Annual planning in channel management can be either a business burden or a huge growth tool. With industrial sales channels and distribution, the key to shifting from burden to growth is to shift the way we think about the channel relationship strategy. By moving from reseller to partner, from channel to ecosystem, we can reframe the process to create business value and redefine channel strategy.
The Rote Mystery of Annual Planning and Performance Reviews
Most people rank annual reviews just ahead of colonoscopies on the enjoyment scale.
While they’re not enjoyable, they should be valuable. Both help identify and resolve small issues and avoid bigger problems later, as long as they’re done properly, with preparation, vision and clear goals.
In the channel selection and planning space, that’s unfortunately rare. Because annual reviews are not enjoyable, it’s easy to want to just get them over with. This is often true with industrial manufacturers where the focus is on making things, and ancillary tasks feel like a distraction from that important work. Companies may take a formulaic “check the box” approach to reviews with their own sales strategies and direct sales team members who we work with every day, much less with channel partners who are a step further removed.
But the value of planning and substantive reviews to success is clear. So, an important step in improving the revenue contribution of a channel is to grow the value of planning in order to deepen the collaboration. Let’s look at how we can rework the annual planning, techniques, goal setting, and performance review process to create enough mutual value that the task gets the attention it merits.
Reseller? Or Partner?
Industrial manufacturers are inspiring examples of a “can do” mindset. They dream up products, tinker and experiment, bring them to life through vision and force of will, and then make them from raw materials. Brands within the manufacturing sector are justifiably proud of that contribution and are intentionally self-reliant. When they want something done right, they often rely on themselves to do it.
That’s admirable in many ways, but it can also hamper their channel management operations if they see the channel as just “resellers” and frame their relationship around transactional interactions, thereby negatively impacting their business outcomes.
Industrial channel relationships have evolved significantly over the past twenty years as the internet has developed. Initially, traditional marketing channels, distributors, reps and agents provided manufacturers access to local markets. Local channels had trusted relationships through which manufacturers could reach buyers who turned to local resellers for solutions and ideas.
Channel also provided stocking of local inventory, technical support, customized commercial terms and business advisory.
Manufacturer-imposed requirements generally helped minimize intrabrand competition while supporting vigorous interbrand competition. Marketing focused on brand recognition in support of partner demand gen.
Valuable channel partners sourced, sold, and serviced deals and owned relationships.
Not all channels were valuable; however, some simply loaded their catalogs (line cards) with products, hoping to catch business based on convenience rather than providing value to the manufacturer or buyer. Others relied on their control of information and product to isolate end users from vendors. And some simply occupied territories defensively, lackadaisical pursuing vendor provided leads without proactively growing a market.
The internet changed that as it facilitated buyer research and direct contact between prospects and manufacturers. The role of channels in demand generation, lead creation, and information exchange was quickly diminished. Logistics networks reduce the importance of local stocking, and recent advancements in remote inventory control and technical support have reduced dependence on local channel technical expertise.
Strategic thinking business leaders in manufacturing have watched Tesla’s disintermediation of channels with interest, and as manufacturers push into subscription services, data aggregation and remote support, angst has increased among those who view channels as resellers with transactional relationships.
But not all channel relationships have deteriorated. Partners in an ecosystem have found important ways to collaborate. That’s reflected in the Nearbound movement, which creates collaborative marketing and sales opportunities with adjacent suppliers and service providers. The goal of Nearbound, which originated in technology sales, is to create buyer value with confidence that it will redound to vendors by reframing the relationship.
Nearbound success requires a shift in how you see sales affiliates. Where channel is a transactional and hierarchical one to one relationship, a partner ecosystem is built on collaborative and mutually enabling relationships. It’s many to many.
Impact on Planning and Performance
That difference in mindset is the key to turning planning and performance reviews from admin tasks to business value drivers.
Think about the typical annual planning meeting for channel partners.
There’s typically a conversation about what happened last year, and, extrapolating from that, what might be possible this year. A quick “sales math” calculation might be run to determine what those results would mean for the partner (deals @ average $ * normal margin = why you should be excited.)
There’s a brief chat about MDF or other resources, and often a list of target accounts. The final step is to set a check-in date for the first performance review.
Then, everyone goes back to their work.
Great partner planning is different. Manufacturers work deeply to understand the multiple facets of channel management, including partner’s goals, business lifecycle stage, succession planning, financing requirements, ideal customer profile, and revenue streams.
