Lead Generation: A Good Lead Every Day

In the race to win business, it always helps to pass on leads. But why does the channel keep dropping the baton? Drew Cullen reports

Computer vendors spend a small fortune on generating leads for their resellers. But poor conversion rates mean that much of this money is poured straight down the drain.

Lead generation is a highly contentious issue for many vendors. They expect business from their advertising and direct mail budgets. But the channel is failing to deliver.

Resellers, in turn, say manufacturers are to blame. Vendor-generated leads are either poorly qualified, too cold, or distributed to the wrong dealers. At IBM?s Business Partner Executive Conference (BPEC) in March, one Spanish reseller complained to PC Dealer: ?As a large reseller, we get inappropriate leads, like the upgrade of a single hard disk.?

There is, in short, a massive level of cynicism about lead generation in the channel, according to Michael Kianfar, chairman of Systems International, a #42 million Brighton-based reseller. ?No one jumps up and down because an envelope stuffed with leads has arrived on their doorstep,? he says.

Hewlett Packard (HP) is committed to the channel for lead fulfilment, according to marketing manager John Yelland. But there is a wide variation in skills, he says.

?We have the good, the bad, the ugly and the totally incompetent,? he says. ?Many resellers put substantial amounts of money and time in generating leads through exhibitions and mailshots, which we back with MDF [marketing development fund]. On the other hand, we have received complaints from customers about many resellers who are incapable of even taking orders.

?We always seek to address these problems. But as an ultimate sanction, we will de-authorise resellers that fail to shape up.?

In recent years, HP has barred six indirect dealers and one direct reseller from buying its kit ? even through distribution.

Last year, HP appointed a single dealer to sell HP Support Packs across the HP reseller base. In effect, this is a subcontracted direct operation. The company said it authorised 911 Sales to tout the support packs to a wider audience, because other dealers had not sold enough renewals. But it admitted passing on rival dealers? customer databases to 911 Sales, before telling the rest of the channel.

Compaq?s decision to set up a direct sales arm is even more controversial with the channel. Its direct operation will take on Dell and Gateway in the micro-business sector, targeting companies which have fewer than 10 employees.

?The channel is not best placed in terms of cost for these buyers as a route to market,? claims Peter Blampied, Compaq commercial marketing manager.

In Q4 1996, Compaq UK advertised a special promotion price with 40 Compaq-led inserts and 144 reseller-led inserts. Sixty per cent of respondents were individuals wanting to buy just a single machine, Blampied reveals. Few resellers are interested in the micro sector, he says, because repurchasing cycles are too long and post-sales support costs are too high.

Compaq?s rationale for setting up a direct operation makes good business sense ? for Compaq. But inevitably, some dealers will lose business to their supplier.

But there is no reason why the channel should not continue to fulfil all vendor leads, says IBM marketing manager Vince Smith. ?Compaq is going off the rails. There is no intrinsic reason why the channel should be more expensive. Many dealers have established their own telesales teams, and vendor costs are driven down with initiatives such as channel assembly.?

Efficient qualification is the key to getting the most out of vendor lead generation, according to Smith. IBM, HP and Microsoft funnel their leads into national call centres before distributing their leads into the channel.

IBM puts a ?lot of focus into its response centre team?, says Smith. ?We don?t count a brochure request as a lead. Our telesales people can qualify these. They also pass on leads to an incumbent dealer, wherever appropriate.

?It is horses for courses. Some dealers are keen to move large volumes of inventory through their telesales operations, while others are into pushing their value-added services. And they tend to do their own demand generation.?

Microsoft?s national call centre handles 30,000 to 40,000 enquiries every month, reveals channel marketing manager David Smith. Prospects who are interested in buying packaged software in single units are directed to their local retailers, while customers who are interested in so-called solutions sales are funnelled into the company?s seminar programme. More than 100 UK resellers currently run seminars in conjunction with Microsoft.

Microsoft also qualifies leads garnered from its Web site. Customer prospects are guided through a series of questions on their systems and applications requirements towards relevant solution providers.

HP?s call centre also qualifies leads for each advert and mailshot campaign. ?We like to think our matrix for qualification is a good one,? Yelland says. ?We apply some intelligence to the type of leads we generate, segmenting them from corporate down to end user.?

Unsurprisingly, these vendors work actively with dealers which, as Smith says, ?take these leads to natural generation of business?. Robin Sternbergh, head of IBM global general business, is more blunt. ?We will give you leads. You give us the status of the leads. Business partners who close leads quickest will be given all the more,? he told resellers at BPEC.

IBM is installing a Notes system, which will enable the vendor and resellers to monitor leads from initial enquiry to closed sale.

IBM and HP are happy to work with active dealers that are willing to lead with their products ? even if they do not necessarily come from their top-tier channel. HP typically includes a handful of dealer names and numbers on each response-type advert it pumps out. The cast list varies according to market segment and product promotion. IBM is preparing a national ad campaign for the Think Pad 365, targeting the SME market, which will flag 12 selected dealers.

Microsoft takes a different approach, preferring to work entirely with its authorised channel. ?We are doing quite a lot of work with our corporate customers, advising them that they should be using our solution providers,? says Smith.

The small and medium business market is a big battlefield for hardware vendors. It is more fragmented than the corporate and retail sectors and is projected to grow faster than the rest of the marketplace. Direct response adverts in consumer monthlies such as Personal Computer World are regarded as an efficient method of reaching this sector. But many vendors are hamstrung by their channel-only policies.

