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Is Your “Partial-Channel” Business Stalling? 3 Human Emotions that Prevent Traction

February 27, 2016 10:04 pm / Leave a comment

Recently I had a call with a channel director for a company based in India. His company sold software for banks and he managed their channel for them across the Asia-Pacific. region. It struck me that the challenges they faced is common to many companies in the tech industry – and beyond, and that they were rooted in decisions made years ago by his company, when they set their route-to-market strategy.

His company had sold “direct” until about 5 years ago when they started adding “some channel”. Now they had a loose network of 1-2 companies per country who acted as “Agents” for them in Australia, Singapore, Taiwan, Malaysia, Vietnam, Thailand, etc.… He had previously managed their business in Europe and they had the same setup – and the same challenges….

Of the 20 or so countries he managed, with nearly 50 partners, he only considered 3-5 partners to be focused and enabled on his business. His plan was to get another 3-5 enabled in 2016. He’d done this before and knew he would need to 1) focus on a country or set of partners, ) he would need to spend a lot of time with the partners’ technical team to help them get “enabled” and 3) he would need to get them engaged with his field sales team with account targeting. But since he had gone through this process before, he also knew just how hard this was going to be – and in the end, that it was a gamble that might not work…

 

What Could the Channel Rep/the Company do to Become Relevant to Partners and Gain Their Focus and Commitment?

 

The company had a sales rep or two in each of these countries, and as we discussed the situation, what jumped out at me was the shallow relationship that the vendor seemed to have with these Partners. Sometimes they would be engaged (when the vendor brought them into a deal), but then they would not talk for a few months. In the channel manager’s heart, he knew that every week that went by without engaging, meant the Partners’ business was moving farther away from selling his product…

 

So what was the “Route-to-Market” decision that led to these issues?

The decision to have a “Partial-Channel” Sales Model!

 

What I mean by “partial channel” sales model is that some business is sold by partners, and they get compensated for what they sell, but a lot of the business is sold directly by vendor sales reps without involvement or compensation for any partner. They have “some partners”, but neither party is very committed to the relationship.

 

My experience is that

  • Vendors can have some success selling “Direct” (particularly in specific segments/markets)

OR

  • They can be successful with an “Indirect” (or channel) sales model.

 

But it is hard to be successful with “partial-channel” sales model.

 

The results are like the old saying, “You cannot be ½ pregnant”. Either you work with partners, or you do not. Working with partners only when it is “convenient” does not result in a true partnership (or much revenue).

So why is this the case? A “partial-channel”sales model makes building a channel difficult because it runs completely against 3 Powerful Human Emotions that dictate both vendor and partner behavior. These 3 emotions are incredibly powerful and stack the deck against a “middle-path” on channel –

  • Trust
  • Envy
  • Greed

Let’s discuss each of these emotions and the dynamics of selling in a bit more detail.

Trust

We intuitively understand that “Trust” is a good thing in a partnership – but clearly lack of trust can have a very bad impact. Unfortunately, a “partial-channel” model tends to create a lack of trust between a vendor and their partners.

Think of it this way – on Monday, you make a sales call together, with your partner.   But what is the vendor sales rep doing the rest of the week? In a “partial-channel” model, the answer often is, “calling on customers direct”. That’s OK and was probably the situation when the partner signed on, but it makes the partner ask themselves questions like:

  • “Why didn’t the vendor ask me to work with them on ABC opportunity (that I heard about in an RFP)?”
  • They sold XYZ opportunity direct – and I’ve known that account for years…
  • I just invested in training on their new product, how could I recover my costs if they don’t work with me?
  • I wonder how they decide when to work with me? It is probably just their sales rep trying to make more money on the deal by keeping me out…

All of these questions indicate a lack of trust in the partnership – and make it less likely a partner will commit, invest and initiate new sales opportunity for your products…

Envy

Google dictionary defines envy as “a feeling of discontentment or resentful longing aroused by someone else’s possessions, qualities or luck.”   When a vendor has a “partial-channel” sales model, they often create guidelines for when they will sell “direct”. For example, they might say they will sell direct only to a) some named accounts, b) their current customers, c) some particular geographic area or d) specific vertical markets (such as financial services).

