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For many companies, their main interaction with customers is through an intermediary. This intermediary or ?channel? may be a retailer, dealer, agent/rep, distributor, integrator, independent catalog or web-based reseller.

If this situation describes your company?s ?go-to-market? strategy, then you are acutely aware of the critical and complex nature of building strong channel relationships. Channel Marketing

Many companies, especially smaller firms, manage their channel relationships on an ad hoc, informal basis. To more effectively reach end users, companies should develop a more formal, strategic approach to managing channel partnerships. Conducting a ?channel audit? might be a good first step.

What?s wrong with a ?seat-of-the-pants? approach to working with resellers?

Obviously, a strong personal relationship with the owner, salespeople and support people at your resellers is a good starting point. However, the nature of the overall relationship is too complex to simply rely on spur-of-the-moment decision-making.

Also, channels are consolidating. Many companies now sell through large resellers such as Home Depot or Wal-Mart on the consumer/contractor side; big wholesalers such as Ingram or Tech Data in the technology market; or large distributors such as Motion Industries, Ferguson or W.W. Grainger in the industrial markets. These huge resellers expect formal, consistent programs.

What are some of the major challenges in working with intermediaries?

First, good channel partners can bring significant market coverage at a relatively low cost, especially when selling to consumers or small and mid-sized business customers. Many channels also add technical or logistics skills beyond the suppliers? capabilities.

On the flip side, channels can pose several challenges. Simply communicating with so many people can be a problem. Gaining ?mindshare? among these independent resellers is another challenge. If you do not establish clear roles and a well-reasoned compensation structure, destructive conflict between channels may occur.

What is a channel audit and how can it help? Multi-channel Audit

Many companies know their channel sales are below goal or that intermediaries are complaining about seemingly random problems. However, unless someone undertakes a structured, objective analysis, the company may never uncover the root cause of their channel woes. We developed a multi-channel sales and distribution audit that looks at over 30 elements of the supplier/channel relationship.

We gather information in advance and conduct interviews of key people involved with channels. Then, we facilitate a face to face review with management, including channel strategy, channel sales, channel marketing, organizational and financial aspects of their channel program.

Typically the CEO, the VP of Sales, the VP of Marketing and one or two key channel sales and marketing managers will attend.

What is the typical output of a channel audit?

At the end of the process, we provide the client with a report card on each element of their channel program. We rate the importance of each element of the channel strategy and programs.

Our commentary will pinpoint specific issues such as understaffing a particular marketing function, lack of training for channel sales people or over-supporting under-performing resellers. At a basic level, a channel audit provides a company with a measurable set of ?next steps.?

After undertaking an audit what are some of the typical steps a company takes?

One of the common things we find is suppliers who are overpaying their resellers (or some of their resellers) relative to the functions performed by the reseller. So, these companies will often revise their channel compensation programs with an emphasis on function-based, rather than purely volume-based criteria.

Also, the channel audit often highlights companies trying to sell new products or move into new markets by relying on their traditional channel partners. Frequently, companies need to sign up new types of partners to open up growth areas. Based on this audit finding, many clients recruit new types of channels that offer better growth opportunities. Channel Workshops

Companies that have already pursued an aggressive growth strategy can run into various types of channel conflicts, as I mentioned earlier. The channel audit will uncover actual and potential channel conflicts. We will then work with our clients to develop new policies/contracts, compensation, communications or other tactics to tamp down the conflict.

Bob Segal is a Principal with the channel consulting firm of Frank Lynn & Associates. Reach him at 312.558.4808 or bobsegal@franklynn.com

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