Original post date November 22, 2010
On Wednesday November 17th, I attended the Corporate Executive Board’s Enterprise Council on Small Business member meeting in Philadelphia. The meeting entitled Selecting and Building Channel Partnerships included attendees from about 10 member companies such as; Xerox, Symantec, Experian, Erie Insurance and Comcast, who hosted the event.
ECSB practice leaders opened the meeting reviewing recent research on enabling channel partners to effectively sell to small business (title of the post). The research compared the performance of high and low performing partner programs. The meeting also included a review of best practice case studies. Highlights from the research include:
- How small business owners want to buy – business owners stated that the type of supplier most preferred was a local supplier (34%), followed by a sales rep selling multiple lines (26%). Top 3 reasons they buy from a local supplier; 1) location, 2) know them personally, and 3) responsiveness (immediate answers to questions).
- What high performing partners want from companies – 1) Training (all types), 2) Evaluation (compensation related), and 3) Resources (access to information, additional infrastructure, etc.) This was interesting because low performing partners ranked Leads as #1.
- High Performing vs Low Performing Partners – the size or maturity of the partner’s business did not impact the findings, however the age of the ownership team did; younger partners performed better than their older peers.
- Partner Compensation - the preferred plan was overwhelmingly “percentage of sales” 38%; flat $ per unit commission 17%, and discount (either dollar or percentage) was 13%.
Highlights from the case studies and discussion:
- Measuring Partner Performance - 61% of partners said that they are evaluated on a single metric. Number one metric “Volume of Sales”. Most of the attendees also agreed, only one had used an additional measurement for performance.
- Net Promoter – the additional metric used was a net promoter score to measure the performance of partners…really interestiing application of this tool
- Using a Third Party Facilitator – the use of a third party mediator was highlighted in one of the best practice case studies. The company used an outside facilitator to help the two companies negogiate a partner agreement. The goal of the mediator was to encourage honesty, and bring about an accurate appraisal of the relationship potential. Really interesting process to get at what’s in it for both parties, and for getting everyone aligned on expectations.
My key takeaway was that there is a significant opportunity to improve partner performance that is being missed. The opportunity is directing partners to desired customers and/or market segments. Granted some partners are selected just for that reason, but in general, companies do not typically articulate what customers they want or who are best for their products. A couple of members mentioned that they organize products against customer segments and assume that points partners in the direction of those customers.
I don’t think that is enough. At the end of the day, manufacturers know how to sell products better then partners. As a result, they should know which customers/type of customer will most value their product or service, and those customers that will be most profitable and loyal. Use this information to help partners understand, and identify what a good customer looks like, and why. Give clear direction on what you want. If there is one thing we’ve learned from previous research, it is clear communications with partners is highly valued, that in itself might be a wi
Original post date September 23, 2008
Wow, what a couple of weeks it’s been for the Financial Services industry. Investment Banks have disappeared, the government owns the world’s largest insurance company and Congress is debating whether taxpayers should foot the bill to get us out of the largest financial debacle since the great depression.So what might all this mean to sales and marketing folks in the industry? Our Financial Services
practice and I have spent the last week and a half looking at the changes and have come up with a list of potential areas that may be impacted…negatively or positively. I’ve even gotten feedback from a colleague in Europe on what this might mean internationally. Keep in mind that the crisis is shifting everyday, so this is like trying to look over the horizon while standing in quick sand.
Here we go:
- Greater regulation across the industry will reduce the number of ‘innovative” products making it more challenging to differentiate by product. As a result, companies will need to increase the importance on competing through superior distribution, and having an unique segment aligned value proposition.
- A greater need for solution sellers vs product pushers – In this environment, sales channels with reps that can sell value will be essential.” Additionally, the need to sell new services “bundles” necessitates more sophisticated reps. Product Pushers” who sell on price will continue to erode already pressured margins. We may also see someone like Progressive uses their direct model to commoditize more products/services perhaps some low end products in the Commercial Insurance market. If you are an agency or broker, move up the value chain to selling sophisticated service solutions. Wholesalers and/or Aggegrators may help facilitate that shift. Relationships are still key but “best price” will continue to be the key consideration driver.
- A significant need to lower the cost to sell – Increased regulation most likely will add cost and/or impact margin. Companies will have to find a way to do more with less. They may also look to new lower cost channels to distribute products. Relationships + low cost, self service channels = success. Because solution sellers are hard to find and more expensive, there will be a focus on finding ways to create “leverage” for channels/reps.
- Customers will have greater leverage – Good customers will be in the driver’s seat. They will be more cautious, demand greater value and lengthen sales cycles. Profitable customers will be highly valued and targeted, see bullets 6,7, and 8.
- New risk models or new underwriters – There may be a need to rethink how companies evaluate, take on, sell and/or manage risk. This may also be impacted by new regulations.
- Improved segmentation & predictive modeling – Cost pressure and increased competition will force the need to improve targeting, increase yield of programs and campaigns, and get the most out of existing customers (increasing cross sell and upsell opportunities).
- Increase focus on retention and loyalty – Investment banks, now bank holding companies or a part of a Retail bank will now have to fund their activities on customer deposits rather than “funny money”. Look for them to come after your best customers.
- New competitors, “Super Banks” & consolidation – Look for the pace of consolidation to pick up with the recent changes. The banking landscape has changed with Goldman Sachs and Morgan Stanley becoming bank holding companies. This sets them up to either acquire banks themselves and/or merge or being acquired. Existing players, such as BofA and Barclays, are picking up the pieces that will help them expand services.
My colleague, Mathew Stewart in our London Office chimes in;
- Safety in geographical diversification–Major international banks will seek a more geographically diversified portfolio. Being active in U.S. and Europe is not sufficiently diversified to protect against the crisis, as UBS discovered. Those who were strong in China, India, and Brazil have faired better. For example, HSBC’s huge U.S. write-offs were counterbalanced by spectacular gains in their Asian operations, so their shares have stayed stable. Santander, a European bank, has faired well due to its involvement in Brazil, and is now buying up businesses from cash-strapped competitors, e.g Royal Bank of Scotland. Some of the bigger banks will seek to copy HSBC and Santander – most do not have sufficient reach, and are more likely to merge with a domestic competitor.
- Domestic mergers lead to channel rationalization headaches. More domestic banking mergers mean more headaches around how to combine two different sets of distribution channels. These are tough decisions. Huge investment has been sunk into branch networks, a regulated sales forces, broker networks and brands. Exit costs are very high. Banks need a rational basis on which to base their channel rationalization decisions.
- You’ve killed your partner channel. What do you do now? Over the past 10 years many of the reputable agents and intermediaries have come to rely more and more on cheap credit deals for their income. When the banks stopped lending they were the first to go bust – not just the charlatans and quacks, but some good people who will not now come back to the market in a hurry. When the bank is ready to expand again, how do they rebuild the partner channel?
- Look again at Buy vs. Build. Mergers also present dilemmas for product portfolio managers. There are make or buy decisions for different product categories– e.g. should a bank sell its own general insurance? Difficult to know what will happen here. Will the drive for more transparency in investment products actually extend into all FS products?