The problem with these carve-outs is that they create “envy” in the channel. Even if the reasons for the approach make sense on the surface, they create a dynamic of “envy” where a Partner tends to ask themselves questions like:

  • “What if I did invest more in selling Vendor A,’s products? I can only sell it to some of my customers. I’m limited, and they are keeping the best accounts for themselves.
  • “I wonder if there is even any opportunity in the accounts/markets where I can sell? It might be a waste of my time – and then they may take other customers/segments direct later (lack of trust) ?”
  • Why bother – I have better opportunities to pursue…”

Greed

The last emotion that keeps a “partial-partner” sales model from thriving is “Greed”. Once again, some business is “Direct” and some business is “Partner”. The question becomes “How” does the vendor decide what is “Direct” and more importantly “Who” decides. The reality is that in many organizations, the field rep is loosely managed and can make the call whether to leverage partners or not. At some level that makes 100% sense – since they are in the best position to judge the customer situation and the partner capabilities to support the deal.

Unfortunately that is where “Greed” comes in. I cannot count the number of stories I have heard over the years from partners, from channel sales managers and even from sales reps, recounting that the deciding factor in whether to use partners was “How much will I get paid on this deal?”.

 Many vendor compensation plans pay less to a rep on deals that go through the channel – because they get paid on the net selling price (which is the price paid by the customer minus discounts taken distribution/ resellers). In the short term, the Rep gets paid more if they sell direct. In the long term, he may/may not realize/or believe that he would get paid more if they had a strong channel in their patch. But the lure of higher compensation today makes the long-term question disappear for many reps and for many vendors…

 

So What are the options if you are stuck in the middle with a “Partial-Channel? Sales model?

 

In my experience, if a vendor has decided they need a channel, then they need to go “all in” and be willing to have a business that is 100% “channel touch”. They can still set up programs to differentiate channel margins or commissions based on role the partner played, but the assumption needs to be the partner is involved at some level in every deal. With this mandate, the vendor field reps are encouraged to use “team selling” and know they cannot sell around the partners, just to maximize the value of a first deal. That policy provides some incentive to support and enable partners. At the very least, partners are involved in fulfillment – which helps some with “Envy” and “Greed”.

It takes a lot more than that to create a strong partnership – and to begin to build “Trust”. The goal is to get partners to go beyond reactive to proactively creating sales opportunities. A lot of things need to change in the vendor’s GTM to make this happen (strong channel program with incentives, field engagement model, partner enablement, etc.…). But the first step is knocking down (or at least minimizing) Envy and Greed that having a direct team “in competition” with the channel creates. It is not the end of your journey to driving more channel revenue, but at least it is a start…

I welcome any comments below — And make sure you “Follow” our blog (look for the “Follow” link on the left sidebar) and have your say. I’m also available as a public speaker, to support local and global events in Silicon Valley, or the rest of the flattening world…

For more details, and to stay in touch with this community, contact me or Subscribe to our “Climbing Out of the Box” Newsletter via the form below.

 

(Shared) Sales Force Not Selling (all of) Your Products? Three Common Levers to Create Sales Focus (Part 3 of Series)

August 14, 2015 9:34 pm / Leave a comment

In the first post of this series, I discussed the widespread assumption in the Tech industry that shared sales forces help encourage “Survival of the Fittest” products. In the second part of the series, I discussed a checklist you can use to determine if your products can be sold via a shared sales force.

In today’s post, I will be talking about the Pros, Cons and Reality of the “Three Common Levers to Create Sales Team Focus”

Does “Survival of the Fittest” work for a shared sales force? Sometimes, but from what I’ve seen, more often there are major distortions to the “fittest” based on other factors that drive attractiveness to sales. In my experience the products that get sold by a shared sales force are not necessarily “the fittest”, but instead, the products that meet more “human” needs – like reps looking to meet their quota, hit their “accelerators”, or even just to keep their jobs for next quarter – and are often dictated by the comp plan. The way they vote with their time may or may not coincide with what the executives feel are the longer term interests of the company. Of course, a company falters if they miss short term performance needs, but I would argue that just as many tech companies falter when they sell the “products they know, or can sell fastest, until the differentiation for those products withers and they and the company are left in a weak strategic position…

In my experience, there are 3 main tools that most tech organizations use to gain sales rep focus.

