To improve relationships with and increase profits from the channel companies must treat those partners as well as they would their customers.
For the rest of the December 2002 issue of CRM magazine please click here
Selling through a third-party channel can be a costly endeavor. There are costs for training, marketing communications, sales incentives. And although an indirect model can help an organization expand its sales and customer support reach, skeptics argue that the value of the third-party channel is not substantial enough and does not justify the costs associated with supporting it.
Today's partner relationship management (PRM) software can help reduce those costs. As a result, companies are warming up to PRM solutions. META Group analysts predict the PRM market, or as they call it, channel relationship management (ChRM), will develop at a compounded annual rate of 12 to 15 percent, growing from $280 million in 2002 to a market size of more than $550 million in 2006.
"As organizations start to realize [the] difference between B-to-B and B-to-C, they will take a serious look at these applications. People will realize that B-to-B is different from B-to-C," says Gene Alvarez, vice president of electronic business strategies at META Group.
Alvarez maintains that PRM serves two core functions for organizations. The first is enabling e-commerce transactions through partners, where companies can "enable partner self-service or assistance to the buyer with functions such as guided selling, configuration, and negotiation," he says. The second core PRM function is marketing a brand out to channel partners. Companies that already incorporate these functions into their CRM strategies are seeing positive results.
Why Treat Partners Like Customers?
For some businesses, CRM and PRM are one in the same. That is why Fred Krazeise, director of strategic marketing for Sharp Electronics' LCD Products Group, treats his partners like customers.
Since Sharp introduced its LCD projector (nearly 10 years ago), the company has established itself as one of the leaders in this product category. Yet this achievement would not have been realized without Sharp's indirect channel. "Most manufacturers in this business sell through indirect channels, largely through a network of professional audio visual dealers and online resellers," Krazeise says.
Considering the dependence on the success of well-informed partners reselling products to their customers, it is no wonder Krazeise views his partners as customers. However, Krazeise needs to offer each of his partner customers a more advanced level of support than Sharp would give to the average consumer. This support includes market development funds, product marketing information, sales reporting tools, monthly sales announcements, weekly email updates, tech tips, and more.
"The best way you can get [dealers] to sell your product is to give them a customer. I wanted to create more demand for our 200 U.S. dealers--so lead distribution and management is a real priority for me," Krazeise says.
That priority was one of the drivers behind Sharp's decision to implement MarketFirst and use it as a PRM solution. Although MarketFirst is considered more of a marketing application than a PRM solution, Krazeise found some overlap in functionality. For three years, starting with a previous job, he had been tracking MarketFirst, which Pivotal Corp. agreed to acquire this past October in a stock transaction. At last he had the opportunity at Sharp to test the software. Beginning in early April his team ran some trial campaigns targeting the educational community. The system was up and running within a week and a half; after three months his division tripled its lead generation for projection units within the education community, and sales were almost twice what they were prior to launching the campaign, he says.
"MarketFirst has a powerful workflow engine that allows us to automate many processes," Krazeise says. "Also, the system's out-of-the-box functionality is phenomenal. We didn't have to invent anything."
He attributes part of the success of the MarketFirst solution to its ability to get leads distributed to dealers faster than the company had done before implementing it--specifically, within his three-day deadline. "Leads are like fish--they spoil after three days. If you get a hot lead a dealer can take action on right away, that's key," he says. "With other solutions you need to hire a programmer. With MarketFirst I don't have a programmer working on it. We have marketing people designing campaigns. We can change things, test things like email campaigns, rapidly find out if it works, and make changes on the fly."
Contact center agents collect data when calls come in and MarkeFirst automatically ranks leads as the data is entered. This eliminates what Krazeise calls overly optimistic rankings, which was common among agents prior to the MarketFirst solution. The leads are distributed to dealers via email and to a custom Web site that Sharp created for its dealers, where they can manage leads online. "We can see who's getting what leads, each salesperson responsible, which leads are going to what salesperson, and can drill down by region to find out in what areas leads have a higher success rate. We can then redeploy assets to push more business in that area," Krazeise says.
"We never had that visibility. The only thing you could do before [was] watch the sales number change, and its too late once you learn that," he says. "Now you can create a sales pipeline and view information in real time. I can go to a Web site right now and as outbound calls are being made and as people are coming to the Web site and requesting information, I can watch numbers change minute by minute. It's about as real time as you can get."
