Once you have decided which indirect channels you need in order to implement your go to market strategy, it’s time to establish a framework for your ecosystem. Engaging with your channel as an amorphous mass is as unthinkable as engaging with your customers in the same way so you need to create communities of entities that share common attributes so that you can communicate and ultimately collaborate and facilitate collaboration in the most effective and productive way.
Once again, data is critical here. You need to decide which attributes are important to you and how you will use them to segment your channel.
I will illustrate segmentation methodology by using channel accreditation as an example. This is because if it is done properly and utilizes balanced scorecarding, it can be very effective.
First a word of caution! Using an accreditation or certification scheme to segment an indirect channel has been the norm in several industries for decades but just because accreditation is the accepted approach does not mean that it is right for every company. Before you consider it, ask yourself a few questions to assess your true objective:
- Do I want to maximize the number of indirect channels I recruit?
- Conversely, do I want to recruit and retain only those indirect channels who meet stringent criteria?
- At what stage in the technology lifecycle is my product?
- What do I want to measure and can I measure it?
- Can I monitor and manage an accreditation program?
- In who’s best interest is an accreditation program – ours, the customer’s or the indirect channel’s?
- What would compel indirect channels to join a program?
- What commitments will I require in return?
Accreditation programs are typically unappealing to mainstream channels because they require investment to participate and generally deliver limited rewards. By contrast, value added channels (Value Added Resellers and Distributors – VAR’s and VAD’s) keenly embrace them because they provide a means of specialization and differentiation. Specialization is the key. VAR / VAD channels don’t want to maintain multiple accreditations unless they are complementary. It is therefore important to understand your objectives in developing and implementing such a program.
If accreditation seems like the right approach, take a pragmatic approach to defining the criteria:
- What knowledge, skills, facilities are actually required?
- Will accreditation be awarded based upon quantitative or qualitative criteria or both?
- What exactly will I measure?
- Do I have the necessary information and if so, how will I analyze it?
- How will I administer and manage the program?
- How will we play our part in supporting the channel to maintain their accreditation?
- What will happen to defaulters?
- What are the rewards for retention?
- Do I have the systems, processes and resources to manage the program?
The first rule is ‘don’t set criteria that are not absolutely necessary’. If your channel can see no point in your criteria and they have no knock-on benefits to the customer, then your channel will be less inclined to try to achieve them. The next point is very subjective but our view is that revenue, volume and unit sales targets sit rather uncomfortably alongside value-based accreditation criteria. Accreditation schemes that start out with conflicts of interest rarely succeed and in our experience, the need to achieve quarterly revenue targets often outweighs the need to maintain the credibility and respectability of an accreditation program.
It is important to ensure that criteria can be accurately and consistently measured and properly audited. You must be in possession of all of the data required to award an accreditation. As a general rule, data that can be sourced from and verified upon internal systems and data sources is more reliable than data that is sourced from third party sources, especially the indirect channels themselves.
By now, many companies will be thinking ‘the only irrefutable data I have relates to sales results and numbers of trained personnel’ and it is for this reason that most companies often distil their accreditation scheme criteria down to these two factors. Beware! If an accreditation scheme is to be truly valued by indirect channels and customers alike and if it is to deliver results, you must be much more thorough.
Value Based Segmentation
A tried-and-tested approach for value-based indirect channel segmentation is based upon the balanced scorecard method. Using this approach, you can identify all of the criteria both quantitative and qualitative and assign those scores and weightings that reflect their importance, scoring each indirect channel or potential indirect channel accordingly.
The balanced scorecard approach works well in two different scenarios:
- When relatively small numbers of indirect channels are involved and hence the process can be managed adequately using manual methods
- When larger numbers of indirect channels are involved and a suitable technology solution is deployed to conduct automated analysis
- Both scenarios require good data sourced from a variety of places:
- Your transactional or ERP systems
- Contact databases used by marketing staff to distribute channel marketing communications
- Contact management systems used by channel account managers
- Training or learning management systems
- Technical support systems
- External sources such as data companies, industry directories and trade show catalogues
Input from these various sources needs to be brought together into a single repository and one must ensure that it is accurate, consistent and uniform. When these conditions are met, you can scorecard your indirect channels.