3 Tools to Manage “Product Sales” in a Shared Sales Force

  • Tool #1: Provide Transactional Incentives for Product Sales
  • Tool #2: Provide Sales Overlays to Create Additional Sales Focus and Expertise
  • Tool #3: Adjust the Compensation Plan to Provide Incentive to Sell Products

Tool #1: Provide Transactional Incentives for Product Sales

Creating Focus

Transactional incentives are the most common approach to influence sales rep behavior and focus. We’ve all seen this approach till we are numb and a bit confused by the overlapping incentives that are running from different groups each quarter.

Pros

  • $s influence a coin-operated sales team
  • Can be effective for transactional sales

Cons

Is “lack of an incentive” really the reason you don’t have focus on all your products?

Tool #2: Provide Sales Overlays to Create Additional Sales Focus and Expertise

Creating Focus

Since Overlays only sell particular products, they can’t get distracted by easier sales, and they wake up every morning trying to sell your product. Often these overlays are SEs, so they can provide both technical expertise and some sales coaching specific to the product.

Pros

  • Have a team focused on successful selling of a product
  • Provide a feedback loop for product marketing or business units seeking customer feedback on their market

Cons

  1. Typically provide double compensation for the same sale, to encourage collaboration
    • And as any sales executive knows, you don’t want to pay 120% of sales payout for 80% achievement…
  2. Sales overlays have different goals and it is common for organizations to have INTERNAL sales engagement across products. As companies get larger (think HP, Cisco, even mid-sized companies like VMware) different Reps have different agendas at the same customer
    • The Account Reps/Teams who own the overall account and get credit for all sales into the account
    • A great vendor sales rep is often quite “controlling” of the decision makers and timing for discussions within their accounts, and this instinct tends to undermine efforts by those who have different roles, including:
      • Your Sales Overlay Teams that must sell their product
      • Your Strategic Alliances that are trying to sell joint solutions into the same account
      • Your Channel partners who might be selling your product as part of a larger solution that won’t close till next quarter

Tool #3: Adjust the Compensation Plan to Provide Incentive to Sell Products

The most common approach to setting a compensation plan is “a dollar is a dollar”, where the comp plan does not differentiate whether the sale is for Product A, Product B, Training or Professional Services ($ all goes to the same place anyway, right…???)

Creating Focus

  • Quota for individual product groups. For example, a Reps $500K quarterly target might include a minimum $100K from a particular “Strategic” product group
  • Accelerators for certain “emerging/strategic” products (e.g. earn 150% quota credit for selling emerging Product X)
  • Carve-outs – making some easier, “low-hanging fruit products” or categories of sales not part of the compensation plan. For example, many/most technology vendors do not pay their field account reps for Renewals, because that might unnaturally incent Reps to “farm” the renewals business, rather than “hunt” for new business

Pros

  • $s influence a coin-operated sales team
  • Impact to compensation can be significant enough to influence behavior (more than incentives)

Cons

  • Must be utilized sparingly, or comp plan is too complex and Reps get mixed signals on organization priorities
  • Complex comp plan with accelerated payout can result in sales reps making their number, but the organization missing bookings, revenue and profit forecasts.

But here is the dirty little secret of shared sales forces…

Even if you can assign a Product-Specific quota and have an Overlay Sales Force it is quite possible that your organization will lose sales focus (and revenue) on some products

What can organizations do to have a cost effective sales force and sell all their products? In next weeks post I will talk about some “Out of the Box” approaches organizations can use to gain the cost advantages of Shared Sales Forces AND Sell a wide range of products.

I welcome any comments below — And make sure you “Follow” our blog (look for the “Follow” link on the left sidebar) and have your say. I’m also available as a public speaker, to support local and global events in Silicon Valley, or the rest of the flattening world…

For more details, and to stay in touch with this community, contact me or Subscribe to our “Climbing Out of the Box” Newsletter via the form below.

