Here is a summary of the key information covered in this long-form article:
| Topic | Summary |
|---|---|
| Taking Control of the Distribution Channel | Audits, channel management systems, agreements with resellers, training, lead pass programs, MAP pricing, data analysis |
| Optimizing Channel Marketing | Co-branded campaigns, marketing assets, events, incentives, communication guidelines |
| Managing Channel Pricing & Margins | MAP policies, monitoring, incentives, training, analysis, software tools |
| Improving Inventory Management | Inventory visibility systems, forecast collaboration, min/max levels, drop shipping, inventory optimization tactics |
| Motivating & Enabling Channel Partners | Incentives, enablement resources, affiliation-building tactics to drive performance |
| Selecting Channel Partners | Profile analysis, research, due diligence, assessments, relationship alignment |
| Structuring Channel Programs | Tiering, requirements, portals, rewards, deal registration, marketing funds, training, councils, events |
| Leveraging Channel Data | Unified data, KPI monitoring, customer analysis, forecasting, analytics to optimize channel management |
How can distributors take control of their distribution channels?
Distributors can take control of their distribution channels in several key ways:
- Conduct channel audits to understand channel dynamics and identify areas for improvement
- Implement effective channel management software to monitor channel activities
- Establish formal agreements with resellers outlining roles, responsibilities, and processes
- Provide training and support to improve resellers’ expertise in selling and supporting their products
- Implement a lead pass program to get better visibility into end-user demand
- Enforce MAP pricing to limit price erosion and channel conflict
- Collect and analyze sales and customer data across the channel to identify growth opportunities
- Foster alignment across the channel by communicating strategies, product roadmaps, and marketing campaigns
- Incentivize desired reseller behaviors such as sales performance, marketing initiatives, and lead generation
Overall, distributors need to exert more control over their indirect sales channels through better visibility, formalized processes, pricing control, and motivation of channel partners. This will help optimize their channel strategy for greater efficiency, sales and profitability.
How can distributors optimize their marketing for an indirect sales channel?
Distributors can optimize their marketing approach for indirect sales channels in several ways:
- Develop co-branded marketing materials and campaigns to help resellers promote to end users
- Provide resellers with product info, customer case studies, and marketing assets to use in their sales processes
- Arm resellers with competitive intelligence to differentiate against rival brands
- Conduct channel marketing events and training to educate resellers and get mindshare
- Offer marketing funds or co-op dollars to incentivize resellers to invest in demand generation
- Establish marketing communication guidelines and compliance to protect brand reputation
- Help resellers generate more leads and pipeline by syndicating or sharing lead-gen programs
- Analyze channel sales data to refine marketing strategies and improve ROI
- Use marketing automation and CRM tools to deliver consistent messaging across the channel
- Execute national, regional, or local campaigns across the channel in a coordinated manner
Taking this integrated, collaborative approach to marketing through the channel allows distributors to influence customer demand and experiences along the indirect sales path.
How should distributors approach pricing and margin management for the channel?
Distributors should take the following approaches to optimize pricing and margins across their sales channel:
- Establish MAP pricing for products to control price erosion
- Provide pricing guidelines to resellers to influence end-user pricing
- Offer pricing incentives such as volume discounts or deal registration to drive desired sales behaviors
- Monitor channel pricing and promotions to quickly address conflicts or violations
- Structure reseller margins to provide adequate profitability for needed sales investments
- Tie pricing/discounts to resellers based on their investments, capabilities, and performance
- Limit distribution where needed to protect margins in certain customer segments or regions
- Provide training for resellers on effective pricing and margin management principles
- Analyze price elasticity and margins by product, market segment, and reseller tier
- Collect competitive pricing intelligence to inform your own channel pricing decisions
- Use pricing software tools to optimize complex pricing across the channel
Distributors should take a strategic approach to channel pricing to maximize revenues and margins across their various customer and product segments. The right pricing strategies and tactics will motivate the channel while protecting profitability.
How can distributors improve inventory management across their extended supply chain?
