I think that’s a great idea. Just pay attention to who the customer trusts and if that’s somebody that can represent you as you would like them to, that’s a great way to think about it. Sometimes often over looked, but the best ideas are always the easiest ones. That’s a great recommendation.
When we’re talking about messaging, particularly proprietary messaging and value propositions, and in some selling environments, those aren’t mission critical. Some selling environments, they’re really mission critical. In the environments where messaging, particularly value props are so critical, often that requires to sell that type of product through a direct sales force, versus an indirect sales force. The general rule of thumb there, and again this is a blanket statement that doesn’t apply everywhere, is that the more complex the messaging, the more difficult it is for the channel partner to sell that product successfully, because they’re not an employee of the company. They might not have a full grasp of that value prop. In your environment, is that true or not true? How do you think about the complexity of messaging versus channel selection?
It’s absolutely part of the recipe and dimensions I discussed earlier for channel selection. Regardless of that complexity or channel, we believe it’s our responsibility to arm whoever is selling our product with the value prop, so they can communicate to a customer why they would buy the solution and how it solves a problem for them or improves a result. We spend considerable effort on that. This is difficult and we can always be better and continuously strive to improve the quality of the messaging, the marketing content and collateral that we deliver to our channel partners on how we deliver that. Whether it’s webinars, documents for download, or in person training. We focus a tremendous amount of effort on that. We want everybody representing our product.
In the enterprise space, the vast majority of our sales go through channels, different channels depending on the complexity of the product. It’s an ongoing effort to arm them. That’s a reason that a channel partner would invest their sales and marketing resources in representing our product and our brand versus another one. It’s additional competitive differentiator. In a competitive environment, through a channel, you’re both trying to sell to the end customer, making sure they want your product, but you’re also vying for that mind share with the channel partner so they’re investing their resources in your brand.
The way that you do that is through kind of a channel enablement plan. You take all this content, for lack of a better term. You give it to your support team. The support team goes to the channel partners and trains the channel partners on the new messaging. That’s a reason why your channel partners would want to represent Motorola because of all that support. Did I summarize that fairly?
Finally, if you were speaking to a peer, who just landed a job leading channel sales organization, what are the first three things you would advise him or her to address?
There’s a lot of complexity in any kind of channel business. If I was going to boil it down to three things. I’d say most importantly, look at it every day and review it, have a map of who sells what to whom. That’s critical. It changes all the time as you have new products and solutions. Don’t just assume that everything you did yesterday will work tomorrow and re-evaluate who sells what to whom constantly. Secondly, I would advise relative to that first question, always know who your end customers are, and what your dynamics are affecting them. Different markets, different verticals, if you’re in the energy sector, obviously oil prices have effected certain customers. As the channel leader, think about the end market all the time. You can fall into a trap of always thinking about the route to market and losing the big picture of who is using the product or the service at the end of the day. That’d be my second point.
Finally, be transparent with your channels. Change is constant. However, you must make sure that the plane keeps flying while you’re changing the engines all the time. If you’re trying to stay number one and make the number, you must constantly change. There is a risk there. If you’re not transparent with your channel, the impact is bi-fold. One, you could lose the mind share. They could lose trust with you with what you are trying to do for both of you to win together. At the second time, they’re in front of the customer more than you are. They can provide tremendous feedback and prevent you from making mistakes. They’d say, “Who sells what to who?” Never lose sight of who your end user is. Be transparent with your channels of where the boat’s going.
Fantastic advice, really. John, that was a great demonstration on how to cover the market completely with direct and indirect sales channels. I want to thank you for sharing your approach with our audience.
Thanks. My pleasure. Thank you for the opportunity.
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