(Shared) Sales Force Not Selling (all of) Your Products? Use the “Shared Salesforce Checklist” to Uncover the Issue (Part 2 of Series)

August 5, 2015 12:15 am / Leave a comment

Last week I talked about challenges tech organizations encounter when they use a shared sales force to sell multiple product groups. The organization may indeed recognize increased sales efficiency, but also may see a drop in sales and profits derived from some products. Which of these effects is larger depends on your business – but beware of adopting a shared sales force, without taking a hard look at the potential negative impacts on some parts of your business.

(Shared) Sales Force Not Selling (all of) Your Products?

In Part 2 of the series, we will talk about the variables that make a shared sales force across products a success, and when the benefits are an illusion.

When does using a shared sales force work well?

At a high level, it can work well when the products or the business model for the products being sold fit together in some way. In this weeks’ post I will explore this fit in more detail and talk about a tool that I have developed and have used over the years to help companies think through when a shared sales force approach makes sense for an organization. I call this tool, “The Shared Sales Force Checklist”, and the checklist is shown in Figure 1 below.

A good way to get started is to complete the checklist yourself, and then get additional perspectives from customers, and folks within your sales, marketing and product organizations. You will notice that while the questions are Yes/No, you need to think about the underlying question before you decide if the answer is the same for both products. For example, to answer, “Sold to Same Customer”, you need to define target customer for each product. You can use the “Description” column on the right to fill in these details. By comparing the answers from customers and your internal staff, you can make a lot of progress determining how well your products fit together for a shared sales force. 

Figure 1: The “Shared Sales Force Checklist”

Shared Sales Force Checklist

 

 Let’s take a look at the questions in the Checklist in more detail. A single shared sales force selling multiple product groups can work well when:

  • They are Targeted to the Same Organization
    • If you are selling to different types of organizations, you may not be able to get sufficient customer intimacy to sell both product groups For example, problems can arise if one product is sold mainly to Healthcare and another is sold as a horizontal sale across industries.
  • They are Sold to the Same Buying Group and Decision-Makers
    • If you must sell to very different buying groups within an organization – like Line of Business for one product and IT Operations team for another, you may find that it requires a completely separate set of sales calls and account relationships.
  • They Solve Related Problems and are Part of Complementary Solutions
    • If two products are part of the same solution, like two components of the corporate network, you may find that both projects are part of some of the same projects – and therefore get solution synergy.
  • There is “Shared Learning” Across Products
    • If two product groups have a different set of baseline technology and industry learning needed to sell them effectively, training can be difficult and the sales team may resist requirements for hours of enablement training.
    • For example, it may be difficult to sell one product that fits into the network and another product that optimizes storage with one sales force. Your sales team would need to be educated on technology, industry trends, problems and competitors for two separate ecosystems of vendors – a lot to ask for a group of employees who are supposed to be spending their time with customers…

There are also some other significant elements of the GTM for Products that can accelerate or sabotage efforts to share a sales force, and in my experience, organizations tend to overlook or discount their importance.  A single shared sales force selling multiple product groups can work well when:

  • They Have a Similar Sales Process
    • For example, if one product is sold transactionally based on price, and another is a consultative ROI-based sale, they will be very hard to sell with one sales force.
    • I saw this in one client where they had two similar products, but one was sold directly to developer teams and the other was an Enterprise sale. The Product Marketing folks that sold to developers kept expecting the sales team to carve out part of their time to sell their product, but were consistently disappointed…
  • They Have a Similar Route-to-Market
    • For example, if one product is sold by a group of Enterprise Sales Reps on Global Accounts and another is sold by System Integrators who build the product into their solutions, they will be hard to sell with one sales force

In next week’s post, I will talk about the 3 main tools that Technology vendors use to prevent issues with using a shared using force, when these tools are effective (and when they don’t have the intended consequences…)

I welcome any comments below — And make sure you “Follow” our blog (look for the “Follow” link on the upper left) and have your say. I’m also available as a public speaker, to support local and global events in Silicon Valley, or the rest of the flattening world…

(Shared) Sales Force Not Selling (all of) Your Products? (Part 1 of a Series)

