What’s Missing in Your Indirect Channel?

Entering or expanding your presence in the Asia Pacific region invariably requires working with an indirect model engaging channel partners in one form or another, for all or part of your business. There have been many and varied ways of recruiting, enabling and managing your channel partners, just as many agreement types to work with, all well documented, all well researched. We have, over our years of experience, witnessed those that have worked, unfortunately many more that have not. After thirty odd years of business, many organizations in the IT sector continue to struggle with the complexities of an indirect route to market, nowhere more so than in Asia Pacific.

Of course there will be academic nomenclatures for some of the more common scenarios exhibited, however we have provided a slightly more descriptive categorization of those we come across commonly, all have something missing in the relationship.

“Dump and Run’ Model

Mr Vendor recruits Mr Channel Partner, seemingly with all the right criteria followed for selecting the perfect partner. The agreement is negotiated, the contract is signed, hand shakes and bows exchanged. Mr Vendor hands over a box of collateral, some CD’s and manuals, a help desk number, a web address and gets on the next plane returning home, heading straight for the fax machine to collect the flood of orders. Obviously a slight exaggeration, yet not an uncommon approach to partner recruitment.

Clearly partnerships require commitment from both parties. On one side the commitment to enable and transfer skills and knowledge, on the other a commitment to provide capable resources and focus, and a mutual commitment to agree a business plan, with continued review and measurement.

“Show Me Yours First – Stand Off” Model

These agreements take a form where Mr Vendor won’t provide anything or make any significant commitments until Mr Channel Partner first shows some commitment to the ’cause’, maybe hiring dedicated staff, allocating marketing budget or opening the ‘kimono’ up to the customer list.

Mr Channel Partner on the other hand hesitates to provide or commit precious funds and resources until Mr Vendor shows an active desire to support through supplying qualified leads, committing to free training or allocating resources to work with Mr Channels Partner resources. After a time with each waiting for the other to make the first move and not living up to expectations, little if any business is written and the partnership fades with both parties moving on to other pastures.

‘Indirect Is Cheaper’ Model

Many unfortunately still look to the indirect channel model as a free or cheap entry into a market with an expectation of huge success. The indirect model in any of its forms requires discounts, infrastructure and support, by implication there is a cost to this. It should NEVER be considered free.

What should be expected from any indirect channel model is a broader reach into previously unavailable markets with access to domain expertise and or regional experience at a better return for each dollar of outlay. Straight forward, right? Not for all unfortunately.

One all too common example is relatively successful and established organizations making the decision to change to the ‘cheap’ indirect model, significantly downsizing or closing local operations, not implementing a channel enablement and support infrastructure, nor managing the customer expectations. The expectation being revenue and maintenance renewals will continue and grow and the partners would carry on business as usual. The results, not surprisingly, are usually massive drops in revenue, defection of customers, partner dissatisfaction, low staff morale and competitor successes.

‘The Silver Bullet’ Model

Many organizations enter a market such as Asia Pacific looking for the ‘silver bullet’ channel partner, the one that has the contacts, the relationships, technical and sales skills, support infrastructure to sell and support their products – the obvious choice for the desired market segment. Of course this is the perfect scenario. What is often missed is that these channel partners (likely larger organizations) will have a sales force paid on gross profit, already committed to selling known products from multiple vendors with targets like any other sales force.

Ask yourself the question: Will a salesperson focus on a new, unknown, difficult to sell product with a slightly higher margin or will they go and achieve their quota with what they know and what is currently selling, even though the margin may be slightly lower?

‘Committed Start-Up’ Model

Relative to the above, seemingly a reasonable approach. Mr Start Up Partner will be keen to prove themselves, hungry for revenue, eager to impress, often with a specific domain expertise and driven to build their business. Everything that one could want in a sales force. Sometimes. What about resource availability and quality? What about scalability? Smaller organizations will be juggling issues like cash-flow, breadth of relationships, depth of contacts? Again, there are numerous examples of these well intentioned ‘partnerships gone wrong’.

‘You Need Us More Than We Need You’ Model

Typically either Mr Vendor or Mr Channel Partner are a recognized brand in their specific market, sometimes even both. The one more recognized in the market to which the other wants access plays hard ball, or more often, an individual charged with the relationship, suddenly wants to show their value and plays hard ball. A relationship built on animosity from the outset, destined for the ‘seemed like a good idea at the time’ pile. These relationships do have much to offer when executed correctly but can be difficult to manage or negotiate if either party believes they are in the dominant position with little to gain.

