How to succeed and win deals in Asia? Part 3: Channel Sales Challenges.
- Podcast – Manufacturing in Malaysia – Volker Friedrich - June 17, 2020
- How to succeed and win deals in Asia? Part 4: Solutions to Sales Channels Development. - March 3, 2020
- How to succeed and win deals in Asia? Part 3: Channel Sales Challenges. - February 21, 2020
This is the third article in a series of four. We will now dive into the challenges of channel sales. The fourth article will present some solutions and success models on how to tackle these challenges.
The first article presented the general framework and called for professional curiosity for those companies, who are not yet present in the fastest growing market area of the world, namely Asia. If you didn’t read this article yet, please go here: https://asianinsiders.com/how-to-succeed-and-win-deals-in-asia/.
There are validated methods available to test the suitability and competitiveness of your products or services. Market entry operations are a significant investment, hence it is recommendable to carry out a professional reality-check to avoid mistakes and to improve the probability of success. Asian Insiders’ “Market Test Drive”- service concept is designed for this purpose. See more here: https://asianinsiders.com/service/business-development-asian-market-expansion/.
The second article discussed how to choose the best markets for market expansion. There is no standard answer to the question where the best markets are for any company as it is usually not just about the theoretical market size only. Macro-level economic indicators such as the GDP, economic growth, population, etc. are never good enough indicators, but it is actually completely possible to identify where the best market for any product or service is in Asia and as a matter of fact also globally. There is no need for guessing or learning-by-doing- approach. Our approach is always targeted at helping our clients to succeed and win deals. You may read more here: https://asianinsiders.com/asian-market-evaluation-best-practices/.
It is not about finding the channel partner!
I have personally been involved with hundreds of assignments related to finding distributors, agents, importers, system integrators or other types of channel partners. I don’t have a single case where we couldn’t find suitable candidates according to our clients’ criteria and requirements.
We always found them, and our clients have been very satisfied with our work. However, I have been involved with too many assignments, where at the end of the day very little sales have been achieved with new channel partners. Finding channel partners as such is not the main challenge.
We should first understand what it takes to win deals in Asian markets. When we have acquired that knowledge, only after that we can start finding and engaging channel partners to work with us according to our channel concept.
Some years ago this fact started to worry me a great deal. Why did our clients so often fail to meet their sales targets even after a seemingly successful acquisition of qualified channel partners?
What was the problem? We decided to dig deep into the roots of the problem. We collected a big amount of so-called “best practice cases” around the world in order to learn internally.
We also participated in dedicated training programs focusing on channel management provided by some leading management institutions. It helped us to acquire the latest theoretical knowledge on this substance matter and to learn how the leading companies in the world develop and manage their channel sales.
What we learned is now embedded in Asian Insiders’ unique methodologies, which will be discussed in more detail in the final article of this blog series.
When do companies need external sales channels in Asia?
Sales channels are needed, when
- There is a need to rump up the sales
- Local support for customers is required
- Local knowledge of business practices and regulations is needed
- Contacts and existing business networks among targeted end customer segments are needed
- Setting up own sales in the target market is too expensive
- Complementing product offering is required by customers
This may sound incredibly arrogant, but for the sake of honesty, I have to say, that it is simply amazing to recognize how poorly many companies are prepared to develop and manage their channel sales in Asia.
I shouldn’t complain, because this gives me my daily bread & butter, but nevertheless I find it hard to understand as channel sales are probably the most common way to sell globally for almost all companies. Let me bring up some of the most common challenges for you.
Often the partnership with a new channel partner has started by co-incidence for example at a trade fair and not through a systematic approach. The right channel partners won’t be waiting around to sell your products. They’ll need to be sold.
You should have a Partner Value Proposition, which:
- Understands local market opportunities. You know how big the cake is and how big slice of the cake you can realistically expect to win with your partner
- Explains how your product complements your partner’s existing products and creates a new business opportunity for them
- Explains what your working concept between you and your channel partner is. We call this as “Channel Concept”
- Includes reasonable sales projections and investment obligations
- Explains how you plan to solve eventual channel conflicts
- Explains your ideal partner profile
Does your partner “see” the full potential of your products?