August 1, 2015 12:10 am / Leave a comment

For many technology vendors, a Shared Sales Force across multiple product groups is reality of how they go to market and sell their products. Sometimes this approach brings the hoped-for coverage synergy and robust bookings, But as we have all seen in our careers, sometimes “things don’t work out so well…” If you’ve had the role of VP/GM or Product Marketing for a product business unit, you know that

“SHARED SALES FORCE” OFTEN EQUALS BUSINESS UNIT FRUSTRATION AND LOW SALES $

A friend of mine used to be the VP and GM of a Product Business Unit with a tech vendor with many product groups and about $700M in revenue. His organization used a shared sales force across many business units, and his business was allocated a share of the cost of several other sales organizations within the company (that could conceivably sell his products). The problem was that despite all of these “allocated” sales resources, none of the sales teams to spent time selling his product (which did not help his BU performance…). After a year or so, he concluded that he could not control his own destiny, and he chose to move on to greener pastures.

salesperson-choice

The challenge is that when organizations use a shared sales force across multiple product groups, the sales team is asked to vote with their time, by focusing on selling some products and not others. The Tech industry generally sees this decision as an application of Darwin’s “Survival of the Fittest” theories on evolution, to “Survival of the Fittest” tech products.

Shared Sales Forces are usually seen as a way to gain sales efficiency. While it always makes sense to look for ways to reduce the cost of sales…

My experience is that tech vendors often make the decision to use a “Shared Sales Force” without fully accounting for how the approach will also reduce revenue (and profit) for some products…

Some lost revenue is inevitable and planned for, but what if some of the product groups lose a significant amount of their sales, or even just do not grow as expected. Would the decision to use a shared sales force still make sense? Of course the answer is “it depends”, but I think it is fairly common practice is to make the change to a shared sales force based on “financial necessity”, and assume that the BUs and the Sales Team will “figure out a way to make it work”.

The issue is that what often what happens is an accompanying reduction in sales and profit from some products – which can make a decision made for a “financial necessity” into a “financial disaster”…

Let’s take a look at a sample scenario below.

  • In Table 1 we have the baseline situation with 5 products being sold, each with different revenue and gross margin %.
  • In Table 2, we see a potential scenario of how that revenue could change with a shared sales force. The new approach works very well for Product A and Product B, which see 18% and 20% revenue growth respectively. The problem comes with Products, C, D and E (which have smaller revenue, but a higher GM% (perhaps due to lower competition, or a developing market). These products see significant revenue decreases and lost margin $.

Shared Sales Force Impact 1

Shared Sales Force Impact 2

Table 3 below shows that in this example, the Total Revenue $ Decreases by $4 Million (=96-100) and Gross Profit Decreases by $4.65M ($55.30-$59.95) – not exactly the outcome that the company wanted…

Shared Sales Force Impact 3

I am not saying that this always happens when companies go to a shared sales force

What I am saying is that companies need to be honest with themselves, recognize that this scenario can happen, and factor this into the decision on how to structure their sales organization

Technology Companies tend to assume that that sales and the product teams will “figure out” a way to minimize this issue, but depending on your situation, the revenue you lose may be gone forever… So how do you know when you are pursuing better sales effectiveness and when you are pursuing an “illusion”?

In next week’s post I will talk about “The Shared Sales Force Checklist”, a tool that I’ve developed to identify when different product groups can be sold together successfully – and when the hoped-for synergy is an illusion…

I welcome any comments below — And make sure you “Follow” our blog (look for the “Follow” link on the upper left) and have your say. I’m also available as a public speaker, to support local and global events in Silicon Valley, or the rest of the flattening world…

For more details, and to stay in touch with this community, contact me or Subscribe to our “Climbing Out of the Box” Newsletter via the form below.

Channel Not Ready to Sell: Do You Make “Enablement” Real with “On-the Job” Training? (Part 5 of the Series)

July 7, 2015 9:00 am / 1 Comment on Channel Not Ready to Sell: Do You Make “Enablement” Real with “On-the Job” Training? (Part 5 of the Series)

A number of my recent posts have focused on challenges and best practices to “enable” your channel and drive revenue. Below is the list of the posts so far:

Channel Not Ready to Sell?

