Vendors chasing 'channel love'

Next year will witness a glut of structured channel programmes being rolled out by vendors in the Middle East. The days of dumping a wad of marketing funds at the front door of a Dubai-based distributor (and leaving them to get on with it) are being consigned to channel history as the region reaches critical mass.

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By  Stuart Wilson Published  November 16, 2004

Next year will witness a glut of structured channel programmes being rolled out by vendors in the Middle East. The days of dumping a wad of marketing funds at the front door of a Dubai-based distributor (and leaving them to get on with it) are being consigned to channel history as the region reaches critical mass.

Samsung plans to introduce a much more comprehensive programme covering channel rebates and incentives in the first quarter of 2005. This long-term approach will be geared towards improving channel health and enhancing brand loyalty.

BenQ recently tore up the rulebook that many vendors still adhere to by actually going out into the market and asking partners what they thought of its channel policy. As a result, BenQ identified three key areas of channel best practice.

“Our partners told us that they valued ongoing education about our latest products and strategy for the Middle East, marketing activities around key events such as Gitex in both Saudi Arabia and the UAE, and the Dubai Shopping Festival, and providing customers with easy and speedy after sales support,” explained Robert Dung, managing director at BenQ Middle East.

Roughly translating that into channel speak, the message to vendors is pretty clear: “Tell us what’s going on, don’t scrimp on marketing funds and make sure customers don’t get screwed once they’ve bought your product.” I’m sure that a few comments about not over-distributing the product and making sure partners could make a decent margin filtered up to the BenQ management as well.

The point that needs to be stressed here is that vendors are really starting to care about what the Middle East channel thinks. And as one vendor starts showing a caring, sharing approach to channel management, others are forced to follow suit through fear of being frozen out by peeved partners.

This has got to be good news for resellers in the region. With vendors taking a more proactive role in defining channel programmes, promoting closer interaction with their second tier resellers and actively engaging in channel-based marketing activity, the opportunity to pick up some vendor cash and ensure healthy margins is shaping up well.

There is a proviso attached to this pretty picture of partner profitability. Making more money available to the channel also means that vendors are going to want to monitor their partners in even more detail. The vendors want to see some return on investment (ROI) when they invest in the channel — a return on channel investment (ROCI) if you like. They want some channel bang for their buck.

What this means is that resellers are going to have to actually do the work in order to qualify for the goodies on offer. This could be through providing sales out data including end-user account details or targeting specific business segments that match the vendor’s goals. It doesn’t mean abusing special pricing, engaging in grey marketing, fiddling rebate schemes and selling sideways to other resellers.

At the moment, it tends to be the big boys of the IT vendor community that have structured second tier reseller programmes in place in the Middle East. Others have so far shied away from such a vigorous implementation of partner programmes believing the market structure remained too embryonic; the size of the total addressable market did not justify the expense, and that it would be too difficult to implement given the limited channel visibility.

Not any more. The Middle East IT channel is now entering a land grab stage with vendors desperate to stake a claim to vast swathes of the reseller community. Partners with a strong customer base are in demand. With so many vendors queuing up to build effective channels, resellers should not forget that they often need you more than you need them. Make them work for your ‘channel love’.

To win reseller hearts, vendors must pay close attention to the ‘Four Ps’ of marketing: product, price, place and promotion. If a vendor drops the ball in just one of these categories, the whole shebang can fall apart. For place and promotion read channel strategy and marketing strategy respectively. If a vendor gets these wrong or doesn’t put a compelling offer on the table for the channel, there are plenty of vendor alternatives to work with instead.

Indeed, vendor diversity is working to the benefit of the Middle East channel community. In Western Europe and the US, the vendor pecking order is firmly entrenched in the minds of customers both large and small making it hard for newcomers to join the party. In this region, that is not the case. Brand equities are not so well established and this means that more vendors believe they can carve out a decent market share.

Admittedly, brand equity remains a factor in some product segments, but it is not as important as some of the powerful vendors would have you believe. Some vendors use the strength of their brand equity as a leveraging tool to erode channel margins. They believe that the strength of customer brand loyalty will force the channel to sell their goods even if other vendors represent a better margin opportunity.

Across the entire IT spectrum, new vendors are investing heavily in building up their Middle East operations. This move signifies a shift away from the previous tactic of dumping all the responsibility for channel building on to distributors. Vendors themselves are rolling up their sleeves and getting involved in building a strong route-to-market.

So what have we got? The Middle East is a fast-growing market with a limited number of quality resellers and a queue of vendors trying to enter the market. These conditions create a situation whereby resellers can wield considerable power. I have witnessed events where senior executives from major vendors practically fawn over a trader from Dubai’s Computer Street. That’s great to see.

Distributors and resellers need to make sure that all their vendor partners are really putting in enough effort to justify the ‘channel love’ they receive.

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