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A Systematic Approach to Entering the US Market

By Scott Karren

The US market is an obvious opportunity for companies in EMEA (Europe, Middle East, Africa) and APAC (Asia Pacific). As the largest market for computer products, software and service, almost every company would like a productive US distribution channel. Unfortunately, many enter the market naively or without properly preparing.

Some companies are flooded with enquiries of would be distributors, other are ignored and fail to rise above the noise. Other companies successfully recruit partners but fail to achieve sell through. Still others take too long to develop sufficient coverage and allow competition to cherry pick the best territories. Early choices can set limiting precedence in support requirements, compensation and/or territory.

There are no short cuts to successful channel development. There is no simple cure for lack of market knowledge. Be prepared to invest both time and money to build a US presence. Consider the following six step approach to developing US distribution.

Market Assessment: Get the facts and understand the implications for your products. Starting with the size of the market, each company then must determine an objective, realistic available market. Delve deeper to discover the nature of the channel ecosystem, the existing providers, customer requirements, competitive presence, and underutilized players. Public data may be sufficient for initial planning, but custom market data (both quantitative and qualitative) is required for successful market entry.

Channel Strategy: Based on a thorough market assessment, consider the pros and cons of various channel deployments. Critical factors are user awareness, field presence, channel maturity, product demand, competitor responsiveness, cash flow, strengths and weaknesses. A clear strategy simply establishes a business model for achieving specific long-term goals.

Program Design: If strategy is the vision for a channel, program design in the plan. Programs allow you to collectively manage a portfolio of individual partners. State-of-the-art program design includes end user targeting, channel coverage, program positioning, partner communication, sales force requirements, channel support and budgets. The program should be clear to investors and partners as well as internal personnel.

Sales Force Development: Defining the role and duties of the sales force is more important that the exact number of account to me covered. The typical managed, tele-managed and unmanaged account model fails most vendors trying to enter the US. When you have little or no existing distribution, all accounts are covered accounts.

Partner Recruitment: Locating fewer, qualified partners almost always trumps signing any reseller who agrees to sign your agreement. On average, it costs $2,500 to recruit an account. Additionally, providing support to non-productive accounts can double that investment. Instead of viewing recruitment as a binary event, manage it as a process. Level one recruitment occurs when the partner responds to the message, Level two when they sign a contract, level three when the buy product, level four when the sell product and level five when the sell through consistently.

Demand Creation: Although you selected partners desiring them to sell you into their existing accounts and installed base of customers, they are looking for you to create demand. Specialists are looking for new accounts and merchandisers are looking for traffic.

US channels are mature and have little tolerance for unprofessional channel management. Unrealistic expectations, strategy du jour, "me too" programs, "fog a mirror" recruitment criteria and unused marcom top the list of amateur mistakes.

Scott Karren is the CEO of Channel Ventures, a specialized consulting firm that works with vendors and partners to build profitable channels. Mr. Karren has led his companies to successfully complete over 1,000 channel projects impacting over $150B of channel revenue.

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