Archives For channel

In 1995 Geoffrey Moore brought us ground-breaking information in his book entitled, Inside the Tornado.  This book was required reading for many technology manufacturers, including HP, a strategic partner of my employer at the time.  Using a standard marketing normal distribution curve, Moore showed us how market adoption changes when you start talking about technology.  It takes years for, what he refers to as discontinuous innovation, to catch on when talking about cars, phones, or air travel. But when speaking of today’s hot technology innovations, suddenly adoption is taking place in months.  Why is that important?

Well, to the technology manufacturers, Moore showed how products met the first inflection point of that model where early-adopters transitioned to early majority, a new audience of buyers.  He explains in his book that this audience is a bit more conservative than the first, and unwilling to work with technology that is bleeding edge!  This group represents people who might be risk adverse or, like many information technology professionals, goaled and paid on up-time, not innovation.  The first group however, representing those who will take a risk on new technology, is likely in the camp of profit center managers, looking for technology that puts them out in front of the competition.  This is further explained in Bosworth’s book, Customer Centric Selling, as he applies the model in a slightly different way to various kinds of buyers.

Manufacturers studied these models with profit and adoption in mind.  Moore’s point was that, manufacturers needed a way to enter the larger markets of early majority and late majority (possibly representing 33% and 33% of the possible market for each) if they were to enter the larger majority markets with their products.  The first one there would be given the greatest opportunity to become the market’s defacto standard.  Once there, the channel was established to meet the accelerating demand for their products, which Moore termed, The Tornado, thus the title, Inside the Tornado.  This is where the manufacturer views the channel, but this is not necessarily where the profits are for the channel partner.  The problem is, most resellers (VARs) are positioned exactly in the middle of Moore’s Model; perhaps the most unprofitable position possible for a reseller, which in turn, hurts both the reseller and the manufacturer – the company depending on their partners to bring in more and more of their business.  This is a problem.

(You’re probably wondering what this has to do with the red hydrant…nothing, it’s just a fun picture I took while photo shooting with my daughter).

© 2011, David Stelzl


In preparation for our final day in the Virtual Making Money w/ Security Workshop I thought this short clip on urgent proposals would be apropos:

© 2011, David Stelzl

Traditional thinking says that more sales will lead to a higher income.  Here is one more example demonstrating the deception in this type of thinking.  I frequently come across sales people working for smaller VARs, selling into small mom & pop companies.  These customers don’t spend much, so the deals are smaller, yet the VAR model was built on high-involvement sales; making calls onsite, taking people out to lunch, and perhaps performing demos or providing evaluations of the products being represented.  The problem is, they are transactional, and so volume becomes a focus.

So let’s say each deal is priced in the neighborhood of $1500 (which is typical),  and most of the deals are product install.  For argument sake, we’ll say the product is two-thirds of the deal, with a half  day install.

Total Deal Price: $1500

Margin: $350 (Assuming ten points on product and the balance on services)

Income based on 10% payout: $35

(and all if this assumes that the rep priced the services correctly and didn’t go over)

So how many of these transactions do you need to make a reasonable income?  With a 30K base, you would have to do about 166 of these each month to make 100K annually!  You can extrapolate from there, but the point is, you don’t want more deals, you want larger deals, recurring deals, and margin-rich deals.  Stop selling transactions and start solving big problems.

In a recent discussion I had with a young entrepreneur, he asked, “But can this company afford the larger project?”  Great question!  If it’s central to his Twenty Million Dollar business, he can.  If it’s just some new cool technology, he can’t.  So once again, you have to ask, “What problems am I solving, and how much are they worth?”

© 2010, David Stelzl

P.S.: Happy New Year Everyone!

Vendor to Adviser

December 13, 2010 — Leave a comment

This week we have our final teleseminar – Moving from Vendor to Adviser, Friday at 11:30 EST.  There are many things to cover here…

1. People don’t just decide to become “Trusted Advisors” – everyone thinks they are, but only the client knows for sure.  Buyers choose their advisers.

2. Product sales can be made online – with it comes the stripping of all value add.  The VAR is dead…but consultative selling is far from dead.  Do you know the difference?

