Changes in the Buying Process Shaping the Channel of the Future

Over recent months we’re starting to see many of our clients re-evaluate their sales and marketing partner coverage model. It’s being driven by the future role of partners in cloud routes to market. In this document we look at what’s happening, why, and where it might lead for channel sales and marketing. The implications are significant.

Generation X and Y

Generation X professionals (30-50 years old) and Generation Y professionals (18-30) have been the subject of many studies. And no wonder. A BPW Foundation study quoted by Forbes (1) noted that by the year 2025 Generation Y professionals will make up 75% of the world’s workforce.

Each year Cisco publishes its ‘Connected World Technology’ report (2) and in 2014 it focused on Gen X and Y technology behaviours. The report tells us that these generations would rather lose their sense of smell than lose access to the internet. But more relevant here is the fact that Gen X and Y are used to a world that is on line, immediate and omni-channel.

What Drives the Buying Decision

We all know from experience that personal buying decisions are more and more on line. Business buying decisions are on line too. Accenture’s ‘State of B2B Procurement’ study(3) tells us that around two thirds of business buyers make a purchase over $5,000 every month that is transacted entirely on line and by phone, and no face to face engagement is involved. It also tells us that around half of all corporate buying decisions are now researched on a mobile or tablet device.

But here are a couple of interesting facts from IBM’s study ‘How Millennials are Reshaping B2B Marketing’ (4). Using online sources for research is routine for millennials. What really matters is getting to know what it would be like to work with a particular vendor. And that experience is best delivered by phone, email or chat, not face to face.

Rebuilding the Inside Sales Model

Here at bChannels we’ve spent a good deal of time talking to clients about where this leads, particularly in terms of the engagement model for cloud routes to market. We hear a number of key themes in our client conversations:

• Cloud delivery models are often direct from vendor to end customer, so the role of the channel partner is changing quickly. It’s about customer influence. Influence on end customers is possible through software developers, specialist consultants and non-traditional partners like marketing agencies. Software developers pull through Platform and Database technologies. Specialist consultants recommend SaaS Applications.

• The indirect channel is no longer an ‘extension to the sales force’, in the traditional way, owning end customers and selling to them. The indirect channel now works with the vendor sales force, as part of an extended influence ecosystem. The indirect channel is part of a sophisticated sales and marketing engine. End customers are touched by vendor sales teams, by application developers, by specialist consultants and more, all working together to drive outcomes.

Many of our clients are rebuilding or extending their inside sales teams, and not just as a way of accessing small business markets. Increasingly inside sales is seen as a legitimate route to market for larger sales into larger customers. Why? Because it’s part of a sophisticated sales ecosystem, and because millennial end customers prefer phone, email and chat to traditional face to face sales.

Buying a Car

At bChannels we see a parallel to the car industry, which is also dominated by intermediary ‘resellers’. ‘Death of a Car Salesman’, an Economist article (5) explains that ten years ago the average car buyer visited five dealerships before buying, now it’s one. Car dealers are seen as “boring, confrontational, and bureaucratic”. Research shows that today the millennial buyer narrows down their choice on line, then visits a dealer for help to understand the options – entertainment, navigation, automated parking, and so on – then to sign the paperwork.

Visit a Tesla showroom in the US and you see the new model at work. The showroom is like an Apple Store, with specialists to help with options – which is pretty much a software sale – also to promote the Tesla brand experience. Tesla sells direct, not through dealers. But the showrooms represent a key part of the ‘influence ecosystem’ that leads to a closed sale.

The Technology Channel of the Future

What does this tell us about technology routes to market of the future, and how vendors will manage these routes to market? Here’s the bChannels take on that.

• Cloud provisioning direct to end customer means that the role of the channel intermediary changes for ever. We can see this in the Tesla model. The channel intermediary is still vital, but they don’t resell, they influence.

• Millennials research on line, then want to interact by phone or email with the vendor or a representative of the vendor for support. Buying might be direct from the vendor, most likely on line, but possibly by phone.

• This buying behaviour reaches a surprisingly long way up from low value buying decisions made by small companies, to high value buying decisions made by big companies. To assume that this is SMB behaviour is incorrect and puts the vendor at risk.

• Channel influencers – developers, consultants and non-traditional partners – need to be engaged as deeply as in the old resell model. The reward might be in the form of fee for influence, but it might also be in the form of increased influence: training, insight and enhanced vendor relationship.

• Direct selling by the vendor does not create conflict, it offers an alternative buying channel to millennials who want an omni-channel experience. Sales are lost if they are not available on line, and cannot be immediate. However the end customer chooses to transact, the influencer must be rewarded.

It’s easy to forget that influencing partners themselves are staffed by millennials with the same experience and desires as millennial end customer buyers. So the same rules apply. The vendor engagement model is on line and on the phone. The field-based channel sales representative is probably heading the same way as the car salesman. The partner portal experience is critical, and the availability of expert support to the partner on the phone and by email is also critical. It’s the phone equivalent of the Tesla showroom, the place you go as a channel partner to understand the program options, become familiar with the transaction process, and to get the flavour of the vendor brand values, which are built around business relationships.

STUDIES REFERENCED IN THIS DOCUMENT

• http://www.forbes.com/sites/85broads/2012/01/23/gen-y-workforce-and-workplace-are-out-of-sync/#192514172579

• http://www.cisco.com/c/dam/en/us/solutions/collateral/enterprise/connected-world-technology-report/cisco-2014-connected-world-technology-report.pdf

• https://www.accenture.com/t20150624T211502__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Industries_15/Accenture-B2B-Procurement-Study.pdf

• http://www-935.ibm.com/services/multimedia/GBE03658USEN.pdf

• http://www.economist.com/news/business/21661656-no-one-much-likes-car-dealers-changing-system-will-be-hard-death-car-salesman

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