Sales at Walnut, Calif.-based computer monitor maker ViewSonic flow mostly through third party partners, including value-added resellers (VARs), distributors and systems integrators- -the selling chain often referred to as "the channel." But although 90 percent of the vendor's revenue is realized through its 5,000 channel partners, ViewSonic, until recently, had only rudimentary communication with them.
"I couldn't tell you which of our VARs were most productive," says Matthew Gill, ViewSonic vice president of U.S. sales. ViewSonic also couldn't tell which of its partners' marketing efforts, carried out through a system of market development funds, were most successful. "We were spending $18 million a year in funny money," says Gill. "And I had no way of measuring ROI."
In the fall of 1999, ViewSonic decided to remedy that by investing in partner relationship management (PRM) software from Allegis. "We wanted more intimacy with channel partners," says Gill. "PRM was the magic bullet."
PRM systems use extranets, or password-protected Web sites, to improve communication and teamwork between companies and their outside partners. While customer relationship management (CRM) focuses on companies' direct employees and customers to maximize profitable customer relationships, PRM seeks to apply the same relationship management techniques to indirect channels.
With PRM, companies can provide partners with current information such as brochures or leads, along with sales productivity tools such as competitive differentiation, sales scripts and quote generators. PRM applications also allow companies to build lead management systems that track each lead from assignment through sale. Armed with data on which partners have closed the most sales, companies can target their most effective marketing assistance to high-potential partners. The goal, of course, is to increase revenue for both vendor and partner.
Are Channels Dead?
Contrary to popular opinion, indirect channel sales are far from dead, says Bob Thomson, president of FrontLine Solutions, a Burlingame, Calif.-based PRM consultant. Sure, some customers want to buy products direct and online if it's convenient and low cost, but even e-commerce leaders like Dell and Amazon.com allow for some human intervention to deal with customer problems.
The indirect channel remains an important source of revenue for most manufacturers. In the information technology sector alone, about 60 percent of sales come through indirect sales channels. Just looking at the high-tech sector, by the year 2000 Dataquest predicts that indirect sales channels will handle $165 billion in IT products and services.
While e-commerce has not put VARs out of business, though, it has provided a wake-up call, says Thomson. Many VARs realize that they can best add value to a sales transaction by shifting to a service model and offering consulting as well as hardware and software. "As a matter of competitive survival, companies must exploit the new Web infrastructure to manage their channel partners," says Dennis Ryan, Allegis president and CEO.
PRM boosters claim that PRM software can help manufacturers drive down the costs of maintaining channel relationships while boosting efficiency. Analysts estimate that the market potential for PRM software will reach $1 billion by 2001. But if PRM really is the magic bullet, how come it is just now emerging as a distinct category? The answer is that, although channel communication problems have been around for a while, the infrastructure to enable PRM has not.
"The advent of business-to-business extranets changes that," says Ryan. In fact, according to a white paper by Pleasanton, Calif., distribution-channel consultant The Technology Channels Group, the rapid rise of channel automation and PRM will completely restructure the complex and increasingly inefficient distribution chain.
No Clear Vision
Manufacturers who depend heavily on indirect channels have, for the most part, already made some effort to automate communication with their partners. Most manufacturers have put away the three-inch binders and set up Web sites where partners can come for the information they need. Many manufacturers also use broadcast e-mail to alert the channel to new developments.
But, says James McKenna, a principal at the Technology Channels Group, these Web sites typically offer little useful information. According to a study Bob Thomson published last year, channel partners waste six hours per week searching for information on partner Web sites.
Current communication systems are equally unsatisfactory for manufacturers. Thomson compares the average channel manager's job to driving in the fog wearing sunglasses. Channel managers have a hard time finding out if marketing programs they initiated were successful in bringing in leads. They can't make accurate forecasts because they don't know when and where the sales are coming in. They waste marketing dollars on partners who are not profitable.
Sensing a business need, companies like Allegis, Channel Wave, Austin, Texas-based Partnerware, San Francisco-based Ten North and Portland, Oregon-based Webridge have sprung up to offer PRM systems that automate basic channel processes and link companies and their partners together in an extranet-centered communications web. CRM players like Pivotal and SalesLogix have also come out with PRM offerings as part of their wider e-business solutions. The Technology Channels Group has counted no fewer than 30 companies selling what they call PRM, all with different features, functions and costs--admittedly confusing for someone looking to buy.
Although PRM offerings vary by vendor, some basic functions are included in most packages. Here's what to look for:
Partner Profiling: The core of the PRM system is a central, Web-based partner profile database. The profile contains reseller information such as certification status, product specialties, branch office locations and business profile. Since the partners are in control of their profiles, they can modify them in order to get only the type of business they want.
Lead Distribution and Tracking: The number-one requirement partners have for PRM systems is that they supply reliable leads. PRM systems acquire leads directly from forms on the Web site or import them from outside sources such as sales automation systems or trade shows. The leads are scrubbed to eliminate duplicates and then assigned to partners manually by the channel manager or automatically based on business rules such as partner geographic location or profile.
Literature Fulfillment: Partners can go to the PRM site for the latest product catalog information. PRM systems produce pages dynamically out of a database to ensure they are always current. The system is also a central repository for marketing knowledge, including sales scripts, competitive information and frequently asked questions. Manufacturers can provide proposal boilerplate and contracts and price sheets securely.
Soft Dollar Accounting: One of the processes unique to the indirect sales channel is the accrual and distribution of market development and sales incentive funds. PRM systems automate the process for requesting and authorizing these funds and measure their effectiveness.
Marketing Program Management: With PRM in place, manufacturers can develop, launch and track partner-specific marketing programs. Some PRM systems have a system by which partners can report which programs worked best, building up a best-practices database.
Business Planning: Some PRM systems allow manufacturers and their partners to develop joint business plans, track submittal of business plans and view pipelines.
Product Ordering and Configuration: Some PRM systems allow partners to configure and order products directly online and to check the status of previously placed orders.
Service : Some PRM systems let support personnel publish support information to the site, allowing partners to track service requests and warranties.
Bob Thomson thinks the biggest PRM payoff for manufacturers is enhanced partner loyalty. Partners will stay with companies that make product and sales information easily available. According to Thomson's relationship management study, 24 percent of partners surveyed said that more effective relationship management tools would be a major factor in vendor selection.
In addition, PRM leads to improved reseller quality by automating processes like reseller recruiting, training and sales support. And, of course, PRM implementers can save money through improved efficiency, lowering costs for everything from printing and program administration to product returns caused by incorrect configurations.