Ch...Ch...Changes

I am frequently asked about the best way to measure the relationship between a vendor and their channel partners. It is not uncommon for companies to try to assess the relative strength or weakness of their channel relationships by looking at a single point in time. For instance, they may look at total revenue, margin, market share, share of wallet, or number of customers to gauge the value of the relationship(s). Relationships, however, are not static. Every relationship has ebbs and flows, which should dictate how you manage them at any given moment. To effectively market to your channel partners, you need to carefully consider the following:

CHANGE: This is perhaps the simplest calculation. Basically, you take two points in time (A and B) and look at what has changed during that elapsed period of time. Has revenue or profitability increased or decreased? Have we gained share of wallet? So while it is good to know your revenue at a single point in time, it is better to understand whether or not revenue has increased during a period of time.

VELOCITY: Velocity considers the rate of change. For example, let’s say that during a period of time, Partner X increased revenue from 100,000 to 150,000. Calculating the change would tell you that there was a $50,000 increase in sales. During the same period of time, Partner Y increased revenue from $25,000 to $75,000…also a $50,000 increase in sales. While both Partners increased sales by the same absolute amount ($50,000), the velocity was quite different.

ACCELERATION: Acceleration considers the rate of change in velocity. This metric offers an effective way to measure specific actions taken to affect velocity. For instance, let’s assume that a Partner relationship has turned sour and, as a result, there has been a decline in revenue over a period of time. In fact, over multiple periods of time, revenue has declined at an increasing rate. To mitigate the downward spiral, you implement an aggressive program designed to re-engage the Partner. By examining the rate of change in velocity, you can effectively measure the effects of the program.

The “scientific” and ongoing management of channel performance data is essential, because it will help formulate the most effective initiatives to either mitigate or exploit current opportunities. To me, the biggest challenge is to consider multiple variables simultaneously. In the above examples, we only considered one variable…revenue. While this is ok to illustrate the principles, it is not realistic, however, as there are many variables to consider. The “new” channel marketing model should be to effectively measure the change, velocity, and acceleration of multiple variables simultaneously and quickly implement effective campaigns to take advantage of what the data tells us.

If you want to know the strength of each of your channel partner relationships, you need more than a “picture” or single snapshot in time. You have to know and understanding how the relationship is changing, why it is changing, and how quickly it is changing. Companies that are able to gather and analyze this data will be in the advantageous position of building stronger and profitable relationships with their partners.

What's Up With The SMB?

Switching gears a bit form my most recent thoughts on social networking and the channel, I wanted to start a discussion on what is happening in the SMB market. A recent article on ChannelWeb discusses the very significant decline in SMB revenue for North American solution providers. You can read it here...

I found it interesting in that many of the channels reviewed in the article had different rationale for the decline (all double digits...some as high as 20+%). They referred to the exchange rate, geography, market segments, and lower margins. They talked about being "cautiously optimistic", "protracted road to recovery", "markets we serve have reached bottom", "aggressive price competition", and "all segments went down some". This is hardly good news for the channel serving the SMB.

I am curious if the precipitous decline in the SMB market is just a reflection of the economy, or if there is perhaps something else going on. Is there a new world order forming in the products and solutions serving the midmarket? What would it mean to the channel?

ChannelWeb has another article regarding the Top 10 Technologies High On The Minds of Midmarket CIOs. Granted, one article is about the SMB market and the other on the midmarket, but I do think there is some commonality. I won't go through all of the technologies, but rather point out that Virtualization, Business Intelligence, Security, Unified Communication, Collaboration, ERP, and CRM all lend themselves to cloud computing. Are these CIOs most interested in these solutions because of the economic benefits of hosted and managed solutions? Is this trend (if true) only a function of the economy? Will the trend reverse back once the economy makes a turn?

Again, what does all of this mean to the channel and the relationships they have with their customers and vendors?

My guess is that the technology trends are a direct result of the economy, but that even with a turnaround the trend towards cloud computing will continue. Channels serving the midmarket and SMB market will need to adjust their strategies accordingly. Those that have performed well on the top line (at least relatively) have also experienced a significant negative decline in margins.

Let me know what you think....

Is All of This Talk About Social Media Real?

Yesterday I had a conversation with a like minded channel professional about social networking. There seems to be a pretty large number of company leaders that view social networking as business tool to be somewhat of a fad. It seems pretty clear to me that the data indicates that it is certainly not a fad. While there remains kinks to be worked out and business models to be developed, social networking is rapidly becoming an integral part of marketing and customer relationship management.

Just this morning I stumbled across blog post (and subsequent research) from the Gilwell Group that you should check out. This research not only addresses the premise in the previous paragraph, but it is also directly related to B2B channel management. I highly recommend that you check it out here. Take a look at the SlideShare presentation as well.

Where Does Social Media Fit?

As many have concluded before, the use of social media as a stand-alone strategy will not be as effective as the use of social media as part of an integrated effort. As I reflect on the role of social media on building better, more profitable channel relationships, I think that it plays an important role in the beginning and at the end of the process. A high level view of the process would look something like the graphic on the left.