Often one partner cannot cover the full potential of the market. For example, industrial equipment is typically used in a number of different applications in numerous industrial sectors. Your channel partner may not have the required competencies nor resources to sell your products to all those segments, that you have defined in your strategy.
Typically, large corporations in Asia want to deal directly with the manufacturer without any middlemen.
For this customer segment, your channel partner most likely would not be considered as an alternative. Whether you like it or not, to reach these kinds of large, blue-chip customers you may have to take into use a Key Account- concept. You take care of named Key Accounts directly and your channel partners take care of the rest of the market.
For language or cultural reasons in some Asian countries, it is very difficult to reach all geographies through one partner Good examples about this challenge are China, India, and Japan. To dive deeper into this topic, for example in Japan many companies have build agent and sub-agent networks…
Often Asian companies tend to deal with people they know and trust. If your partner is not inside these “circles of trust” regarding your pre-defined target customers, then it will be very difficult to get a breakthrough. The trouble is, that your channel partner would very seldom admit you this in advance.
It is always the end-user who decides how and from which channel they prefer to purchase your or your competitors’ products. Your job is to deploy those channels and work with the best available channel partners in each channel. Because of these complexities and end-users purchasing behavior, often companies end up having some kind of hybrid channel structure in addition to their own sales teams.
- Agility or lack of action?
Often companies let a non-performing channel partner continue for too long. You might fear the legal consequences or negative reaction from the market.
A non-performing partner usually also typically delivers filtered, biased market information to his principals in order to discourage them to take any action. Also from this perspective, it is of utmost importance, that you as a principal are in the driver’s seat.
You must have your thumb on the pulse all the time and acquire sufficient market knowledge by yourself and not be dependent on what you hear from your partners only. The question is: Who is managing your business in the market? Your or your partner?”
- Sales funnel management missing?
Is your partner truly professional in sales management? Are you sure they target and take real sales actions towards potential and current customers according to your strategy?
In case your partner represents multiple principals and the share of your products in his sales portfolio is as an example 10%, you will most probably have 10% of his attention and his strategic choices might not go hand in hand with yours. Often principals push their channel partners by frequently asking sales forecasts.
This most likely will cause some pressure in the mind of the partner, but you are not really supporting them. It is essential to set up a joint sales funnel follow-up system with agreed milestone targets. When you set up the system, agree together on all the milestone targets and follow-up the results frequently, then you can expect results and start winning more deals in Asia.
There are also online digital solutions available for target setting and follow-up so that both the partner and the principal can in real-time follow-up the activities and the sales performance.
- Regional Partner or Country Expert?
Sometimes your channel partners would like to represent your products in a larger territory rather than in one country only. In Asia, this is a particularly common phenomenon – and for you, it is a particularly dangerous strategy as well.
There are numerous reasons why. Asia is culturally, geographically, demographically, language-wise and in many other ways a very heterogeneous region. This is a region, where personal networks are of utmost importance. Success here is built country by country. A regionally operating partner without own local resources in all key markets is seldom the most successful route to the market.
- Channel Management competence missing?
Sales Channel Management is not rocket science, but it requires specific competences to do it well. In B2B- business environment and at SME- companies, in particular, there are often technical salespersons in charge of dealing with channel partners in addition to their normal technical sales work.
Developing and managing sales channels by definition does not require technical competence – it requires business development and sales management competencies. With proper tools, operating practices and training, professional sales channel management can be implemented in any company.
- Unclear Channel strategy & lack of transparency?
Defining and communicating your channel strategy in a crystal clear and transparent manner to your partners, is one of the cornerstones of a successful channel management concept.
If you sometimes compete with your partner by selling directly, or if two partners fight for the same deal, then you are faced with “Channel Conflict”. What is important here, is that you have a clear strategy on how to handle situations like these and that you have communicated it to your partners in advance. There should be neither “grey areas” nor “hidden agendas”.
In the 4th article of this series, we will present and discuss some practical solutions, tools, processes and company cases on how to address all these challenges described in this article. Please stay tuned at www.asianinsiders.com.