Distributors can improve inventory management across their supply chain in several ways:
- Implement digital systems for inventory visibility across the extended network
- Collaborate with suppliers on demand forecasting and inventory planning
- Establish minimum/maximum inventory levels for resellers to reduce excess stock
- Use drop-shipping to ship direct to customers from suppliers or distributor DCs
- Optimize distribution center locations and transportation routes for efficiency
- Track inventory KPIs like days on hand, turns, and fill rates to identify problems
- Provide volume discounts or other incentives for resellers to carry adequate stock
- Avoid stock-outs through safety stock buffers and multiple supplier sources
- Share POS data downstream and upstream to improve demand projections
- Offer vendor-managed inventory (VMI) services to manage reseller inventories
- Use inventory management software to enable complex inventory planning and execution
Enhanced coordination, data sharing, and the right policies and incentives can help distributors better manage inventory across a complex, multi-echelon channel network. This improves product availability while reducing logistics costs.
What can distributors do to motivate and enable their channel partners?
Distributors have several options to motivate their channel partners and enable their success:
- Provide sales incentives like SPIFs or rebates to reward performance
- Offer marketing development funds (MDF) to support demand generation
- Implement deal registration programs to reward business development
- Share technical expertise and training resources to build competency
- Give access to demos, collateral and other sales enablement tools
- Recognize top partners through awards, events and promotions
- Assign dedicated sales, marketing or technical support personnel
- Facilitate peer interaction through advisory councils or events
- Develop capability maturity models defining partner standards
- Provide financing assistance to improve partners’ cash flow
- Collaborate on business planning and information sharing
- Give exclusivity rights or preferred access to certain products or accounts
By creating alignment through a blend of financial incentives, enablement resources, and brand affiliation tactics, distributors can maximize partner performance and channel potential.
What steps can distributors take to select the right sales channel partners?
Distributors should follow a systematic partner recruitment and selection process:
- Define ideal partner profiles based on customer targets, geographic coverage, and capability requirements
- Identify candidate partners through research, referrals, trade shows, and existing relationships
- Require formal applications to gather info on qualifications, capabilities, and business plans
- Conduct due diligence on candidates’ technical expertise, industry experience, and company stability
- Assess cultural fit regarding integrity, transparency, and commitment to collaboration
- Evaluate business infrastructure for compliance, financing, order processing, etc.
- Review financials to ensure adequate capitalization and credit for business requirements
- Validate capabilities through reference checks, site visits, and discussions with existing vendors
- Examine partner’s complementary products, services and Channels to identify synergies
- Hold one-on-one discussions to determine interest level and vision alignment
- Negotiate contract terms aligned to business/relationship model and exit strategies
- Onboard new partners with training, enablement resources, and account coordination
- Continuously monitor KPIs and relationship health to ensure satisfaction
Using a rigorous selection process improves the quality and fit of a distributor’s channel partners for greater channel effectiveness and mutual profitability.
How should distributors structure their channel partner programs?
Distributors should develop structured channel partner programs with the following elements:
- Tiered levels that delineate entry requirements, benefits, incentives for each tier
- Requirements outlining partners’ sales quotas, revenue, technical and marketing capabilities
- Partner portal providing sales tools, marketing assets, training resources and more
- Discounts, rewards and rebates linked to partner tier, sales volume and growth incentives
- Deal registration and protection policies to reward business development
- Cooperative marketing programs funded by marketing dollars from vendor
- Sales and technical training through online and in-person delivery methods
- Certification programs enabling partners to gain expertise to sell and support products
- Partner advisory councils to get feedback and guidance on vendor relationship
- Sales and marketing support provided by vendor field teams
- Clear communications plan and cadence for updating on priorities, products, etc.
- Annual partner conferences for networking, recognition, education, motivation
- Executive sponsorship to demonstrate commitment and ensure alignment
A structured program provides a framework for creating profitable, efficient and mutually-beneficial partnerships across the indirect sales channel.
How can distributors use data to gain insights across their multi-channel sales networks?