Data is collected, organized, and analyzed at the beginning of the process. Data can be quantitative (ie. POS information) or qualitative. It is important for organizations to review and stay abreast of the discussions happening in the social media realm about your company. LinkedIn, Twitter, Facebook, and others are places where there is tremendous amount of discussions happening everyday about your company, your competition, and your industry. This can be invaluable and timely qualitative information that should included in the early stages of your channel marketing process.

Finally, once you have used the data to identify an opportunity, followed your development process diligently, and created your content, it is now your job to engage your partners. Using traditional communication vehicles like email, portals, and newsletters should be part of the communication mix, but these are typically pushed (intrusive) methodologies. Your ability to truly engage and have conversations with your audience will come in with more “synchronous” communication methods. Obviously, anytime that you can engage in person with your customer the better, however this can be time consuming and expensive. The use of social media will enable you to engage your partners more quickly and through your trusted network. Social media will also give the added benefit of exponential reach that a face-to-face discussion will not offer.

Social media should play an increasingly important role of both your channel marketing strategy and the tactical execution.

Lighting The Fuse

The key to effectively build a string of mini-explosions is to reach the individuals that have reach and influence beyond your own. Actually, it is more than just reach and influence. They also have to be willing, able, and motivated to share your message with others that they think will benefit from what you have to say. No problem, then. All you have to do is find those people that find your content so compelling that they are willing to share your information (sometimes at a risk to their personal and/or professional reputation) with other people in which they have some level of influence.

Piece of cake, right?

Not exactly.

These people are often called “Sneezers” because they help spread your content/message...creating the viral effects of social media. They are hard to identify and reach. Even if you could identify them, their attention would be very difficult to get as there would be significant competition.

The BIG question, then, is how do we reach and motivate these Sneezers and get them to help spread your content. First, and foremost, you have to have something they care about. For example, my Mom would not be a Sneezer for this post about social media, but if I was writing about cooking a Bundt cake, she would be a great Sneezer. So you have to target your content to the right communities of individuals. The key is to not be too narrow. Since you may not know who the Sneezer will be, you will have to cast a big net.

The next step is motivation. Why would a Sneezer feel compelled to share your content? This really comes down to being part of communities that share a common purpose. LinkedIn Groups are wonderful examples of these types of communities. I belong to some very large groups, as well as some pretty small groups. The smaller groups are more narrowly focused, but tend to be more passionate about the topic. The larger groups have a smaller percentage of active participants, but those that are active tend to have broader sphere of influence.

The graphic below shows how this would work. The mini-explosions occur within each community as a Sneezer reaches another community…one in which he/she has some influence. In turn, another Sneezer reaches another community. The process continues as long as the content has some value to the next community. The mini-explosions create the viral effect of social media because you have successful caught the attention of the Sneezer who is motivated to share.

Mini-Explosions

If social media is TNT (Trust, Network, Time), then perhaps it has the characteristics of dynamite. But dynamite is really one big explosion and social media has the effect of a bunch of small, or mini, explosions that ripple through your network. It can happen quickly, but the viral spread of information happens through a large number of small connections that reach more communities. The power of your message and communication will determine the number of explosions and how long the ripple effect will last. Done effectively, the exponential effects can be profound.

Consider the following:

You tweet 1000 followers

10% re-tweet to 1000 followers (100,000 have now received your message)

5% re-tweet again to 1000 followers (5,000,000 have now received your message)

Of course, you can change the variables and the number of mini-explosions, but the exponential effect remains. So, in the above example, one 140 character message reaches 5,000,000 individuals. Those that received the message were somewhat pre-qualified by the "trusting" nature of social media. Let's say that only 1% (5,000) buy a $500 product from you. You have just made $2,500,000. Again, you can adjust the variables, but the ROI can be significant.

This may be somewhat unrealistic, however, because there likely needs to be more marketing involved...initiatives with more hi-density content...and additional sales involvement. Again, I would contend, however, that the ROI is significantly larger than a traditional direct mail or telemarketing campaign, where the additional hi-density content and sales engagement will still be required.

Our goal, as channel marketers, is to create content that will maximize the number and size of the mini-explosions.

TNT

Still working on this idea, but I wanted to get some reaction to the thought. It seems that social media offers a unique blend of Trust, Network, and Time (TNT). Using micro-blogging as an example, one would have a trusted group of followers. Those followers would have their own trusted group, etc. This is where the network comes in. In theory, even with a small group of followers, you would have exponetial reach through your network. LinkedIn works the same way. Because of the asychronous nature of micro-blogging, time to communicate and engage is greatly reduced, especially when compared to traditional media.

Social Media = TNT

As a stand alone strategy, social media will offer the benefits of trust, network, and time. Unfortunately, this will not necessarily translate into sales and revenue. Other channel sales and marketing tools are required to bring the benefits of social media to a revenue producing strategy. It is absolutely necessary to have fully-integrated channel marketing plan. Because of the benefits of trust, network, and time that social media offers, it can/should be a critical executional element of the plan.