Light years ahead

Resellers need to move beyond their comfort zone to be prepared for the future, writes Paul Bray

CRN’s Channel Universe project, which has surveyed a wide cross-section of the UK’s 17,000 resellers to produce the most comprehensive picture of the UK channel for a decade, reveals that face-to-face remains the most popular sales method. The vast majority of resellers (84 per cent) use it, and half (50 per cent) say it is their most important method of selling.

Lead generation
Lead generation is equally dependent on the warm handshake and the sympathetic ear. Eighty-six per cent of resellers questioned said they use recommendation and networking to generate leads, twice as many as the next most popular method.

“Relationship selling is still surprisingly strong, despite all the talk about online media,” said James Burckhardt, associate director of ICM Research, which designed and managed the project.
“Resellers still rely on recommendation and word of mouth for new business, and they rely on the same techniques to maintain relationships with existing customers.”

On one hand this is a source of great strength, said Burckhardt. “Relationship selling is where many resellers, especially at the smaller end of the market, maintain real competitive edge over direct vendors and larger resellers who rely on contact centres or electronic media,”
he said.

However, it also poses a challenge for the longer term. “An interesting issue for smaller resellers is whether they are relying too heavily on relationship selling,” said Burckhardt. The economy has been growing for a number of years, and some channel firms may have become complacent, riding this wave of growth rather than investing in marketing and advertising to broaden their reach. As the economic climate cools they may find they need to seek out new business more aggressively ­ and the real test will be whether they have the skills and experience to do this.

“Medium and large resellers are much more prepared to use a broader range of tactics to generate leads,” said Burckhardt. “They are good at telemarketing, lead generation campaigns and email marketing. This could pose a challenge to smaller resellers.”

After recommendation and networking, the most popular marketing tactics are email campaigns, and attendance at exhibitions, seminars and events, both used by 43 per cent of resellers. However, these are used by just a third of smaller resellers ­ those with fewer than 50 staff who make up three-quarters of the entire reseller channel. By contrast, 73 per cent of medium and large resellers go to exhibitions, seminars and events, and 68 per cent use email campaigns. Lead generation campaigns are employed by just 28 per cent of smaller resellers but 74 per cent of medium and large ones.

These methods really do work, according to Barry Cross, managing director of video conferencing distributor Touchline Video. “In-house newsletters, exhibitions/events, email and lead generation campaigns are our main focus,” he said.

“These activities allow us to keep our customers up to date with developments and ensure we keep up a running dialogue with our partners. Exhibitions and events also provide a platform to meet potential new clients and give them an opportunity to see the technology at work and meet us face-to-face. It is all about building solid relationships and informing people about what is new.
“If channel companies want to maximise their lead generation, I would suggest providing good customer support, having a vertical focus, proactively pursuing a customer campaign, giving quick responses to customers, and providing demo facilities and training and technical support.”

Among the other tactics employed by medium and large VARs in the battle to win new customers, the most popular is telemarketing ­ used by 72 per cent ­ followed by direct mail (58 per cent), online advertising and sponsorship (49 per cent), press advertising and sponsorship (almost identical at 48 per cent) and buying in lists (40 per cent).

Smaller resellers also use these tactics but to a lesser extent ­ just a third (32 per cent) use telemarketing, 30 per cent use direct mail, 27 per cent invest in online advertising and sponsorship, a mere fifth (20 per cent) advertise or sponsor articles in the press, and fewer than one in seven (13 per cent) are prepared to buy in lists. Only in the use of that low-tech and largely indiscriminate medium of flyers and door drops do small resellers match their larger rivals; this technique is employed by about a sixth (16 per cent) of resellers, large and small.

A portfolio approach is what the experts recommend. “Rather than looking at any one particular medium or tactic, we are seeing success with a combined, integrated channel approach specifically designed to increase the number of interactions with the customer,” said David Ireland, sales and marketing director at lead generation specialist FST Technologies.

“For example, a customer may respond to an offer by filling in a card or registering interest via a web site. The application forms are then posted out for them to sign and return. It is at this stage that many product offers fail because customers don’t complete and return the application forms.
“However, if the process is managed correctly, a timely reminder can be sent to the customer by an appropriate channel such as text message or email, helping to convert customers that would otherwise have been lost, and without significantly increasing the marketing spend.”

Sales tactics
In sales, too, small resellers are more likely than medium and large firms to rely on face-to-face as their primary method of reaching the customer. Fifty-three per cent of small resellers cited face-to-face as their most important sales channel, compared with 43 per cent of medium and large resellers.

