Channel segmentation

The frenetic pace of market growth and channel development in the Middle East shows no signs of letting up during 2005. Vendors and partners are moving to the next level in terms of go-to-market methodology in the region and that means two things: channel segmentation and an emphasis on in-country expertise.

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By  Stuart Wilson Published  May 25, 2005

The frenetic pace of market growth and channel development in the Middle East shows no signs of letting up during 2005. Vendors and partners are moving to the next level in terms of go-to-market methodology in the region and that means two things: channel segmentation and an emphasis on in-country expertise.

Both are symptoms of a market that has reached a critical mass in terms of scale and a market that is now ready to embrace increasingly sophisticated channel programmes. One news story that sticks out in this respect is Emitac’s decision to diversify its product portfolio and reach a distribution agreement with Acer.

At face value, it is possible to look at the number of Acer distributors in the region and accuse the vendor of over-distribution, but that does not do justice to the policy of clear channel segmentation that the vendor is trying to introduce to the market.

This means specific distributors focusing on selling specific products in specific markets to a specific reseller base — a model that can only be attempted when a vendor has a clear understanding of the channel landscape and the ability of specific routes-to-market to reach a pre-determined customer base. Acer is by no means the first vendor to attempt segmentation of its distribution channel in the Middle East, but times have changed and the vibe coming from major vendors is that the market is finally ready for it.

In recent years, attempts by vendors to introduce multi-tiered channel programmes into the Middle East that sub-divided the channel community into certain categories based on their specific skill sets, customer base, value-add potential and revenue commitment, were the channel equivalent of trying to bang a square peg through a round hole.

The market was just not ready for such a tailor-made approach when partners existed in a constant state of flux, never entirely sure what their next move would be and what their business would look like one year down the line.

This was true for both first-tier distributors and second-tier resellers, but many of these same players now demonstrate a degree of stability and long-term vision that was previously lacking. This has encouraged vendors to start deploying more complex channel models in the region and the glut of structured partner programmes that have been introduced by vendors during the last year is testament to this fact.

If you are giving one partner specific support in terms of leads and even preferential pricing over another, you need to be incredibly sure that they are doing what they said they would do, and not abusing their position to chase other opportunities. To put it another way, you require a reasonable level of channel transparency.

It is necessary for a word of caution at this point. While many believe that some of the larger more mature markets in this region do now have a relatively established channel landscape and are ready for sophisticated channel programmes based on clear segmentation, this tenet does not hold true for every market.

If you want to know the markets that are maturing quickest, just look for the locations where vendors and distributors (those supplying genuine second tier resellers at least) are opening offices or locating warehouses respectively.

Channel transparency is now a reality to some extent in some of the mature markets in the Middle East and the partner landscape can be mapped fairly accurately. Simultaneously, we have other markets that are only just opening up (or are not actually open at all) where vendors and partners actually prefer a bit of channel fudging to free up the necessary product and make the sale without too many questions being asked.

These two approaches do not always sit comfortably side-by-side and it is one of the fascinating aspects of the Middle East channel development that looks set to continue for some time. There is so much variation in terms of market development within the region itself that vendors, distributors and partners need to remain constantly on their toes to stay abreast of market moves and margin opportunities.

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