Friday, April 22, 2011

CRM is only half the story

Seventy percent of your sales force is selling your competitor's products. You shouldn't be surprised; after all, you don't pay them, you've never put them through an induction, they've never been trained, had no incentives (financial or otherwise), received no sales, marketing or other support from your company. You don't provide them with any product information, pricing, collateral, or sales tools. In fact, you have never actually communicated with them directly or managed their performance to give them a fighting chance of success.

Of course, the sales force I speak of doesn't actually work for you. They work for your indirect channel partners; the tens and hundreds of thousands of nameless, faceless people who sell products just like yours every day to precisely the kind of customers you're targeting. Just not for you.

A recent Forrester report concluded that on average, only 31 percent of a vendor's channel partner community is actively selling for them. Furthermore, 80-95 percent of total sales are generated by between 5 and 20 percent of the entire indirect channel base.

By now most companies of any size have invested heavily in a CRM strategy. Its objective is to target, acquire, nurture and retain customers and ultimately encourage them to renew their products or services. But the overwhelming majority of vendors address the market through indirect rather than direct sales channels.

This is especially the case in business to business sales to micro, small, and medium businesses. Most of the practical components of CRM are executed by people who are not a part of, and do not subscribe to, your CRM strategy.

So, what proactive steps are most companies taking to address this rather obvious oversight? Historically, they've done very little. Many executives take a rather jaundiced view of their non-affiliated partner network, considering it to be a fulfilment channel, fragmented, disloyal, expensive, and inefficient. But as we enter the third straight year with a weak economy and austerity measures have cut sales, marketing, and back-office resources to an all-time low, many business leaders are beginning to look for external solutions to bolster their revenues.

Indirect sales channels are unquestionably the cheapest method of increasing your market reach and augmenting your product offering with value-added services. And in practice they're the only viable way to address the micro to medium business market. But what could be the return? Consider this: If a vendor could increase its active partner-base from 31 percent to 41 percent while increasing revenue yield per partner organization by just 10 percent, the reward would be an impressive 46 percent compound revenue growth borne almost entirely out of increased demand generation and increased market share.

The real key to success is a sound strategy supported by systems, processes, people, and flawless execution. The mistake often made is to attempt to improvise or repurpose existing systems and processes. The capabilities of CRM systems are frequently misunderstood and incorrectly applied to Partner Relationship Management (PRM). The fact is that if you sell your products or services through an indirect sales channel, then CRM is only half of the story. A CRM strategy should nurture your customers through the customer lifecycle. But as I already pointed out, in an indirect sales and support model, the individuals and organizations most likely to interact with your customer on a daily basis will be members of your channel partner community, not your own staff.

At the very least, partners have as much impact on the success of your CRM strategy as you do. In my experience, their impact can be even greater. So does your company have a PRM strategy? What provision have you made for PRM methodologies and systems to ensure that you manage the far more complex relationship with your partners? Managing a partner lifecycle involves the same kind of nurturing as a CRM strategy provides for customers but with the added need for maximizing the partner's propensity to market, recommend, and sell for you. And that's not easy.

PRM systems were often sold to stand alone. The relationship management paradigm for the next decade is Integrated Partner and Customer Relationship Management. In this model social, CRM, and PRM strategies and systems will converge around a central enterprise data repository which may well be the existing CRM system. Businesses will seek to harness the power of customer and partner communities, encourage (but not control) collaboration throughout their partner ecosystem, and influence selling as well as buying behavior.
This will be achieved by developing unprecedented levels of intimacy with partners—upstream, peer-group, and downstream—and through them (as opposed to around them) to better understand the needs and buying behaviors of their customers.

As partner eco-systems become increasingly more important to vendors and as their diversity and complexity increases and vendors' ability to directly influence business buying and renewal decisions diminishes with CRM alone, PRM as both a strategy and a system will finally become as strategically important as CRM and ERP.

Thanks to Mike Morgan for the article