 

In the final post of the series, we will be talking about Natural Law #5

  • Sales Engagement: How Channel Enablement Becomes Revenue $

 onthejobtraining image

 

Let’s start with a baseline question – How much training does it take for someone to be able to do something effectively? That seems like a reasonable question, but it actually misses a critical point of enablement.

  • In order to be “enabled” to do something, people need to learn how to do it, and then they need to practice the skills they’ve learned

But think about the “enablement” programs that you’ve seen in your career. How many of them provided opportunities to practice what was learned? I’ve seen it happen it happen occasionally, but not often. Sometimes the vendor coordinates “Role Plays” in a workshop setting, and I’ve done whiteboard training where the participants broke into small groups and practiced whiteboarding to each other. But for many vendors Training = Enablement, because creating “practice” can be complex, hard to measure, expensive and difficult to scale.

That statement defines the dilemma that tech vendors face:

  • Partners need practice to be effective selling
  • But providing a programmatic way to get practice can be complex and difficult to scale

What can vendors do the provide opportunities to practice and get partners “enabled to sell”. The answer is something that the sales reps do every day – talk to customers (and to do it with partners, as the final step in “enablement”). What I am suggesting is connecting your “Enablement” plan to your Sales Engagement approach.

Those of you working in large vendors may be reading that suggestion with skepticism – how can a field Rep at a complex vendor and a lot of partners (like Cisco or HP) participate in “channel enablement”. After all, that is the Enablement Team’s job and is done by “corporate” folks, leaving the field to do their job, to engage with customers….I see your point, but hold that thought for a second.

 

When have you seen “enablement” work well, so that the teams in the field are confident that they can rely on the local channel partners to initiate and close sales opportunities?

 

In my experience, “enablement” works when there is a strong connection between the local sales team and the partners. That connection often occurs in smaller companies where the local sales team has responsibility to recruit and enable partners in their region, to help them in selling deals in their territory (but no so often in larger companies with fragmented responsibilities). Part of the value in this model is that the local sales team feels that they are accountable for helping to “enable” the partners in their region, to help them in selling. But a large part of the value is the local sales team, not only trains the partners, they go with them on sales calls and provide feedback on their progress. In other words, “THEY PROVIDE ON THE JOB TRAINING”.

That sounds wonderful, but it does not scale well to a larger company. You can’t expect the local sales team to own recruitment, on-boarding and the enablement process for all their partners. But the local sales team could be accountable for the “last mile” of enablement, which helping partners practice what they have learned by going after real sales opportunities together.

How would this work? The critical element is creating a channel program requirement that the “last mile” of enablement occur in the field with the local team. In this model, it would be part of their role to work with the partner to jointly engage with customers (and get on-the-job-trainijng). In effect, the process would work the same way it works for the channel-savvy and channel-friendly reps that you already have:

  • New partner or newly certified partner calls the local team looking to work together on some opportunities
  • Often the onus is on the partner to provide the first couple of contacts for targeting – after all, they have many local customers, just not with the vendor’s product (and what vendor does not want that???)
  • As the vendor sales team and partner get used to working together and have some success, the vendor reps bring the partner into opportunities
  • As the relationship matures, the vendor sales rep and the partner start to do joint account targeting and selling, with defined roles like “Partner SE runs the POC” follow up from the intial meeting…”

That process is really just basic sales engagement. But for many vendors, this process only occurs where you have sales reps that understand how to work with partners and drive revenue. With channel program design, there are always important details to define and operationalize, but this approach is a winning solution for vendors and for partners.

The opportunity is to build this approach into your channel enablement plan and “Package” the Enablement (see my recent post on this) this into your channel program to scale. This approach has the following benefits:

  1. Create a set of “enabled” partners who have both the training and experience necessary to help vendors drive revenue
  2. Help the vendor field standardize on a best-practices sales engagement approach that creates new sales opportunities and a community of enabled partners in their territory

I welcome any comments below — And make sure you “Follow” our blog (look for the “Follow” link on the upper left) and have your say. I’m also available as a public speaker, to support local and global events in Silicon Valley, or the rest of the flattening world…

For more details, and to stay in touch with this community, contact me or Subscribe to our “Climbing Out of the Box” Newsletter via the form below.