Addresses issues to consider when developing an effective channel strategy & program. Lecture delivered by Craig Justice at University of San Diego to graduate students in the MSEL (Masters of Science in Executive Leadership) program, March 12, 2011.

1. Effective Channel Management Craig Justice, Alliance International Lecture to Master of Science in Executive Leadership University of San Diego, March 12, 2010

2. Channel experience from a number of industries.

3. Definitions “Channel Sales” is the use of well-defined distributors, resellers, VARs, websites and other sales outlets to transact sales of your branded product/service “Business Development” involves creating partnerships with companies to take advantage of their channels and customer base and includes OEM, Private Label, M&A A “Reseller” , “Dealer”, and “VAR” sell direct to end-users. A “Distributor” sells to resellers and does not sell direct to end-users.

4. Why Use Channels? Reach important buyers or segments not adequately served online or by your sales reps Extend sales reach & accelerate growth Make it convenient (remove obstacles) for customers to buy Penetrate international markets

5. Channel Fundamentals 101 It’s all about the incentives/motivation you provide ….

6. Channel Fundamentals 101 With the exception of VARs…. distributors & resellers don’t sell your product. (Your marketing & your sales team do that.)

7. Distributor & Reseller Landscape Courtesy of : ChannelSources

9. Multi-Channel Model

10. Considerations Before Starting Executive management: growth objectives, margin, price control, resource allocation priorities, support, credit policies, cash flow Operations: channel manager, sales support, marketing support, resource allocation, budget, compensation policy inside sales, lead allocation What is your value proposition? For channel partner? For channel sales rep? Ideal profile of your channel partner? Ideal program for your offering? Talk to potential partners before finalizing program. Your Goals, Objectives & Plan

11. Comprehensive Program Pieces Pricing Considerations: Does your pricing reward partners who promote /recommend/demo your product? Order Makers vs. Order Takers “Deal Registration” Special Pricing to encourage hunting Retail price maintenance MAP (Minimum Advertised Price) MSP (Minimum Sales Price) Channel Sales Team In-house Independent sales reps in field (5% - 10% commission) Recruitment Strategy Develop profile, trade shows, telesales, in person calls, reseller sales sheets & resources (price lists, contract), eval program Contract: key business issues: territory, exclusivity, price level, return policies, stock rotation, payment terms

12. You’ve Recruited Partners, What Next? In House Resources Who will provide training, answer questions, provide sales assistance, manage account? Out of sight, out of mind. 90% of life is showing up. Training: KISS Recorded webinars, videos, screen cast with incentive Training sheets, tests to become certified Live training over web, in person Develop Territory Sales & Marketing Plan With VAR partners with goals & planned activities. Manage it!

13. Channel Marketing Marketing “kit” for partners containing resources (on line) Special demo pricing. Friends & family special. If reseller rep uses your product they will recommend Provide leads to channel partners or sell direct? Market development fund (2 – 5% of sales). Will you require partner to co-invest in activity? Will you proactively work with partners to generate leads? Pay to Play. How effective? Pay to be in their print catalog Pay to be on their website Pay to participate in lunch & learn Pay to participate in their vendor summit Pay to participate in their show case to end users Pay to do direct mailing to their list Pay to participate in their trade shows Pay to support a funded head

14. SPIFFs & Rebates SPIFFs can be useful to stand out from crowd where there is competition But…. Rebate program to reward VAR owners Rebate program (through distribution) for specific resellers as part of a marketing program

15. International Channels Planning, prioritizing. Where is low hanging fruit? Which are largest, strategic markets? Regulatory requirements? Electrical, safety, power? Piracy, patent infringement considerations Localization Exclusivity Pricing: should you price higher, lower, the same?

16. What They Don’t Teach You in School Channel sales reps respond to enthusiasm & opportunity to make money. Channel reps appreciate when you make money for them (give them leads, support, joint sales calls) Channel reps/partners appreciate honesty. Screw them, loose them. Taking an account direct Mislead / Lie

17. Case Studies: Risks of Foregoing Channel Interactive Whiteboard Industry U.S. company cuts VAR channel program to sell direct and stalls. UK -based IAWB company comes to U.S. sets up channels and becomes strong player. Software Industry Internet sales focused company ignores channel & remains small. Other companies starting at similar size built channels & grew 5 X larger.

18. Tips for Channel Managers It’s not about: “It’s the end of the month and you need to order.” It is about making money for valued partners Develop good relationship with accounting dept Avoid end of month, end of quarter “specials” Be wary of large, stocking order “deals” – low priced product may show up where you don’t expect Avoid exclusive contracts. If you must, draft & monitor goals. Require opening stocking order to demonstrate commitment If you’re trying to build a VAR channel, be careful about over distributing Be responsive. Be straight-forward.