Two opposite but equally strong trends are occurring in the hi-tech marketplace:
* The collapse or “disintermediation” of the distribution channels originally set up to move products from manufacturer to end user.
As pricing and margins shrink, technology obsolescence and innovation increase, and speed to market becomes critical, hardware and software firms are going direct.
* The addition of other firms to the marketing mix that might reduce the selling cost but, more importantly, add a missing ingredient to selling a complex solution.
These value-added business partners may only distribute the hardware and/or software but frequently provide key components such as customization, service and support for the customer.
This situation leaves one wondering what's really the right strategy. An unintended consequence is that the channel members, which include distributors, value-added resellers, value-added dealers and business partners, are even more skeptical of working closely with their suppliers, fearing they may switch strategies and go directly to the customer.
For database marketing to reach its potential, there must be cooperation and feedback from channel members because they have direct customer contact. This is not to assume they also possess much customer knowledge, other than transactional information, since most channel members are good at selling but not database marketing.
In essence, they face the same problem as the primary supplier. Certainly, this is a common ground in establishing a partnership. So here are five recommendations for partner database marketing:
Talk. Sounds silly, but more often than not, no meaningful dialogue has transpired on database marketing. So sit down with the channel member and discuss what it is all about. This education may even include a basic course, because if the channel partner is not properly schooled, selling the concept will fall on uninterested ears.
Once an understanding is achieved, ask which of the following three levels of cooperation the partner wants to pursue as the basis of the relationship:
* No feedback on customers but will agree to selling quotas, functions, etc. This is the typical distributor agreement.
* Feedback on the transaction only with regard to who bought what product and when. This is what many companies are attempting to obtain as a big improvement in feedback systems.
* Full data exchange on not only the transaction, but contacts and other selling information. This is the goal, but few companies have obtained this level of feedback.
This conversation also should include two other key issues.
The first is the actual roles channel members will perform. As an example, creating brand awareness typically falls to the primary company while closing the sale and serving the customer usually fall to the channel member.
The second issue is the handling and qualification of sales leads. The primary company has and will continue to be the lead generator, but much improvement can be made in the area of handing the lead to the partner, and the speed and method of follow-up by the partner.
Align agreements and systems. Once the level of cooperation is understood, it likely will be necessary to align the written agreements and systems (people and computer) to reflect the new cooperation.
If a database exchange agreement is reached, typically a longer-term contract will be required to assure the partner that no customer poaching will occur. The cancellation clause will receive some attention as there will need to be more protection for the partner.
On the supplier side, the “primary area of responsibility” clause will include feedback mandates with sanctions if compliance is not met.
Develop mutual marketing programs. On the assumption that the third level of full database exchange is achieved, great programs and direct marketing campaigns are possible. These efforts usually focus on these key areas:
* Market analysis and customer profiling for future targeting.
* Demand-generation campaigns that produce high-value sales leads.
* Cross-selling and upselling efforts that may include both partners' products and
services.
* Relationship building or loyalty programs.
Don't abdicate. Even in the best channel partnership, the control of customer information and continual communication to the end user should remain a responsibility of the primary supplier.
The brand values, technology advances and relationship-building efforts remain key to keeping and growing share of customer. The channel partner most likely will not invest in these areas, so it's the primary supplier's job to send these messages to the customer.
Everyone is a customer. It's tempting to be satisfied with the tracking of product movement through the channel and the feedback on results, as this is a major victory compared to the current situation. But don't forget, you sell people, not companies.
Therefore, you need to organize the database to track product movement and the people that are involved in the decisions that produce the sales. Then it's important to create communications that treat everyone like a customer based on the role they had in the product's sales. This, of course, includes all channel members.
This journey of partnering with channel members is probably the most difficult one marketers face. Channel members have been tripped up in the past, think your intentions are not all they appear to be and have their own agenda. But for those channel members you can convert to true dance partners, the rewards are great.
John M. Coe is president of Database Marketing Associates, Armonk, NY, which specializes in consulting, education and training for BTB clients.