Distributors can leverage data to gain visibility and insights across their complex distribution channels by:
- Integrating sales, inventory and customer data across channels into a unified view
- Tracking key performance indicators for sales, growth, share of channel, and more by channel
- Performing customer segmentation to tailor strategies for different customer groups
- Analyzing trends and customer buying patterns across channels
- Monitoring pricing and discounting practices across channels to identify conflicts
- Developing channel dashboards and reports to identify opportunities and surface issues
- Using sales forecasting models for demand planning by channel
- Conducting “what if” scenario modeling to predict outcomes of strategic changes
- Applying predictive analytics to anticipate channel challenges and disruptions
- Leveraging AI and machine learning to rapidly analyze complex cross-channel dynamics
- Building cross-functional teams to provide broad inputs into channel strategy
By harnessing rich data and advanced analytics spanning their distribution channels, distributors gain agility, insights and strategic vision to optimize their complex multi-channel sales ecosystems.
How can distributors build stronger alignment with channel partners?
Distributors need to foster greater alignment with their indirect sales partners to enhance collaboration and drive better results. They can improve alignment through several best practices:
- Involve partners earlier in strategic planning to get buy-in and input
- Establish regular touchpoints between executives to discuss goals and issues
- Encourage open communication and transparency around challenges
- Provide accurate forecasting to allow partners to plan effectively
- Give sufficient notice on any policy or program changes
- Solicit feedback through surveys, focus groups and advisory boards
- Act on partner feedback quickly to address concerns
- Recognize partners’ contributions and successes publicly
- Offer partners first access to new products and innovations
- Share customer insights and sell-through data to demonstrate trust
By improving transparency, sharing more information, and treating partners as true extensions of the distributor, alignment and mutual success can be enhanced.
What steps can distributors take to reduce channel conflict?
Channel conflict is common in indirect sales models. Distributors should proactively manage conflict through:
- Clear definition of roles between distributor and resellers
- Ongoing communication on strategies, product launches, and pricing
- Enforcing MAP pricing and discount policies through monitoring
- Lead pass programs routing qualified leads to protect partner accounts
- Deal registration to protect partner-sourced accounts
- Partner account assignments to eliminate sales overlap
- Impartial dispute resolution processes for channel conflicts
- Contracts allowing termination of consistently disruptive partners
- Separate partner tiers serving different customer segments
- Exclusivity agreements prohibiting competition within accounts
- Cooperative marketing programs to drive shared investment
- Focus on growing the overall market rather than fighting over share
With the right policies, oversight and incentives, distributors can minimize unhealthy competition and friction across the partner ecosystem.
Why is carrying out a channel audit important for distributors?
Conducting periodic channel audits provides distributors with data-driven insights into current channel performance, while identifying areas for improvement. Audits assess:
- Channel design model and structure
- Partner recruitment, onboarding and management processes
- Current partner profiles including capabilities, business models and challenges
- Channel activity metrics like revenue, margin, inventory turns, etc.
- Program satisfaction levels through partner surveys and interviews
- Channel marketing effectiveness based on assets provided, leads generated, etc.
- Operational efficiency related to ordering, fulfillment, payments, etc.
- Compliance with distributor policies and agreement terms
- Channel sales coverage relative to market potential
- Competitive landscape and threats from alternate channels
Channel audits establish baselines, uncover problem areas, and inform strategies to enhance channel performance, control and profitability.
What are some emerging technologies that can optimize distributor channel management?
Leading-edge technologies are creating new opportunities to enhance distributor channel management, including:
- Predictive analytics to identify the most promising partners and opportunities
- Artificial intelligence to automate administrative tasks and product recommendations
- Blockchain to streamline and validate cross-channel transactions
- Internet of Things (IoT) for tracking assets across the supply chain
- Virtual reality to engage and train channel partners remotely
- Advanced robotics to improve order fulfillment speed and accuracy
- 3D printing to produce specialized parts on demand
- Drones for last mile delivery from distributor warehouses
- Autonomous vehicles to enable efficient delivery routes
- 5G networks to support data-intensive digital channel interactions
Adoption of these emerging technologies allows distributors to collaborate, transact, fulfill and sell more effectively through indirect channel partners.