If all of these scenarios sound unfamiliar … then credit to your channel people, they should be rewarded handsomely as your channel is most likely working well for you, with mutual benefit.

But if any sound a little too familiar then … the big question! “What IS missing in my indirect channel?”

It’s not difficult to search out the plethora of material on the ‘6 things’ or maybe even ’12 things’ you must do to make a channel partnerships work. Or, on how to select your channel partners with what criteria etc. All these will have valid guidelines, all will have important aspects you should take note of and incorporate in your channel approach. Most will highlight aspects of company alignment, market segmentation, sales processes, clear rules of engagement and documentation of mutual expectations combined with constant, open communications, some identify a need to support your channel partner through resources and infrastructure, even funding of direct sales support during the enablement stage. All of which is correct and important.

Personally I like to boil things down to their simplest level, a common denominator or two. In this instance there is a fundamental state of mind that determines whether the partnership will succeed or fail, the one thing in the scenarios above that is missing.

A level of desire and ability to INVEST.

Each of the scenarios fail due to a lack of investment and we are not talking only of financial investment. We are talking about investment in all its forms – time, resources, focus, commitment and financial.

The ‘dump and run’ model lacks investment in support and commitment; ‘show me yours first’ lacks investment in the relationship and building trust; ‘indirect is cheaper’ lacks investment in many areas and so on. I’m sure you get the point.

Think of it this way, you would not expect your bank to pay you a dividend or interest income if you have zero dollars invested in your account. So it is amusing and somewhat worrying when speaking with seasoned and generally successful executives who seek to expand into Asia Pacific, actively avoiding investment in their channel development, yet they maintain high expectations of results. This is no more important than in Asia Pacific, a region accepted as requiring a strong indirect channel strategy to succeed, built on commitment, relationships and mutual trust.

The summary

The key to a successful channel partner strategy and in turn a business that will grow and gain strength year on year is simply, a commitment to invest appropriately based on the returns required and expected. Namely in the areas of:

o Understanding the market through research and segmentation.

o Partner selection and due diligence.

o Partner enablement (resource allocation & execution support).

o Support infrastructure and partner management.

o Communication, relationship and trust building.

o Regular and focused reviews.

Like all good things, successful, mutually beneficial relationships require commitment, focus and effort – there are no short cuts, there is no money for nothing. Your outcomes, returns and profit is directly proportional to your desire and ability to invest in your channels.

Why Sports Marketing and Sponsorship Is Becoming Popular in Asia

Asia has no doubt now become a marketing playground for multinational brands and businesses to expand their niche beyond normal reach. Many companies have recognized that sports have an incredible potential to be turned into an influential and lucrative marketing tool for any brand’s growth and it certainly outshines traditional marketing efforts by reaching a mass which far outnumbers those of any other channels.

Brands are able to capture an unbridled passion with sports which it could not achieve through other platforms. A sports sponsorship can reach large numbers of people by bridging the divide between label and consumer, allowing people to engage with the sport or its star players on a more personal and emotional level. It is no longer an advertisement waiting to be skipped; it becomes the energy that ignites the sport. The brand will be seizing the prospect of lifetime loyalty with their consumers by investing in relationships rather than advertising which prove to be a more economical and cohesive approach to marketing.

For example, 192 million people tuned in to their television sets to watch Southeast Asia’s national football competition the 2010 AFF Suzuki Cup, and a total of 15 million people watched the two final leg games in record breaking numbers. The enormous viewership clutches the attention of millions of fans across the region, not to mention the sell-out crowd at the stadium, followers on social networking sites and many more viewers of its online broadcasts. A survey has shown that traditional above-the-line advertising at such level would cost significantly more while yielding smaller impressions and revenues.

Sponsorship opportunities will affect a company’s market segment by offering them the chance to develop awareness and devotion to the brand. The passion derived from the target market is what the brand relies on to achieve a positive sponsorship. By putting together their own brand values with that of the sport, companies are able to uphold its brand trust, effect buyers’ spending trends and better capitalize on customer relationship.

A compatible sponsorship will leave a strong impact on an audience and will likely rouse a surge in sales and profitability. Therefore, it isn’t all just about jumping on the bandwagon like everyone else but a careful selection process needs to take place beforehand to maximize the brand’s visibility and exposure in line with its core values and objectives. Sports marketing have revolutionized the way brands are being depicted to consumers. It pervades more advertising channels and cuts your costs, targets a broader and more focused group, and is definitely more effective than traditional marketing activities.