Partners work to understand the manufacturer’s strategic plan and how various product lines, target markets, and territories support those.
How does that play out?
The most impactful change is for manufacturers to help partners understand how their product helps them sell others. For instance, a manufacturer who makes a product that’s sold as a simple add-on to one perceived as more mission critical may gain their most traction by helping the partner use their product as an entree into new accounts to create opportunities for sales of other products.
Helping train partner salespeople and providing recruiting and hiring assistance as well as best practice forums (not pricing collusion) will create value. Mutual promotion through PR, case studies and events will help. Even introducing resources to help the partner with succession planning, technology implementation, financing, and introducing them to other adjacent manufacturers all create value.
In most cases the manufacturer will also have to train the partner in how to mutually engage in this kind of planning. Mindmatrix’s next-gen PRM helps manufacturers go deep into how their partners’ contribution (or lack of) will impact the manufacturer’s strategic plan, expansion, labor force, etc. will help develop a deeper value connection. Additionally, sharing details on why specific target accounts and market opportunities are important creates context to nurture collaboration.
This type of mutual exchange moves from the traditional transactional, channel planning to something closer to Simon Sinek’s “Gold Circle” of why. It imbues the partner relationship with meaning.
Change Your Partner Criteria
Of course, not every partner and not every manufacturer is capable or interested in making this transition.
Therefore, it’s critical to understand the type of company you want to work with in order to find those which you want to grow financially and professionally. For manufacturers, that means creating your ideal partner profile (IPP) with more nuance and detail than typical. Since creating your IPP is the stepping stone, Mindmatrix has identified that Consilium brings its decades of expertise in helping manufacturers develop their IPP and overall channel strategy, whereas Mindmatrix’s tech stack enables you to automate this entire process, from running partner recruitment campaign to enabling your partners to winning their mindshare. Refer to this article to learn more on channel enablement.
Where many manufacturers select channels to access their existing customer base to realize the anticipated short-term boost of excitement and market penetration, an ideal partner profile weighs future opportunity heavily.
Beyond the zip codes, number of reps, and other products (or competitors) they sell, it’s about their philosophy of growth and collaboration. Beyond simple firmographic stats, it’s about the mindset.
And not just what ownership and management say, but what they model and do. After all, all the performative pronouncements in the world won’t matter if your partner’s contact doesn’t reflect the ideals each day in their behavior.
What kinds of factors should you consider? Some to consider include:
- How do they discuss customers, prospects, and their vendors & suppliers – are they transactional or relationship based?
- Their marketing – you want partners whose marketing will complement and reinforce yours.
- Is their sales process going to align with yours?
- What’s their approach to the market? Solving problems? Land & expand? Or vomiting up line cards and pitching price & availability?
- What product fit do you want? Should yours be one of their primaries? Or is it a complementary secondary product? How should it open doors for them?
- What’s their growth rate? And the forecast? What happens if they miss?
- Who owns relationships with the buyers you want to access as part of your strategic plan? (These could be different from the ones you sold to before your roadmap matured, or you extended into other markets.)
- How do they use technology?
In the due diligence and courting process you might also consider a mutual “pre-mortem”, or the process by which you explore today the causes that might explain disappointing outcomes in your partnership in 3-5 years.
And finally, back to the premise of this article, consider running through a full annual planning process with them to see how they react. If they embrace your robust process, appreciate it, and start to get excited about applying it elsewhere in their business, it might be a great fit. On the other hand, if they’re disengaged and resistant, move on.
Annual Planning and Performance Reviews Shouldn’t be a Chore
Mindmatrix has partnered with Consilium to create a perfect blend of technology and strategy that helps you develop a joint business plan, performance metrics, and collaboration for your channel ecosystem with ease. If you’re the kind of company that celebrates and supports the growth of your customers and employees, then you’ll naturally want to extend that to your channel. Evolving your annual planning process to power mutual growth will benefit you, your partners, and your mutual buyers. Success requires compatible corporate cultures and shared visions for the future. That means that cultivating the mindset in your firm and finding the right partners are as important to annual planning success as the process itself.
Get the demo today to explore how Mindmatrix can help you orchestrate your annual channel business planning.
This article is co-authored by the founder of Consilium, Ed Marsh.