How could Brexit impact European B2B distributors?
The UK’s departure from the European Union could impact European B2B distributors in several ways:
- Potential decline in UK market due to economic slowdown
- Higher costs and delays if tariffs and customs checks are imposed
- Supply chain disruptions if borders and trade are restricted
- Need to establish different UK business entities and importer partners
- UK regulatory divergence may require product changes
- Volatility in currency exchange rates impacting profitability
- Changes in UK privacy laws and data regulations
- Disruption of pan-European distribution center networks
- Lower EU budgets if UK funding drops, hurting public sector clients
- New UK isolationist policies favoring domestic distributors
To mitigate Brexit exposure, distributors should conduct scenario planning, negotiate favorable trade terms between UK and EU, and localize supply chains, accounting and partnerships.
What are some key performance indicators distributors should track for their sales channels?
Critical KPIs for distributors to track across their sales channels include:
- Revenue growth by product line, customer segment and geographic market
- Channel sales as a percentage of total revenue
- Revenue and margin by partner tier
- Channel inventory turns by partner and product category
- Number of active resellers and share of potential resellers
- Reseller product portfolio breadth and share of wallet
- Channel sales and tech personnel turnover
- Partner satisfaction scores and Net Promoter Score (NPS)
- Customer satisfaction metrics for accounts serviced through channel
- Time to pay and DSO metrics across channels
- Channel marketing qualified lead (MQL) volume and conversion rates
- Price variance vs. MSRP across channels
- Channel sales and training certifications achieved
Monitoring these KPIs allows distributors to pinpoint sales channel health, partner performance, and areas for improvement.
What tools do distributors rely on to manage their sales channels?
Essential tools for managing distribution sales channels include:
Partner Relationship Management (PRM) software to track partnerships and drive enablement
Channel Management systems for partner program administration
Partner Portals providing 24×7 resources to support partners
Incentive Management to track partner rewards and rebates
CRM for visibility into channel pipeline and partner interactions
Marketing Automation platforms for cross-channel campaigns and assets
POS Data Analytics for visibility into end-user demand
Pricing Management tools to control channel pricing
Sales Configuration software for product bundling through channel
Channel Forecasting to predict demand across network
Order Management for seamless order taking and processing
By implementing these channel management technologies, distributors gain control, insights and efficiency across their complex partner ecosystems.
FAQ
What are some key channel management challenges for distributors?
Some key channel management challenges distributors face include lack of visibility into channel activities, conflict across a complex partner network, inability to control indirect sales processes, and channel partners lacking capabilities or motivation to sell their products effectively.
Why is selecting the right channel partners important for distributors?
Carefully selecting qualified channel partners is crucial for distributors to build an effective sales channel. The right partners with complementary capabilities and strategic alignment can extend a distributor’s market reach and growth potential. Poor partner choices result in underperformance and channel conflicts.
How can distributors incentivize desired partner behaviors?
Distributors can incentivize desired channel partner behaviors like sales growth, marketing investments, technical training, etc. through financial incentives like SPIFs and rebates, preferential access to products and accounts, recognition programs, co-marketing dollars, and other motivation tactics tied to key objectives.
What are some components of effective channel marketing programs?
Effective indirect channel marketing programs include activities like co-branded campaigns, shared lead generation, collateral and assets, partner training, events, analyst and PR outreach, sales incentives, and demand generation tools and support for partners.
Why is pricing optimization complex for distributor channel programs?
Pricing optimization is challenging for distributors due to invisible end-user demand, multiple parties involved including suppliers and resellers, gray market risks, and the need to allow partners to profit while preventing price erosion. Sophisticated pricing strategies are required.
How can distributors enable indirect channel partners?
Distributors can enable indirect partners by providing sales support, technical training, demonstrations, marketing assets and funds, sales tools, partner portals with resources, and dedicated partner account managers or technical resources.
What sales metrics should distributors track for channel partners?
Key channel partner metrics include revenue growth, deal size, pipeline and activity metrics, program tier level, certification completion, MDF utilization, sales performance against quotas, product line sales mix, and customer satisfaction and NPS scores.