Telesales proved to be the next most popular sales tactic, with 56 per cent of resellers using inbound telesales and 47 per cent using outbound. Nine per cent said inbound telesales were their most important tactic, with little statistical difference between small and large resellers. But outbound telesales is the most important medium for 20 per cent of medium and large resellers, compared with only seven per cent of smaller firms.

Perhaps the most surprising finding on sales was the extent of collaboration within the channel. More than half (56 per cent) of resellers said they use collaborative sales, and one in eight said it was their most important sales tactic; the number was slightly higher for medium and large resellers (14 per cent) than for smaller ones (11 per cent).

“One in eight is a high proportion, and resellers partnering with other resellers could become a big growth area in future as they seek to win business in areas that are outside their core skill sets,” said Burckhardt. “Customers are not prepared to accept jacks of all trades any more.”

But, however good your product is, it will not sell unless customers are familiar with it. “The channel can play a vital role in educating end users about new technology developments,” said Cross. “People make assumptions about product quality and price that are based on outdated notions and it can take a lot to dispel these myths. But seeing is believing. When we show people what the technology can do these days and the quality of the product, they are sold.”

The shop window, whether virtual or vitreous, is less important to resellers, the Channel Universe research found. Walk-in retail is used by just 16 per cent of resellers, and is the most important medium for only six per cent of small resellers and a tiny two per cent of medium and large firms. Online ordering and sales is offered by nearly a third of resellers (31 per cent), but it appears to be a sideline for most, since only five per cent said it was their most important route to market.
However, the online model could have potential, especially for small start-ups or diversification ventures.

“EBay and Amazon have spawned a new breed of Small office/Home office (SoHo) resellers which in some cases drop ship to customers direct from the supplier, never even touching the product,” said Mark Woods, chief executive of Apple distributor Channel Dynamics. “With aggressive pricing on Amazon to put themselves at the top of search lists these companies are generating traffic to their own web-stores.”

Customer growth
When it comes to customers, the Channel Universe survey found that resellers are more likely to be changing what they sell than who they sell it to, since they reported consistent growth in all customer segments.

SMEs (organisations employing 10-99 people) are the most popular market segment, with 60 per cent of resellers selling to them ­ hardly surprising, perhaps, since small firms make up the great majority of UK businesses. Growth in this market was healthy if not spectacular, with 62 per cent of resellers who sell to SMEs reporting rising sales to this sector and just seven per cent reporting a fall. This gives a net growth (the percentage of resellers experiencing sales growth minus the percentage experiencing decline) of 55 per cent.

Almost half (49 per cent) of resellers also sell to MEs (100-499 employees), a market which showed good net growth of 59 per cent, while 46 per cent sell to SoHo firms (with fewer than 10 staff), where net growth was 49 per cent.

The largest net growth, 61 per cent, occurred in the enterprise sector (500 or more employees), which is served by 40 per cent of resellers. “I was surprised because I did not expect this to be the growth sector,” said Burckhardt.

Whether this growth will continue during the current credit crunch is debatable, but there could still be benefits in certain product sectors for resellers who are positioned to take advantage.
“Interest from the bigger companies, especially listed ones, is certainly being accelerated by the green agenda, with firms looking to reduce their carbon footprint and boost their environmental credentials by finding alternatives to travel,” said Mark Bird, group sales and business development director at audiovisual distributor Steljes. “We are also seeing a lot more belt-tightening, with the need to reduce costs and increase productivity with better use of collaborative technology such as whiteboards and conferencing systems.”

The consumer market is served by just 26 per cent of resellers, who reported net growth of 50 per cent. The public sector market, having experienced major growth a few years ago, is quieter now, with net growth of just 45 per cent ­ the lowest of any sector ­ reported by the 41 per cent of resellers who sell to it. Even here, however, there are pockets of opportunity.

“We are seeing a growing demand from schools trialling mobile technologies which will drive opportunities for resellers at both local and national level,” said Bird. “And we are increasingly seeing IT managers at schools buying products locally. Smaller channel partners who often offer different levels of service and support can really take advantage of this trend.”

“The public sector is doing well for us this quarter because there has been a lot of interest around encrypted data,” said Lianne Denness, managing director of memory and storage distributor Hypertec. “We are also seeing increased demand from large corporates for devices that encrypt data, as the issues around loss of data reverberate around large busineses.”