The problem with MDF in the channel

The problem with MDF in the channel

Partners falling behind market pace through commitment to age-old practices

Mark Iles (Tech Research Asia)

Mark Iles (Tech Research Asia)

Credit: Channel Asia

Channel partners are failing to maximise the potential of market development funds (MDF) with a lack of marketing expertise hampering future growth.

As new customers adopt new technologies in new buying cycles, the supply chain is falling behind the market pace through a commitment to age-old practices.

In taking a helicopter view of the channel - assessing vendor, distributor and partner strategies - a glaring gap is widening. This is a gap swirling with dollar notes, housing under-utilised, wasted or unspent MDF.

On occasions, antiquated vendor practices render the process pointless, while on the flip side, partners remain hindered by a lack of resource and expertise.

According to EDGE research - commissioned by IDG and delivered in conjunction with Tech Research Asia - marketing makes up only six per cent of a partner organisation today, emphasising the disconnect between management priorities and changing market metrics.

Whether in Singapore, India or Australia, partners either don’t value marketing enough to invest in the required resources, or have no support structure in place to ensure success. Either way, MDF remains an opportunity missed for the channel.

Irrespective of size or stature, partners are challenged by an inability to maximise marketing, especially at tier-2 and tier-3 level. This is an ecosystem in which value-added resellers are skeptical about an art they know very little about.

In defence of the channel however, business owners have been burned in the past by underperforming digital agencies and expensive media campaigns, such as “throwing thousands of dollars of LinkedIn without return”.

Anecdotally, “approved agencies” suggested by the vendor cause equal angst among the channel, with junior executives failing to understand the strategic difference between an inexperienced partner with $10,000 in disposable income, compared to a global technology giant with a multimillion-dollar budget.

As one partner told Channel Asia on the condition of anonymity, “treat me as a Microsoft partner, not Microsoft”.

Add to the fact that success is difficult to define due to conflicting ROI expectations between management and marketing at partner-level, and the channel is facing an uphill struggle to progress.

Likewise, vendor rules and processes are becoming more complex and contradictory by the month, as new updates and releases dissuade rather than encourage potential collaboration.

For example:

- Will partners engage if they are required to plaster a vendor logo over all collateral?

- How can partners differentiate in a crowded marketplace when the vendor is assuming the lead?

- Does it matter if a vendor emblem is half an inch to the left of a banner advert? Or if the trademark logo was missed off the roundtable invite?

- What if a partner uses MDF from multiple vendors, are they expected to cater for each demand? Shouldn’t the partner be the hero of any campaign?

- Are unrealistic timeframes for MDF ROI helping or hindering utilisation? Do vendors understand customer buying cycles?

- How many "email blasts" or events can be commissioned without ruining a database?

New buyers, new rules

In short, the marketing methods that have dominated the channel for decades are outdated, archaic and bordering on obsolete, with customers turned off to traditional techniques.

A damning assessment perhaps, but customer dollars are being diverted away from partner purses through legacy sales tactics and a perpetual cycle of marketing mediocrity.

“Customer acquisition and engagement is the new sales and marketing,” said Mark Iles, executive analyst at Tech Research Asia. “Partners must rethink how they go to market because so far, they haven’t reinvented themselves.

“Most partners have head of sales and head of marketing roles but today, those titles make no sense. They shouldn’t have either because they are very traditional approaches, the focus should instead be around creating customer acquisition and engagement positions.

“This isn’t telesales, partners should be doing very specific targeting of customers with content that is directly relevant to them. And then once in a sale situation, ensure you have people capable of understanding the solution.”

According to Iles, partners must deepen focus on customer acquisition, focusing on a longer engagement cycle between the channel and the end-user.

“When partners acquire a customer, this customer must be seen as a customer for life,” added Iles. “Partners must look at customers through the lens of a telco - think about the cost of acquisition and the life-time value.

“If a partner adds a customer, it might take them nine months to get them on-bard. But they will be with you for five or six years, perhaps even life, and they will be paying $10,000 per month. Those are the numbers that are important because this is a new game the channel is playing.”

Therefore, and in acknowledgement of such a shift, Iles advised partners to stop thinking about sales and marketing in conventional manners.

“Once you’ve acquired those customers, partners must ensure they have an ongoing engagement strategy in place,” Iles said. “So, stop thinking about sales and marketing and hammer home the values associated to customer acquisition and engagement.”

Findings customers

Across the channel, partners prioritise referrals from existing customers when acquiring net new business. Such an approach is also complemented by leads generated through a partner’s own website, search engine optimisation and content marketing, ahead of events such as seminars, workshops and roundtables.

Yet misalignment exists between a partner’s ability to hunt for new customers, compared to an ongoing reliance on leads from key vendors.

“Partners have to be able to acquire customers themselves, they can’t simply rely on the vendor,” Iles explained. “Some forward-thinking partners are also grading customers today, through an A, B and C ranking system.

“That’s a great approach and helps focus on customers that the business actually wants. There might be much more profitable customers in your business that can be replicated, meaning you can remove unprofitable customers in a considered and structured way.

“Ultimately, partners must have a clear vision of what their ideal customer looks like by ensuring they are profitable and in their sweet spot.”

Too often, Iles said partners bundle customers together due to the misplaced belief that more customers mean more money for the business.

“More of the right customers is always good,” Iles cautioned. “But I get it, nobody turns down a customer and it’s very hard to hard down a deal. But sometimes, you might need to because it’s either not a profitable customer for you or because you’re not focused in that particular area. They are either not paying you enough money, or are not in your sweet spot.”

Finding partners

On the slip side, and according to EDGE research, 24 per cent of customers find partners through web search, word of mouth or peer referral, while 27 per cent are contacted proactively by the provider.

Delving deeper, 21 per cent of customers said partners are referred by one of the organisation’s other partners, while 13 per cent consume content or marketing within a specific area of interest.

Meanwhile, a lowly six per cent of customers find partners from attending industry forums, roundtables or conferences.

“Partners can no longer think about sales and marketing as different disciplines because they are not anymore,” Iles added. “We think about customer acquisition and engagement as different concepts but again, they’re not anymore. There’s a huge role that content plays in that.”

According to findings, the current anatomy of a partner aligns to the traditional make-up of a reseller.

Specifically, 42 per cent of a partner business is made up of technical expertise, spanning pre-sales, consulting and support services, following by 25 per cent within sales, 10 per cent across business operations - such as HR, finance and administration - and nine per cent specialising in software development.

Furthermore, eight per cent make up senior management leaving six per cent of the organisation focused on marketing.

“Every partner must sit down, spend time offsite and out of the business to assess - what is their real differentiator?” Iles asked. “What’s the magic that they have? And everything needs to come from that, especially around how they market themselves and the content that they put together.”

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