Many high-tech companies have traditionally relied on direct sales channels to sell to the upper mid-market, or the “big middle.” Over time, however, industry leaders have determined that channel partners are needed to succeed in this attractive segment. Cisco, HP, Microsoft and others have built large-scale indirect channels and encouraged their partners to move upstream, beyond their traditional focus on small businesses, to engage upper mid-market and enterprise customers. Newer “born on the cloud” competitors such as Amazon Web Services and Google have followed suit and similarly adopted multichannel sales strategies in the big middle.
Most high-tech sales and marketing leaders now realize that indirect channels not only enable greater market coverage, but are often preferred versus direct channels by many mid-market high-tech buyers. As a result, most high-tech companies now utilize multiple sales channels in the mid-market. Seventy-five percent of high-tech companies that ZS recently surveyed claim to utilize both direct and indirect channels in the big middle. However, many of these companies have moved to a “hybrid strategy” in name only. They’ve implemented partner programs, hired channel sales teams and recruited channel partners but aren’t getting the lift in productivity that they would have hoped for. Channel partners are encouraged to independently sell to upper mid-market customers, but struggle to meet customer needs without significant support from vendors in the sales process. As a result, upon close inspection many big middle sales channels look more direct than indirect. Partners are involved in big middle sales, but play a limited role in establishing new customer relationships and driving purchasing decisions.
To effectively cover the big middle, high-tech companies must implement a true multichannel strategy where partners do more than fulfill demand created by vendors. Here’s how:
- Clearly define your go-to-market strategy and partner rules of engagement. Define and articulate the roles that your channel partners should play in demand generation, the sales process, post-sale service and ongoing customer management. Industry leaders have focused on removing ambiguity regarding vendor and partner roles for years. For instance, when IBM was dealing with channel conflict in 2008, the tech giant published its “Principles of Engagement,” a set of policies that defined when IBM will sell direct versus indirect through partners, how IBM sales reps engage channel partners and what role partners are expected to play when selling IBM products and services. Other high-tech leaders such as Dell have taken a similar approach to reduce confusion regarding their channel strategy.
- Find the right channel partners. Of the total big middle IT spending in the U.S., 72% comes from just five industries, and 50% of IT spending in the big middle comes from companies based in just eight states, according to ZS’s research. Your channel partners should have expertise in those industries, customer relationships in the target geographies, in demand technical skills and the sales and marketing capabilities needed to play the desired role in the channel and grow their businesses.
- Provide a compelling value proposition to channel partners. Provide support and implement business processes that make it easy for a partner to do business with you. Offer incentives that reward partners for generating, capturing and fulfilling demand. Industry leaders are making it easier and more attractive for their channel partners to expand their businesses in the big middle. For instance, NetApp recently introduced incentives to reward partners’ investment in growth. NetApp partners can earn an additional 10% discount when they bring in a new customer and additional incentives to reward large deals and sales of converged infrastructure solutions designed to meet the needs of mid-market customers. The company also launched “Express Packs,” simplified offerings geared toward mid-market customers that allowed partners to sell more products, more efficiently. Other high-tech leaders have introduced similar programs focused on expanding share of the upper mid-market.
High-tech manufacturers who want to implement a true multichannel sales strategy for the big middle typically start by investing in customer research. Gather input from your target big middle customers about their buying behavior and channel preferences: when they prefer to buy direct versus indirect, and their preferred partner profile. Understanding your customer and how they prefer to buy will help define the role your sales team and channel partners will need to play to capitalize on the potential of the big middle market.