Taking on Goliath
Competing against such multibillion-dollar behemoths as Avaya and Nortel Networks, $385 million business communication systems provider Inter-Tel Inc. needed to invigorate its 450 partners to stay competitive.
Inter-Tel offers digital telephone systems and related software, Internet-based long-distance service, and computer telephony integration (CTI) systems to small and medium-size businesses. The firm wanted to create a Web interface for partners that would serve them from order to payment. Already a satisfied Oracle customer using its back-office solutions, Inter-tel executives elected to expand upon that trusted relationship. So after launching its partner Web site in early 2001, the company implemented Oracle's iStore product that fall.
"We were looking for something to allow our partners to check the availability of equipment in stock, place orders [by means other than] the phone or fax, track orders, and track invoices, receivables, and payables," says Jeff Ford, chief technical officer at Inter-Tel.
Oracle iStore allows merchants to efficiently build, deploy, manage, and personalize scaleable Internet storefronts. iStore enables companies to accept multiple payment types like credit cards, purchase orders, and invoices.
One of the immediate gains, according to Ford, was that Inter-Tel was able to cut its order-entry staff from 24 to 13 employees--a salary savings that Ford estimates to be at least $225,000. Additionally, partners are taking to the Web site. "When we launched this program last year zero percent of our orders were coming in over the Web. Last August 87 percent of the dollars coming from the [reseller] channel were coming in from the Web, which is purely from an increase in customer service our partners feel they get from the interface," Ford says.
Not only is Inter-Tel cutting costs, but it is collecting money from outstanding bills faster than before. Inter-Tel's date-sales outstanding (DSO) is down to 40 days, an improvement over last year's already low DSO of 50 days. "That's an industry low and an Inter-Tel low," Ford says. He says many in the enterprise communication industry have a DSO of 85 days.
"Since the dealers and partners are entering their own orders on the Web, they have full control over what gets ordered. There is no human error in regard to things like quantity. If there is a mistake it's theirs and they know it, so fewer items are disputed," Ford says.
PTC wants its partners back. For almost two years the 14-year-old engineering ISV has been working to restore relationships with a reseller channel it abandoned roughly 12 years ago.
PTC is managing more than 12,000 leads and needs to expand its sales and customer support reach nationwide. The Waltham, MA--based company had abandoned a channel it had cultivated in its early years and opted to sell directly to customers for a decade. PTC executives realized that restoring the partner relationships would not be easy. "We needed a tool that would show the marketplace we're serious about engaging with partners," says Bob Thibeault, vice president of channel operations and strategy at PTC.
So Thibeault began his due diligence. After examining a few PRM solutions, he selected ChannelWave, located not far from PTC, in Cambridge, MA. Despite its smaller size compared with competitors, Thibeault selected ChannelWave because he "liked its product offerings and direction of where the product was heading," he says.
A thumbs-up review from one of ChannelWave's existing customers convinced Thibeault that ChannelWave could deliver on its promises. More important for Thibeault was ChannelWave's ability to host its customers' solutions. "We had big IT projects going on in-house at that time, so knowing that I didn't have to worry about another project was critical," he says.
So PTC opted for the full suite of ChannelWave 4 hosted solutions, (it has since upgraded to ChannelWave 5 and its Java-based platform). Starting with the recruiting tool, PTC posted online partnership applications on its partner-portal site, where it could also get a log of recruitment activities. Once partners sign on to the program they can view sales information like their discounts and terms of their contracts. To PTC's benefit the system can automatically send sales leads via email, cell phone, and pager, as well as through the primary delivery method, the portal site. If the intended partner does not accept the lead within two days it is redirected back to the channel manager to get pushed to another partner, or the channel manager can work with the originally assigned partner on closing the lead.
The partner portal site is "starting to gain a lot of acceptance," Thibeault says.
So impressed are channel partners with PTC's commitment level that more than 170 partners signed on in only 18 months--most are already active users of the partner portal site. In fact, Thibeault says that 85 percent of his existing partners are hitting the site every week for things like email, leads, and product information.
"I have three people on my IT staff, and we went from supporting one reseller to 170 without hiring more people," Thibeault says. "We have not utilized all the benefits of the tool, such as the marketing co-op piece, but we plan to do that soon."
PTC is on target for $780 million in revenue for 2002, of which channel partners generate 15 percent. Thibeault estimates that channel partners should generate 25 percent of overall revenue next year.
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