Buy Lines: Resolve this year to craft an effective channel strategy
- By Steve Charles
- Jan 17, 2006
So many partners, so little time. Manufacturers are constantly developing new technologies to improve the operations of large corporations. After proving private sector success in markets such as finance or logistics, they cast their eyes toward the public sector.
They hire a federal representative with expectations that he will build a pipeline of potential opportunities in six months, close a few sales within 12 months and demonstrate a predictable revenue stream within 18 months.
But for each government customer the manufacturer identifies, there are a half-dozen contractors acting as advisers, specifiers, influencers, buyers, implementers, integrators and managers. This dizzying array of potential partners is a core component of any public sector go-to-market strategy.
The box below shows, for instance, how many contractors there are under the code for computer system design services alone.
From the handful of top-tier prime contractors to the tens of thousands of smaller contractors, each has different skills, serves different customers and is motivated by different business drivers. No single company knows where all the funded requirements are, has the technical capability to support all of your products, is favored by all the agencies you hope to sell to, or is looking out for your long-term business interests.
So how do we design a productive channel for manufacturers that lets partners make money performing the activities needed to focus demand, and generate resources to satisfy customers? The answer is two-fold: market segmentation and partner specialization.
I encourage clients to stop thinking of government as a vertical market. It is a sector with many verticals: finance, logistics and transportation. This is the first level of market segmentation.
Segmentation and focus are necessary prerequisites for the second half of the equation, partner specialization. Establishing a business relationship with partners that have unique expertise and market focus is key to success in the public sector. A manufacturer's decision to let any reseller sell to any customer would quickly lead to its technology becoming a loss leader for contractors most interested in selling their own services.
The government-contacting officer often ends up buying from the lowest-price supplier. A contractor may be willing to sell at low margin because it hasn't spent the previous six to 12 months performing the activities needed to generate demand. That advance work may be developing a compelling value proposition, hosting demonstrations or building support for the vision throughout the layers of bureaucracy. In such a case, the manufacturer would be left with an unproductive channel, one that makes technology a commodity without generating the requisite sales volumes.
To build a productive channel, think market segmentation and partner specialization implemented and enforced with precisely defined reseller, subcontract, agent and teaming agreements. Then you'll start seeing business relationships develop that help your company grow market share in the many verticals and segments of the public sector.
|Numbers don't lie|
NAIC code for computer system design services, No. 541512, yields the following:
|Total active contractors: ||19,409|
|Small Business Administration 8(a)-certified contractors: ||2,363|
|SBA-certified HUBZone: ||917|
|SBA-certified small disadvantaged business: ||2,995|
|Self-certified small disadvantaged business: ||1,564|
|Small business: ||17,350|
|Emerging small business: ||3,586|
|Veteran owned: ||3,473|
|Woman owned: ||4,565|
|Source: Central Contributor Registration Database|
Steve Charles is co-founder of immixGroup, a government business-consulting company in McLean, Va. Steve welcomes your comments at email@example.com.