3. Fees should be commensurate with value, but few are charging correctly.  I covered much of this last month, but will bring out some key concepts this week that pertain to advisers.

ALSO:  I just have 5 seats left in the January Virtual Training: Making Money with Security.  There are 19 confirmed attendees coming in from all parts of the world.  Don’t miss this!  It’s a game changer for 2011 and central to the strategy needed to grow in this market.

Find out more and register here:

P.S. – I had some great NY Pizza last night at 36th and Broadway!

© 2010, David Stelzl

Photo by David Stelzl

No matter how much value you represent, and no matter how well you communicate it, you will find that some prospects/clients, just can’t afford you.  In this economy, expect that number to grow within your current client base.  So what do  you do?

Move on!  But remember, every past client, every prospect, and those struggling to pay their bills right now, represent spokespeople for your company; expect them to pass on their experiences working with you.   So a couple of points are key here:

1. First, don’t be afraid to lose customers.  If it’s the economy, no problem, there are more customers out there.  On the other hand, if you have a service problem, fix it.  Over time, customers come and go, and hopefully your value grows (along with fees); while their business may be shrinking.

2. If they can’t afford you, you can’t afford them.  Don’t compromise to win a client that will continually struggle to make payment.  In the end, you lose, even if its just from the stress of waiting on payments.

3. Be prepared to refer them to a less expensive solution.  You want everyone you talk to, to perceive you as helpful, and wish they could do business with you.  One day they may be in a position to hire you, right now they are in a position to recommend you.  So keep a list of quality partners that target lower end markets.

4. Finally, don’t let your clients get behind in payments.  Extending credit may seem like you are doing them a favor, but you’re not.  Debt creates bondage… it adds stress to the relationship.

With this in mind, plan your solution strategy for 2011 based on the market you intend to serve.  Put brackets around the low and high end of your target, and serve them well.  Refer business to partners  that falls outside of your parameters, and charge for the value you deliver in your circle.  This is good business.

© 2010, David Stelzl

Social Networking

June 24, 2010 — Leave a comment

Some key points from today’s training on Social Media Marketing with and Business Service Management Sales Training with BMC Partners;

  • Sales and marketing must come together – sales people build their own brand
  • Buyers want expert advisers in business service management, ITIL, change management etc.  The sales person can no longer say, “I’m in sales”, but must rather be positioned as a consultant in one of more of these areas.
  • Every sales person should be commenting on blogs in their industry, using phrases that are searchable through Google, and considering building their own blog with links back to their corporate websites.
  • Publish,post, and tweet unique, edgy, controversial, and pointed information.  People want opinions not more bits and bytes.
  • Don’t advertise in social media.  No one wants to read another product special.
  • Build out your linkedIn profile – it’s your billboard so use it.  Use first person to create you summary, list searchable areas of expertise, and make is readable and interesting.
  • Connect with people – don’t be shy.  You’re in sales…
  • Join groups, create groups, and get involved in delivering unique content that will brand you as the expert.
  • Don’t underestimate the power of twitter.
  • Build a following.

© David Stelzl, 2010


Lots of channel talk out there…Juniper is revamping reseller training online to address complaints from their channel, Fortinet coming out with an MSSP program, probably in response to the SMB and midmarket growth in managed services offerings – of course all of the AV companies out there are doing this or headed that way, and numerous comments on the CRN forums concerning whether partners should be exclusive or committed to one vendor in a given area.  The problem with just about all of the programs out there is this: Vendors are not always addressing the root problem – resellers need more GP (Gross Profit).  This won’t come through install services, and increasing product sales doesn’t necessarily mean more GP either.  Sales must come earlier in the sales cycle with shorter sales cycles driven by high touch solutions, consulting, and low cost of sales in terms of people resources.  So what do channel managers need to do?

  • Understand the reseller profit model – it’s nothing like the vendor’s…
  • Provide sales training that focuses on selling, not speeds and feeds
  • Help resellers build your technology into solutions that drag other product areas within that reseller
  • Learn about marketing and help/support VAR marketing efforts
  • Clarify how deals are protected from direct reps and competition
  • Don’t over distribute which hurts the street price
  • Remember that GP is what matters – not revenue.