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February 8, 2012   Posted by: Dale Underwood

OEM Generated Qualified Leads for Channel Partners

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If you work for an Original Equipment Manufacturer (OEM) and have ever thought about using LeadLifter™ to generate qualified leads for your Channel Partners, this article is for you.

You see, LeadLifter’s core tool, EchoQuote™ grew out of a Channel partner business (VAR) so it is perfectly suited for the job. The rub, however, is that many OEMs assume it will not work for them because their partners are responsible for providing pricing to interested end-users, not the OEM.

I’ve had many discussions with OEM marketing folks that go like this:

“We really like the LeadLifter™ concept for lead generation but we sell 100% through our channel partners so we can’t provide end-user pricing. It won’t work for our business model.”

- OEM Marketer

 

I appreciate the finality, but with all due respect, it is totally wrong, and I think I can prove it.

I’ve owned an IT Hardware/Software VAR business for 10+ years in a channel heavy environment. Having been on the receiving end of a variety of OEM channel programs (both good and bad) I’m one of those that would supposedly get hurt by the OEM offering List pricing using LeadLifter™.

My take: An OEM actually helps its VAR partners by providing a way for website visitors to request “List” pricing via a Self-Service Portal so long as it helps the OEM generate leads for the VAR channel.

Channel Partner Programs

Strong channel partner programs adhere to a strict set of rules that drive several key goals. First and foremost, the channel program must generate sufficient revenue for the OEM to grow. Second, it must motivate VAR partners to promote and support the OEM’s product set by providing the VAR with it’s primary objective; protected margin. Protected margin is achieved by carefully designing, and then enforcing, a deal registration program that guarantees channel partners substantial revenue in return for their sustained effort.

Here’s how most deal registration programs work.

MSRP (List Price) Non-Registered Partner Cost Registered Partner Cost
$10,000 $9,500 $6,000
100% 5% off MSRP 40% off MSRP

 

MSRP (List Price)

The List Price is the number set by the OEM that merely establishes all other discounting levels. It is not a real “price” of any kind. In my 10+ years of running a VAR business, I have never seen a customer buy a solution at List Price through the Channel….ever.

Non-registered Partner Cost

The non-registered discount level of 5-10% allows all channel partners to participate in sales opportunities and drives better customer service by introducing competition. It also facilitates Open Market procurements via Requests for Proposals (RFPs) that some customers follow, especially the public sector. The non-registered cost provides a “floor” under which no partner can sell. If strictly enforced, this floor provides the high-water mark for the registered partner’s pricing to the end-user.

Registered Partner Cost

With this program in effect, OEMs will allow one, and only one, VAR partner to have the “Registered” cost for a specific sales opportunity. All others are relegated to the non-registered cost giving the registered VAR 35%+ guaranteed margin on the deal. This margin is critical for any channel program to grow and thrive. Partners need to know that if they spend the time working with end-users, it will be worth their investment.

The customer wins because they get much better service from a provider that is making a reasonable profit. The VAR’s margin is coming out of the OEM’s part of the deal and does not mean the customer is paying more than they should for the product if they bought direct from the OEM.

Using List Price Offer for Lead Generation

So, assuming an OEM has setup their channel program this way, will using a List Price Offer to generate leads negatively affect the channel?

Some say yes. I say no. In fact, I say it will help the channel.

It sounds counter intuitive until you really look at the structure of the program and consider these facts:

  1. A VAR with a Registered Deal will never sell at MSRP (100%), they will generally go 1% below non-registered cost to lock out any competitors
  2. Many buyers require 2 or more quotes so an OEM quote at full MSRP will suffice as a competitive benchmark without disrupting the VARs pricing
  3. Having the OEM set the bar at MSRP during the budget phase of a project ensures adequate funding when the project is executed (this is perhaps the number one advantage for public sector projects)
  4. Using a Self-Service Pricing call-to-action ensures the OEM can find early stage leads for its partners, improving win rates and profit margins
  5. By providing a Self-Service pricing mechanism, an OEM can reduce pricing misinformation available to end-users via Google and other search utilities.

 

An OEM’s fear of providing MSRP budgetary pricing is seriously over blown, especially in the age of Google. Whenever I hear this objection I immediately go out and Google the OEMs name along with “price list”. It will invariably find dozens of sources of confusing prices. In many cases the search will pick up pricing from state or federal contracts which have been negotiated at well below non-registered cost. What OEMs had hoped to avoid has actually backfired.

In the OEMs effort to enforce a “no pricing policy” they are condoning and encouraging potential customers to leave their website and go find pricing on their own. Like Stefan Tournquist, formerly of Marketing Sherpa once said, “if you don’t provide MSRP pricing to your end users, someone else will….including your competition. It just needs to be done in a controlled, safe way, not published directly.”

Summary

Buyer behavior has changed since most OEMs began operating. Old rules of controlling MSRP in a bubble are gone. Pricing is everywhere and you cannot control it. So, why not take advantage of the fact that early stage end-users are looking for pricing and help your channel partners find new customers? The offer of a List Price quote to capture an end-user will not negatively affect the ultimate margin for the Channel Partner. In fact, it will most likely increase it. It’s a win-win.

OEMs that have made the transition to providing an easy way for early stage prospects to request and receive budgetary pricing are winning market share. Take it from a VAR owner – don’t let a no-pricing policy hurt your channel partners! Finding customers is tough enough these days without archaic rules.

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