Multiple Measurement Criteria
Establishing multiple measurement criteria creates a need for repetition and continual validation. This is complex to manage and nowhere will this complexity be felt more than in the areas of fulfilment and administration. Before embarking on this route, ask yourself:
- Who will transfer the knowledge to your indirect channels to the level you require?
- Who will monitor and manage accreditation criteria attainment across your channel?
- What systems processes and supporting resources will be made available to them to do it?
- How will you manage education, examination and certification?
- How will you manage certification expiry? How will you punish defaulters?
And what of those indirect channels who do maintain their accreditation? Those who do everything that is asked of them? How will you reward them? How will you protect their investment? How will you support them to maintain their accreditation? And how will you manage those who create demand for you without actually fulfilling it? After all, many companies have the expertise and customer relationships to influence buying decisions and yet they have no interest in actually supplying the customer with the solution.
Your accreditation scheme must be sufficiently robust and flexible to cater for such indirect channels for which revenue criteria and product margin will be completely irrelevant and counter-productive.
Indirect channel segmentation through accreditation is a proven and successful method of targeting a suitably qualified indirect channel network or channel but only if your product is in the right phase of its lifecycle. Exclusive models such as this will deter volume channels from selling mainstream products if alternatives exist in the market. For value added channels selling early-life, specialist or low volume/high value products accreditation can work well depending on the approach to effective administration and management of data, systems, processes and resources that exist to implement such a program.
Segmenting your indirect channel based upon compliance with a predefined set of criteria that is unique to your company, product, market or customers and according to company profile is for many companies the end of the line. It should be the beginning because so far you have only satisfied your own needs.
As I intimated earlier, in the past, vendors saw themselves at the top of the food chain with a succession of indirect channel tiers between them and the customer. They pushed programs and information downstream and attempted to “manage” their indirect channel. It just doesn’t work that way today. I’m not really sure it ever did.
Your indirect channel represents a rich and diverse ecosystem of companies and individuals. This ecosystem is a community that is comprised of many smaller communities of businesses and people each with shared attributes and each sub-community is comprised of still smaller groups with shared interests. Companies wanting to be successful in harnessing the potential of their indirect channel ecosystems in the future will have to acknowledge that they are nothing more or less than members of these communities and that they must play an active role in collaborating with and facilitating collaboration among them. There is no food chain in contemporary business ecosystems.
At a very high level, you know that the constituents in your ecosystem have some things in common:
- They market, sell, support or recommend products or services like yours
- They market to, sell to, service or support the customers that you want to reach
- They are active where you are or want to be active
- They want to make money
Your task in segmenting this ecosystem is in facilitating collaborative conversations among companies and people who share common interests and then listening to and engaging in the dialogue. Do this and the ecosystem will form itself into multiple overlapping communities all by itself and if you possess the technology to make it happen and to monitor and track the interactions you will be able to learn more about those communities and have more effect on their behavior than you could ever imagine possible.
I want to tackle the question of why you should collaborate. There has been a behavioural change in the context of communication methods and preference and a shift in the way individuals are influenced – by the opinions and expressed consensus of fellow community members than by companies. Logically then it follows that building communities, facilitating collaborative conversations, and through them encouraging members to endorse your company, your products and your strategies will play a big part in generating positive feelings about you and influencing positive behavior. What is more, eventually the community will become self-sustaining and a font of knowledge for all of its members. In time reducing the need for you to fuel conversations and provide answers and support.
Since you facilitate these conversations, they take place on your systems and the output can be recorded and analyzed you can now use this data to create usable segmentations of your communities based upon the groups and discussion topics to which they subscribe, their shares, likes and comments. This in turn enables you to engage in much more effective targeting of conventional communications. Better targeting and topic relevance improves response rates and outcomes.