Making the Connection
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 and its partners' marketing efforts, carried out through a system of shared marketing funds called co-op or Market Development funds (MDF), were most successful. "We were spending $18 million a year in funny money," says Gill. "And I had no way of measuring ROI."
Resellers consistently rate ViewSonic best-in-class when it comes to partnership. The company is the winner of three straight awards for outstanding channel practices. And in the fall of 1999, ViewSonic decided to further improve its record by investing in Partner Relationship Management (PRM) software from Allegis. "We wanted more interaction with our resellers," says Gill. "We had to find a way to use our indirect sales force more efficiently. We wanted more intimacy with channel partners without hiring more in-house staff to communicate with them. 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?
Sounds great, you say, but hasn't e-commerce sounded the death knell for indirect channel sales? If my customers can log on to the Internet to buy everything from books and clothes to computers and airplane tickets directly, why should I invest in my relationship with resellers and integrators?
Contrary to popular opinion, the channel is not 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.
"We wanted more intimacy with channel partners without hiring more in-house staff to communicate with them. Partner Relationship Management was the magic bullet."
Jack Conners agrees. "Simple products like books can easily be sold online, but complex solutions need channels," says Conners, vice president of business development for ChannelWave, a Cambridge, Mass.-based PRM vendor.
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, Dataquest predicts that in the year 2000 indirect sales channels will handle $165 billion in IT products and services.
While e-commerce has not put VARs out of business, it has been the wake-up call that channels needed, 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. The Internet has changed the ground rules for commerce and sales channel relationships, agrees Dennis Ryan, Allegis president and CEO. "As a matter of competitive survival, companies must exploit the new Web infrastructure to manage their channel partners," he says.
PRM boosters claim that PRM software can help manufacturers drive down the costs of maintaining channel relationships while boosting their 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.
"According to a 1999 study, channel partners waste six hours per week searching for information on partner Web sites."
"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.
And, say vendors and analysts, let's get one thing straight: PRM is not SFA. If you are thinking of extending your in-house SFA system to cover your partners, think again, they say. According to PRM industry conventional wisdom, partners are quite different from customers, and they need software solutions that cater to their needs. Some SFA vendors have introduced Web-based solutions that they claim extend their products to the channel, but according to Bob Thomson, most of those systems weren't conceived with the partner's point of view in mind. Channel partners are independent companies with their own processes and automation systems. What they want is a Web site that furnishes them with the information they need to close a sale, quickly and easily.
Thomson has seen very few examples of Web-extended SFA solutions working for channels. He refers to the PRM offerings of vendors like Onyx, Firstwave, GoldMine and UpShot.com as "PRM Lite." But he sees potential for these and other traditional CRM vendors to buy-or strike up a partnership with-PRM specialists. "The specialists have something unique to offer," he says. This is not lost on the likes of Pivotal, a vendor who has moved beyond PRM Lite to offer a more robust partner solution.
Marketing Vice President Bob Runge says Pivotal is exploring the possibilities of a partnership with a PRM software specialist. As the market shakes out, Thomson expects some small PRM specialists will be bought by CRM vendors trying to build a PRM solution, while other PRM specialists persist as niche players.
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 offer little useful information. "Partner Web sites are a joke," he says. And information is hard to find. According to a relationship management study Bob Thomson published last year, channel partners waste six hours per week searching for information on partner Web sites. As he characterizes it, partners are looking for a glass of water and get a tidal wave of information that quickly submerges them.
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. Over 70 percent of respondents in Thomson's survey did not give a satisfactory rating to CRM and PRM tools in place.
Sensing a business need, companies like Allegis, ChannelWave, Austin, Texas-based Partnerware, San Francisco-based Ten North and Portland, Ore.-based Webridge (Thomson's PRM specialists) 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 less than 30 companies selling what they call PRM, all with different features, functions and costs-admittedly confusing for someone looking to buy.
"Partner Relationship Management is a cattle prod to keep leads from going stale."
