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Channel Matters Blog > March 2012 > Getting The Most Out Of Distribution

Getting The Most Out Of Distribution

by Sue A Johnston
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Because distribution plays a key role in a vendor’s channel model, every vendor who is serious about it will have implemented an annual business planning and QBR process with their distributors. But how often do they review their overall distribution model and current distributor capability against route to market requirements? 

What are the key roles and responsibilities distribution partners are required to fulfill today and in the future as the innovation cycle speeds up and ‘the cloud’ gains momentum? How well do current distribution partners meet this need? Are distributors motivated and rewarded to fulfill their required roles? Answering these questions can bring considerable benefits; lack of knowledge can be costly in terms of revenue, coverage, profitability, market share, resources and customer and partner satisfaction.

Distie’ review triggers

A distribution review assesses existing or potential distribution partner competencies and capabilities against the roles and responsibilities needed to execute a vendor’s route-to-market (RTM) strategy. Best practice vendors do this at least every 3 or 5 years; more often if their markets and products are rapidly evolving. 

Triggers for a distribution review include:

  • Limited coverage of target market segments – missing out on competitive share in high-growth or high-return areas
  • Changes in regulation, market forces or the distribution landscape as new distributors emerge and companies acquire other distributors
  • Launching new products or entering new market segments
  • Changes in product life cycle requirements – what makes you successful in one part of the lifecycle can doom you to failure as products and markets mature
  • Declining revenues or overall channel success
  • Decrease in share of the distributors revenue
  • Any significant change in distributors business model, focus, relationship or vendors represented
  • Moving to two-tier distribution model for the first time

Distie’ review considerations

So what are the key components of a successful distribution review?  

  • It’s vital to have a documented channel model that is aligned with the overall RTM strategy
    • This includes a comprehensive economic assessment of the distribution model
    • Understanding coverage requirements –the number of active resellers across solutions and market segments
    • The type of distribution partners needed – value, broad based and niche (industry / technology) distributors
    • The number of distribution partners the business can support; though the final decision on this should not be made until the analysis is complete
  • Distributor roles and responsibilities must be defined and the partner compensation model realistically aligned to these requirements
  • Establish a clear set of leading and outcome metrics to track distributor competency and capability
  • Clearly documented review process and communication strategy
  • Involve legal counsel at the start of the review process, as they will need to review and approve documentation and process

How to conduct a review?

Another important decision for vendors is whether to manage the review in-house, or outsource it. Running a full RFP based review is very intensive and requires dedicated resources to successfully manage the process.  Many vendors choose to outsource the review process for several reasons including.

  • Resource constraints
  • Compression of time – by leveraging proven distribution review processes and methodologies
  • It brings impartiality to the management of the process
  • Ability to leverage a consultants knowledge and experience 

So it is important to look for a distribution consultant with the appropriate industry, channel and distribution knowledge, and a best practice review methodology.

Review outcomes

A positive review outcome does not always mean switching or appointing new distribution partners.  Stronger relationship focus and goal alignment, better understanding of partner business drivers, new opportunities including market coverage, and new value added services, can all result from a review with existing distributors.

We have conducted many distribution reviews and in our experience only 50% of vendors actually make a significant change to their distribution model following a review.  However, all vendors have made some significant positive changes in the way they engage with their distributors. 

It is so easy and natural for the focus to remain on quarterly objectives, but over time other key opportunities or risks can be missed. Implementing a formal distribution review as part of your longer term channel strategy is a best practice initiative that should never be overlooked.

Do you think a distribution review can help your organization? Click here to contact us

 

Last modified on 6/30/2013 10:10:59 PM
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