The Switzerland of Asia Shines

In many respects, Singapore is the Switzerland of Asia.

Begun in 1819 as a British trading colony, the Republic of Singapore was founded in 1965 under the leadership of the current Prime Minister’s father, Mr. Lee Kuan Yew. While it is only 1/5 the size of Rhode Island and three times the size of Washington D.C., it is perhaps the most strategically important global trading, finance and service nexus in Asia.

Here is why you should consider investing in Singapore.

While Hong Kong and Shanghai will argue, Singapore is the busiest port in Asia situated next to the vital trading channel, the Straits of Malacca.

Unlike South Korea and Taiwan, which are heavily dependent on the cyclical electronics industry, Singapore has a well-diversified economy. 70% of its GDP is attributable to finance and services.

Singapore’s accounting rules and regulations are amongst the most conservative in the world. For example, its rules on inventory accounting and the expensing of stock options are more conservative than those in the United States.

Trade Surplus

Despite only 1.6% of its land being suitable for agricultural activities and having to import almost everything including water, Singapore manages to have a trade surplus.

Singapore has a balanced budget, a stable currency and still manages to allocate 5% of GDP for defense.

It represents a multi-ethnic society with 77% Chinese, 14% Malay and 8% Indian.

Singapore has a parliamentary form of government, an English common law judiciary system and is corruption and drug free. Slowly but surely, a freer political climate is developing with a Speaker’s Corner instituted in 2000 and the ability to express one’s views freely anywhere with the exception of the sensitive topics of race and religion

Singapore’s educational performance is legendary. The fact that it has twice as many Internet users as television sets is telling.

Singapore’s New Resorts

Singapore is also changing with the times. To generate more investment, tax revenue, and add a bit of sparkle, Singapore recently approved the development of two large casino resorts. It is part of a strategy to reduce the country’s dependence on manufacturing and to position itself as a livelier tourism destination. Of course, there will be restrictions. Singaporeans will have to pay a $60 entry fee and the gambling areas will be restricted to just 5% of the resort. According to projections, the resorts will lead to $4 billion in investments, $3.5 billion in annual revenues, 35,000 jobs and $350 million per year in taxes and fees.

Singapore has also made great strides in patching up misunderstandings with its neighbor to the north, Malaysia, from whom it split in 1965. Tax issues, water supply agreements and transportation arrangements are all moving much more smoothly.

Singapore is adept at holding on to its manufacturing base even as several large semiconductor manufacturers such as National Semiconductor announced plans to move plants to China and Malaysia. For thirty years, Singapore has relied on electronics as the backbone of its manufacturing sector but is making the transition to a more service and R&D economy. Electronics is about 40% of manufacturing output but accounts for only 5% of employment. Surprisingly, some firms are moving manufacturing centers from China to Singapore due to its infrastructure, logistics and laws protecting intellectual property. Exxon Mobil, Shell and Sumitomo are expanding petrochemical facilities and Singapore added 27,000 manufacturing jobs last year by moving up the food chain.

After 8.4% GDP growth in 2004 and a weak start early this year, Singapore’s economy posted 12% plus growth in the second quarter and should be a solid performer over the next few years. Continued strong global demand for transportation, communications and logistics services, increasing IT spending, rising consumer spending and property prices and expanded tourism all point to continued growth.

An easy and smart way to invest in Singapore is through the Singapore iShare (EWS) which tracks the Singapore Straits index. It is up 26% over the past year and up 9.4% year to date. Its largest positions are in Singapore Telecom, United Overseas Bank and DBS Bank. Even better, it is tax efficient and has an annual expense ratio of only 0.59%. Trading at 14 times projected earnings, the Singapore market is still attractive. By comparison, the Switzerland market and iShare (EWL) is trading at 18 times earnings.

The epitome of quality and increasingly creative, Singapore is a great core holding for any global portfolio.

Carl Delfeld is head of the global advisory firm Chartwell Partners and editor of the Chartwell Advisor and the Asia Investor Intelligence newsletters. He served on the executive board of the Asian Development Bank and is the author of The New Global Investor (iUniverse:2005). For more information go to http://www.chartwelladvisor.com or call 877-221-1496