Aligning Channel Sales and Marketing: A Practical 5-step Approach

Step 2: Define Your Strategic Options

In our first blog post in this series we discussed the importance of starting with the customer as a key element for aligning channel sales and marketing efforts. This includes the need to segment your customers and then gain customer insight—by market—to drive your go-to-market strategy.
Today’s post will walk us through an example of the type of customer feedback, by market, that is typically received, followed by the implications to the go-to-market strategy.

For this example, we are working with a hypothetical vendor of high technology products and services.  This specific technology vendor has a broad portfolio that sells into both the Enterprise (assume >1,000 employees for simplicity) and Mid-Market/SMB (assume <= 1,000 employees). The markets targeted by this vendor are global in nature. Channel Impact has surveyed a representative sample of customers, across both markets, on a worldwide basis, specifically about future purchase intentions and preferences. The following summary feedback was received.

This feedback triggered a number of key customer implications that will assist you in defining your own strategic options.

1. Mid-Market and Enterprise market sizes are both significant and will require different sales models. The market size for each is above $10 billion per year and roughly equally split in terms of total available market (TAM) for Enterprise and Mid-Market/SMB segments. This implies a need to cover both markets as a vendor, but the mechanics of sales and marketing coverage need to be different by segment. Specifically, the 10,000 Enterprise customers may be reasonably targeted by a high-touch sales approach using channel leverage. However, the 200k-5M customer in the Mid-Market/SMB space requires a much greater level of coverage, which makes marketing and channel partners the critical levers here. Many companies try to brute force apply an Enterprise sales model to markets like this—the common result being a high cost of sales and low customer penetration.
2. Customers need multi-product capable partners. Both Enterprise and Mid-Market/SMB customers expect to buy multiple products from the categories the vendor has in the portfolio over the next several years. The customers also commonly use only one channel partner 50%-70% of the time. The key implication being that if this vendor wants to maximize sales of the total portfolio over time, then they will need to recruit, train and maintain a base of channel partners that sell across the portfolio.
3. Partners require high service skills—particularly in the Mid-Market. Since the customer is often using only a single partner and they generally desire to have that partner deliver both products and services, this implies a low-skill channel is not a good fit. More interesting, the need for having services capabilities is even greater in the Mid-Market than in the Enterprise. This is common because Mid-Market customers don’t have large IT staffs (or in many cases, no in-house IT staff at all) and, therefore, are more dependent on partners than larger customers.
4. Economic drivers are portfolio selling and new customer acquisition. The customer’s stated intention is to buy 3-5 technology categories that the vendor has in the portfolio over the next 1-3 years. However, this doesn’t mean that the customer will buy all the categories at the same time. If that is the case, this vendor will need to consider:
   • Implementing a land and expand model, over time, working with the single partner that is preferred by the normal customer
   • Effectively acquiring new customers via joint demand generation with partners that, later, are marketed to using the expand approach
   • Developing lifetime value models by customer segment to measure joint vendor-partner effectiveness in gaining customer wallet share
5. Technology alliances and specialist partners are less important to pursue in this example.  While we are proponents of strategic alliances and skills specialization in general, the customer feedback indicates these factors are not needed.  Specifically, the customer is not asking for:
   • Complementary products to be sold with this portfolio
   • Specialist partners who focus on only 1-2 of the 3-5 categories. They are less desirable than partners with broader portfolio coverage.

There are probably other implications the reader can draw from the above data; and, if so, please feel free to comment. Our next blog post in the series will focus on building out sales and marketing coverage to execute against this strategy. It’s a critical step in our proven 5-step process, and you won’t want to miss our strategic advice.