Which is where Northamber comes in. The distributor runs direct response ads on behalf of IBM, HP and AST through its Solution Point programme. Currently, the company has on its books 1,000 dealers who have asked for Solution Point leads, according to marketing director Loay Lawrence.

?We set up Solution Point because vendors were taking up to three weeks to pass on leads. With our service, dealers receive the leads on the same day,? says Lawrence. He cites Northamber?s position as the UK?s top distributor for IBM, HP and AST as proof of Solution Point?s effectiveness.

HP and Compaq are introducing a different type of lead generation model intended to reach SME customers that prefer to deal with proximity resellers. They want to tie-in local dealers through franchise-type programmes which will see their brand names on most high streets.

HP?s version is the HP Office Centre. The company is one 10th of its way to a target of 350 dealerships, which will carry HP?s line-up of computers, printers, copiers and palmtops in dedicated showrooms.

Compaq?s rival offering, the SMB Reseller Programme, is still on the drawing board. Participating resellers are expected to set aside showroom space for Compaq kit. In return the company will promote the accreditation heavily, and it will put more account managers on the streets to help SMB resellers close their deals.

Both HP and Compaq say they will support these programmes with extensive lead-generation activity.

The local dealer market is ready for a franchise network market, according to Martin Briggs, owner of MCB Computing, a #1 million dealer in North Wales, and financial director of the Network Buying Group. But he says HP will need to sharpen up the HP Office Centre programme to attract more dealers.

?It does not offer anything ? better margins, stock availability or bigger marketing budgets,? says Briggs. ?I am distinctly unimpressed.?

Vendors could also do better in the corporate market, according to Kianfar. ?Manufacturers need to do more to differentiate smaller and larger channel players,? he says.

?Lead generation might be of interest to local dealers addressing the SME market. But even then the expense-to-revenue ratio may be too high. Ultimately, you might end up making #50 per machine.

?At the top end, corporate resellers have no interest whatsoever in lead generation. The results are too generic. You hear the argument that the sole trader who wants a brochure or a single computer may end up as a 2,000-people company. But it is not worthwhile holding your breath.?

Vendors are wasting much of their money on lead generating activities in the corporate market, he argues, as everyone knows who the customers are. ?I want to move the debate from lead generation to business generation. Resellers don?t really know what to do with their soft dollars. All too often, they convert this straight to the bottom line,? he says.

Corporate resellers define themselves on the basis of their service, rather than product. ?We are trying to market a relationship ? to say we are better than the rest. This is a service marketing proposition, and it is a bloody hard message to get across,? says Kianfar. Resellers tend to be poor at service marketing. And hiring a top-flight marketing agency is too expensive for most resellers, he says.

?The channel always says ?generate more activity?, but it usually lacks the creative strategies required for business generation. And it doesn?t have have access to specific intellectual advice.

?Instead of funding shenanigans such as corporate hospitality events, the vendors should work more closely with their resellers.

?If IBM got two or three marketing hotshots to spend a day with Compel working on business generation and moving the business forward, think what it could achieve.

?Here is another scenario. A vendor could get people from their own marketing agencies to work with their resellers. They would give you 100 man hours to work on a programme of events as part of a 12-month marketing campaign. In return, the reseller will give the vendor his commitment.?

Supporting this type of activity will be beneficial for the vendors, Kianfar claims. ?The corporate market in the US is beginning to get saturated. New PC sales are levelling off, and the market is starting to move in to replacement sales. Where the US leads, the UK follows ? 12 to 18 months behind. This means the vendors will need to get a lot cleverer about their marketing.?

Kianfar adds: ?If HP wants to sell more PCs to corporates, it will have to take that business from AST or Compaq. And this is very much a branding exercise. But they need the backing of their resellers. They need to ensure their delivery channels are working effectively in generating business.?

Manufacturers will benefit by developing the service marketing skills of their resellers, he says. ?More focused activity will see everyone gain. But so far, no vendor has grasped this particular nettle.?

Interest in marketing is evident at all levels in the channel, judging by attendance levels for the marketing seminar held at Inside Track 97, Microsoft?s annual reseller shindig. ?The seminar we ran at Inside Track was intended to help Microsoft Solution Providers develop broader marketing skills. Our channel tells us that they have more business than they can handle. They need to skill up before they can grow their business. This is where we can add value,? says Kianfar.

The recession of the early 90s saw the channel grow up very quickly. Survivors of the margin wars tend to be lean and mean battle-hardened organisations. But the channel needs to plug some elementary business skills gaps before it is fully mature.

It is unreasonable for dealers to expect vendors to do their lead generation marketing programme for them. It is also impractical for vendors to delegate all this activity to the channel, which is ill-prepared for the responsibility.

Franchising along HP Office Centre and Compaq SMB reseller lines appears to be a promising method of generating business for dealers servicing the SME market. But the vendors will have to fine-tune the programmes if they are to work effectively.

Kianfar?s suggestion that vendors should divert some of their MDF into building up reseller marketing skills is very sound and there is no reason why this should not apply to box-shifters as well as corporate dealers. Many resellers ignore vendor-sourced leads in favour of self-generated leads.

But vendors need to be convinced they are getting the most out of their co-op spend. Only then will they release more marketing money into the channel.

Compaq shows what will happen to the channel if this gulf between vendor expectations and reseller is not bridged. Unless the channel gets its act together, other vendors will be tempted to follow Compaq?s direct route.