Distribution Strategy Glossary: ​​Terms of Trade

When a technology vendor pursues an indirect sales model, the company’s effort to recruit and cultivate partners is called a channel strategy.

A host of vendors are making the sales channel approach central to their sales and marketing initiatives. The channel’s list of followers ranges from long-established IT vendors such as IBM, Microsoft and Cisco to start-ups looking to channel allies to publicize their products. In recent years, cloud providers in the IaaS and SaaS industries, for example, have developed large channel partner ecosystems.

Salespeople pursuing a channel strategy cite a number of benefits, including the ability to have more “feet on the street” to represent their brands to customers that a direct sales force may find difficult to access. Channel partners, the label applied to a range of businesses from resellers to managed service providers, are also a way for vendors to target specialized vertical markets and expand their reach in different geographic regions. Channel Partners also provide consulting and professional services that help vendors ensure their products are not only sold, but installed, integrated and adopted.

This glossary provides certain trade terms for vendors or channel partners who are establishing partnership relationships.

Partner program. The channel partner program is the embodiment of a vendor’s channel strategy. This program serves as a hub for vendor-directed communications, financial incentives, training and accreditation initiatives, co-marketing activities, and other forms of partner outreach. Partner programs can be tiered, with partners receiving various benefits for achieving sales, training, or other mutually agreed-upon business goals.

Partner Account Manager. The Partner Account Manager, or Channel Manager, serves as the critical link between the vendor’s partner program and individual channel partners. Partner Account Managers are responsible for establishing and managing relationships with distribution companies. They develop business plans with partners and help them seize revenue opportunities.

Channel Partner Portal. Portals are the online component of a vendor’s channel partner program, providing partners with access to product information, marketing assistance, and training, among other features. The portal provides a permanent resource that partners turn to when they don’t have time to contact a partner account manager.

Market Development Fund. Partners can request market development funds from vendors, also known as MDF, to purchase radio spots, roll out digital marketing campaigns, host webinars or trade show booths, or support other marketing activities . MDF funds sometimes go untapped if partners are unaware of their existence or unsure of application procedures.

The MDF is one of the components of a supplier’s distribution strategy

Sales Management. The main point of MDF is to generate leads – individuals or organizations who express an interest in a channel partner’s offerings. However, business partners should be prepared to dedicate sales reps to follow up on leads to turn them into leads and, ultimately, customers.

Transaction record. In this component of a distribution strategy, a partner submits a sales lead for vendor approval. If approved, the supplier prioritizes the sales lead and gives the partner a set time to close the sale. During this protected period, the supplier agrees to prohibit other channel partners and internal sales personnel from negotiating a similar agreement with the prospect. Transaction registration efforts are typically accessed and managed through a vendor’s channel partner portal.

Channel conflict. A channel contention occurs when a vendor’s sales team competes with a channel partner for a given customer transaction. In some cases, the conflict arises between a vendor’s channel partners. Offer registration programs are intended to reduce instances of channel contention. A Supplier may publish Channel Partner Rules of Engagement to formally state how the Supplier’s sales team should conduct themselves with Channel Partners.

Marketing strategy. A go-to-market strategy is the overall approach a company uses to deliver its product or service to end customers. This strategy encompasses the definition of the target market, the determination of the value proposition and the definition of the pricing approach. A distribution strategy is another element of the overall go-to-market strategy.

Tanya J. Hill