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. Partners and company employees can usually update this information-for example, change a phone number or e-mail address or promote a partner from silver to gold status-via standard browser forms. In fact, because the partner profile is so important Jim McKenna of the Technology Channels Group predicts that in the future PRM will change to "PMR" for Partner Managed Relationships. 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 SFA 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. Partners log onto the Web site using a secure password to get their leads, and many systems are designed to reassign the lead if the partner does not act on it in a specified amount of time. Some systems require partners to provide forecast information, such as opportunity size and timeframe to closing, before assigning that partner more leads. "PRM is a cattle prod to keep leads from going stale," says ChannelWave's Jack Connors.
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. Each partner gets a unique view of the catalog depending on which products they are authorized to sell, and catalog pages show partner-specific pricing and discounts. New products can be added via standard browser forms. The PRM 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, called MDF and co-op funds. Typically, a manufacturer sets aside a small percentage of revenue that comes in from a channel and gives it back to that channel partner for use in marketing activities. PRM systems automate the process for requesting and authorizing these funds and measure their effectiveness so that the manufacturer can assess the sales impact of co-op and MDF-sponsored programs.
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, view pipelines and apply rules to score plans based on partner profiles.
Product Ordering and Configuration: Some PRM systems allow partners to configure and order products directly online and check the status of previously placed orders. Configuration rules can limit partners to products they are authorized to purchase.
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. Companies who do not implement PRM will be absolutely left behind, predicts Jim McKenna of the Technology Channels Group. "Why would a partner want to do business with a manufacturer who couldn't provide that information?" he asks. PRM-savvy manufacturers will eventually dominate the channel, his group predicts.
In addition, PRM leads to improved reseller quality by automating processes like reseller recruiting, training and sales support. PRM systems collect data that contributes to the continual improvement of the collective knowledge base and can help manufacturers enforce reseller adherence to best practices defined by the manufacturer.
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. If new partners sell quicker; if current partners sell more or if deal sizes increase because of PRM, the increase in revenue could be millions of dollars, says the Technology Channels Group.
The Dwyer Group, a franchise management company based in Waco, Texas, selected Pivotal's PartnerHub PRM system in 1999. Dwyer is made up of over 1,500 franchisee/partners who are independent service providers, including plumbers, electricians and rug cleaners. "They are very good at their respective trades, but have no experience running a business," says Al Kruzel, Dwyer's CIO. The Dwyer Group provides its partners with common marketing services and helps them grow by teaching them a system for doing business, which covers marketing, customer service, financial skills and hiring and training skills. By becoming a member of Dwyer, tradespeople agree to abide by a set of standards like putting on booties before entering a home and cleaning up when the job is finished. "We build brand awareness for our members," says Kruzel.
"The company founder wanted our management style to be personal," says Kruzel. "A Dwyer field service manager calls each partner once a week and visits at least once every three months." But as Dwyer's number of franchisees grew, the company started losing control. Visits and calls were not timely. When Kruzel joined the company in 1996, data on franchisees was not even good enough to generate a decent holiday card list.
Now all interactions between Dwyer and its members take place over a PRM Web site. Information, including franchisee addresses, is always current. "Plumbers are not in their offices from 8:00 a.m. to 5:00 p.m.," says Kruzel. "But they can log on to our PRM Web site 24 hours a day, 7 days a week." On the site, partners find the most current training manuals. They can trade tips with other members at a discussion site. A franchise reporting system simplifies their accounting, eliminating the 40 pounds of pink invoices that used to arrive at Dwyer headquarters every week. Partners can access news releases and labor law updates. "Every two months we update the labor laws," says Kruzel, "but before no one ever looked at them. Now with the information online, there is no question that it is up-to-date."
With the Pivotal system, says Kruzel, partners have quicker access to the information they need. "We achieve greater contact using the same number of field service managers," says Kruzel. "We're able to provide real value with technology."
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