CONSULTING

CHANNEL MANAGEMENT

Channel Management

Managing distributors and their sales reps is very different from and significantly more complex than managing one???s own sales team because one cannot directly control and oversee them. Yet one relies on them to do so much: represent one???s brand, overcome regulatory hurdles, set reasonable??pricing, manage an opportunity pipeline, build??relationships, conduct market intelligence, navigate the local culture,??expand??access, be financially disciplined, and close deals. To further complicate matters, most distributors are distracted, splitting their time between selling on your behalf and selling for other companies in adjacent product categories.

This leads to the two fundamental challenges of channel management:

  • Performance Management: How do you get distributors to continuously put forth their best effort and finest skill on your behalf, regardless of market ups and downs?
  • Transition Management: How do you decide when it is time to leave a partner and switch to an alternative, and how can you transition smoothly and painlessly?

Unfortunately, most organizations do not really equip their channel managers to tackle these challenges with confidence. They do not provide an effective process for how to manage a distributor, what??KPIs??to measure (beyond backward-looking commercial results), how to run a quarterly-check-in meeting or what kind of support to provide. They do not explain how to set effective tone, how to encourage information sharing or how to discuss underperformance in a way that generates more than just excuses and polite promises to do better.

Asking a direct sales manager to be a channel manager with no further guidance is like asking a an old-school, battlefield military general to drop their uniform, put on a tuxedo and be a diplomatic envoy. They might do quite well, but if so, it will be due to fortunate circumstances or strong internal instincts, not because you set them up for success.

The good news is that there are strong answers to these ???how??? questions, based on sound principles of channel management that are proven in the real world.?? As a result, they have more consistently outperformed their competitors, have grown steadily even when markets are stagnant (by grabbing market share), and have grown faster than competitors when times are good.

So what works? In our experience, each of the two challenges has three main principles, as follows:

Performance Management:

  • Measure inputs, not just outputs: Build a scorecard with KPIs that put a spotlight on improving high-priority capability gaps, not just commercial outcomes.
  • Schedule collaboration, not just accountability: Commit to a transparent calendar of interactions with your partners across the year that includes various forms of partner support and interaction, not just quarterly performance reviews.
  • Reward with status, not just margin: Give distributors higher partnership levels to strive for (and lower ones to fear) with commensurate privileges and consequences, not just deeper rebates or bonuses

 

Transition Management

  • Plan months ahead, not just weeks:??Prepare for transitions well in advance based on a forward-looking timeline, not just as a response to crisis.
  • Evaluate how candidates act, not just what they say: Examine the detail with which potential partners tailor their proposals to your needs, not just the lip-service they pay to your goals.
  • Treat outgoing partners graciously, not just efficiently: Avoid turning a former ally into an enemy by taking their concerns into account even during an exit, not just abiding by contractual rights.

These six principles may seem straightforward. In fact, many of them will sound familiar from a different field ??? that of HR (e.g. how to hire, fire, motivate, develop, reward, plan, promote). Talent management practices cannot be imported directly to guide the channel manager, but they are cousins of what works for channel managers.