The year 2021 has brought in new sense of optimism for channel networks, distribution networks and franchises. A recent survey of B2B enterprises with channel operations showed that:
- 91% of companies plan to increase revenue directly attributed to their partner network.
- 79% of organizations plan to increase the number of partners in their network.
Yet, only 20% of these companies say their sales program through these channels are effective. And another 5% of organizations see the number of partners in their network decreasing this year.
Coming out the chaos of 2020, it is clear that distribution channels and franchise agreements remain a viable go-to-market strategy. But how can you ensure that your channel distribution strategy is positioned for success?
While expanding your channel distribution strategy can be a sound strategy, it can be dangerous to assume that new channel partners are willing and able to end their current relationships in favor of your offering. After all, it is highly likely that their current partners have been consistently helping grow their business for many years.
So how can the partners make this work? How can we successfully align with our desired distributors and franchisees, to mutually benefit?
When working with sales leaders in the manufacturing space, we focus on a three-step process:
It all starts with a really good look from both the manufacturer and channel side to establish what value will come to each partners’ business from the relationship. In the past decade or so, this equation has changed the most from the channel side. For example, I recall working with a client who had previously worked with distributors in the paper industry. The client quickly learned that localized competition was heavy in this segment. Before long, a low-cost competitor entered the business with a slightly different approach. Rather than using local warehouses for logistics, they pioneered the use of overnight delivery and tracking capabilities to seize business from many local paper distributors.
The lesson here for manufacturers? Be sure that your channel partner has the expertise, track record, and understanding of trends to ensure a successful value-add strategy. Looking to creative solutions, like a different way of packaging your product, or to kit it in a way that reduces labor costs, can ultimately deliver a better solution to the customer.
Product training is the key to success. The most successful strategy a manufacturer can give to their distribution partners is to train them on how to best market and sell the product. Channel partners will likely face some stiff competition in selling your product. That’s why the channel must also offer value add – extra knowledge, service after the sale, installation, etc. – in order to warrant their role as an intermediary.
Increasing the effectiveness of the channel salespeople usually pays direct benefits back to the manufacturer. Many of The Brooks Group’s clients offer sales training to their top channel partners, because they know that the partner’s salespeople represent the manufacturer’s brand.
Other ways for a manufacturer to optimize its relationship with distributors include the creation of a launch package, including point-of-presence materials; lunch and learns; and a portal or other solution to facilitate communication and knowledge enhancement.
Manufacturers should think about training all the way down to the product installer, while simplifying service issues as much as possible. Making product problems easy to resolve and limiting returns – which are extremely costly for distributors — improves profitability for both of you.
The final piece is to develop a solid partner growth plan to drive your channel. Including a target number that captures the expected revenue from the partner is important, but a good partner growth plan also defines some key specifics: Who is responsible for what aspects of delivery? Who’s going to generate leads? Who is going to drive end-user demand? And, if the manufacturer is going to drive end-user demand, which lead types are they going to push to the partner?
Additionally, it is vital to spell out channel marketing responsibilities up front. How does the channel partner access market development funds? How do they earn funds? In our research, only 50% of partners are receiving funds from manufacturers for mutual marketing activities or events, or for spiffs or bonuses for reaching sales targets. That’s why we advise that you align your incentives with the activities that will deliver most impact in the marketplace.
Finally, set up a simple feedback channel. Allow your partner’s salespeople to relay information they are learning in the field back to the manufacturer. Consistent communication is key, so set up a regular communication, such as a newsletter or weekly email update, to push new product updates and information to channel salespeople.
Strengthening your channel partner network can be a great way to reap the rewards of an expanding market – but it will take a true partnership to ensure satisfaction and success for both parties.