The look on the guy’s face suggested he wasn’t sure if it was a personal slam, a screwed-up organization or some third thing he hadn’t thought of yet. Recently appointed to a nice management role in a midsize company, he called a large network vendor to discuss a possible order and found himself referred to a channel partner.
“I wanted to buy direct from the manufacturer, because I figured I could get a better price,” he said. “But the rep from [the vendor] kept wanting to bring in some middleman.”
“Yeah, that’s what they have to do,” I replied. “While [the vendor] certainly wants the sale, they also need to protect their ability to reach the whole market.” When he looked at me like I had antennas growing out of my head, I realized that one of the main tenets of channel sales probably seems pretty strange to those who encounter it for the first time. Here’s how it breaks down.
There are thousands of companies worldwide that want to buy the vendor’s product. If the vendor employed the number of salespeople necessary to meet that demand, the vendor’s cost of sales, and hence the cost of the product, would go through the roof.
“But they’re on commission, aren’t they?” you ask.
Yes, but the demand is uneven. Some areas would see high sales, while in others it would be very hard to make a living. In addition, network equipment is used in conjunction with other vendors’ products. So customers need someone who can pull together all the different types of software, hardware, connectivity and professional services necessary to make it all work.
“That still doesn’t explain why they don’t want to sell it to me direct, when there’s a deal in hand,” you reply.
There’s always an inherent tension between the vendor’s direct sales force and the indirect channel partners, so they develop rules of engagement that dictate which types of customers belong to whom. Typically, huge corporations and carriers can buy directly while the rest of the customers buy through the channel. The vendors need both types of sales strategies, so they need to prevent one group from eating the other group’s lunch. If the vendor becomes inconsistent, the channel relationships fall apart, which wreaks havoc on their revenues.
“But I can buy directly from the vendor online,” you point out.
Those sales are often routed to the channel anyway. Again, it depends on the rules of engagement. Buying directly from the vendor is not necessarily an advantage. Vendors will never say this in a brochure, but they really can’t reach very far down-market under the best of circumstances. What if you’re having a technical problem at the same time MegaMajorMassive Corp. is having one? Who do you think is going to get the attention? The channel partners are more able to respond.
Presti is president of Presti Research & Consulting, which specializes in go-to-market solutions for technology companies. He can be reached at ken@prestiresearch.com.
