Market fragmentation makes it cost-prohibitive for most large vendors and service providers to sell directly into small and midsize businesses. Instead, they rely on local solution providers.
Posted Oct 28, 2003
Small and midsize CRM vendors need to use the sales channel more than ever to get new products to market, according to a new report from the Yankee Group. The report, "SMB and Mid-Market Channel Partners Face Challenging Market Dynamics," says that although there is increased optimism in the sector, the sales cycle remains long and the channel still must creatively and persuasively sell to customers with tight budgets.
In the United States there are 5.9 million small and midsize businesses (which the Yankee Group defines as companies with 2 to 2,500 employees). Market fragmentation makes it cost-prohibitive for most large vendors and service providers to sell directly into small and midsize businesses. Instead, they rely on local solution providers, which provide the critical, trusted link between the manufacturer and the customer, to sell into this market, the report suggests.
Vendors depend on the channel more than ever to push new products into this market, according to Helen Chan, Yankee Group small and medium business strategies senior analyst. "Competition is always increasing, as even enterprise-focused vendors attempt to move down market," she notes in the report. "This inundates the channel with a confusing choice of vendors and products. Vendors must understand the needs of the channel in order to cultivate long-term, profitable relationships. By providing more than just the traditional product rebates and volume discounts, vendors can help channel partners transition to a services revenue model."
The Yankee Group recommends that solution providers adapt so they can capitalize on revenue opportunities by transitioning from box-pushing to solution-selling for recurring service revenue; implementing process, methodology, and discipline to their business; focusing on specific horizontal solutions or vertical markets; and building brand to differentiate from competitors.