Transcript

Marcus Cauchi (Introduction):       Forrester is forecasting that 90% of all technologywill be sold through partners by 2026. So if you’re not channel curious now you will have no choice or you’re going to become extinct.

Announcer: Welcome to the Software Channel Cartner Podcast where you’ll hear leaders of partner programs talk about their greatest challenges and most successful solutions. And now your host Louis Gudema, the president of revenue & associates.

Louis Gudema:            Welcome to the Software Channel Partners Podcast, where we talk with leaders in software partner programs to learn about what’s working today. I’m Louis Gudema, the president of revenue & associates, where we help companies grow faster by helping their channel partners grow faster.

Today we’re doing something a little bit different. Typically our guests are leaders of channel programs, but today I’m talking with Marcus Cauchi, author with David Davies of Making Channel Sales Work. In addition to his experience in working with partner programs, Marcus has been a trainer of the Sandler sales methodology for 16 years and he’s located in the UK.

Marcus, welcome to the podcast.

Marcus:           Thanks for having me.

Louis:   So, why don’t you tell people just a little bit about your career path and what brought you to where you are today.

Marcus:           Okay. I’ve been selling since 1986. Started out selling advertising and media, graduated into recruitment. And for the last 15, 16 years I’ve been selling training, after a brief stint in selling technology directly.  And I’ve worked across 450 different market segments. I’ve done everything from helping them to build their structure of their business all the way through to building sales teams, turning sales teams around. And in the last 13 years or so, working in the channel space, helping people to build effective channels and stop wasting time recruiting lots of partners who then don’t work out.

Louis:   Yeah, well certainly I hear from a lot of companies, a lot of vendors that, it’s the 80/20 rule and maybe 50% of their partners are not producing anything and a small percentage of partners are really delivering most of the revenue for them.

Marcus:           Absolutely. I mean, that’s very common. And the problem that I see is that vendors don’t really pay attention to their partners and what drives and motivates them. And they have a tendency historically and currently to see them as a resource to be largely used and abused in drive-by shootings. And they really don’t spend any time trying to understand the individual personal motivations of the owners or the salespeople. And then they wonder why the partners get vendor fatigue when the channel manager turns over every 2.1 years — I think Forrester’s research shows. So they spend six months trying to find the washroom, six months complaining about how bad everything that came before them is, six months then implementing a bunch of changes that none of the partners really want,and then seven months getting their CV out and going on interview.

Louis:   Right. That really cuts down on effectiveness. So in your book, you say that selling through channels has quote long been seen as the ugly sibling of direct sales, unquote. But for some companies, channels are 95% or even I think Microsoft, the number is 95% and there’s other companies where channels are 100% of revenue. With the companies that you’ve worked with, what’s that range of contribution to revenue that channels have been contributing.

Marcus:           It varies from nothing to 100%. So it’s a full gamut. Something like 75% of all products sold globally today are sold through partners, 26 vertical markets. So channel is, it’s not a trend, it’s a wave and it’s inescapable. Forrester is forecasting that 90% of all technology will be sold through partners by 2026. So if you’re not channel curious now, you will have no choice or you’re going to become extinct.

Louis:   Yeah, those are great numbers. So is that B to B and B to C or is that, are you talking B to B?

Marcus:           I’m talking across all 26 verticals.

Louis:   Okay. And in your book, it sounds like you’re really focused on enterprise sales. Is that right?

Marcus:           Not necessarily. I mean, enterprise sales is a little bit sexier and the pockets that you sell to are deeper, but the tools that we’ve got in the book are routinely used by our clients for selling direct to SMEs. So you may not have to necessarily map out and account to quite the level of detail, but things like pre-call planning, post-call debriefing and rehearsal.Things like using LinkedIn in order to be able to map out an account.Making sure that you’re identifying which opportunities you should pursue and which aren’t.Being able to understand the competitive landscape. All of those tools can be used by anybody. So, we’ve catered for companies that want to scale up aggressively without losing control, but the tools come from an enterprise environment, but we use them in SME as well.

Louis:   So you were recently interviewed on Douglas Burdett’s Marketing Book Podcast, which is a terrific podcast others may want to check out also. And at one point you said that sales is really part of marketing. A lot of salespeople may take offense to that, but what did you mean by it?

Marcus:           Well, I think anything that touches the customer is marketing, and the problem is if you look at the lifecycle of any business, any marketplace, any job: there’s startup, then there’s continuation by the time you’ve kind of ironed out the creases. Now you either go into growth or you go into turnaround, and then from turnaround you go into recovery with the hope that you’ll move into continuation or growth again.

Now, if you look at the evolution of virtually every business, it starts out with a technician who is good at something, but they’re not really salespeople. So the first hire they make is a salesperson, and they burn through 5 to 10 of those before they find one that can do the trick. Meanwhile, either they move into growth, but they then have to build in all the backend infrastructure and all the functions, or they move into turnaround. Meanwhile, sales moves into continuation and they hire someone in marketing because the salesperson doesn’t really like prospecting. And then they hire a finance person and then they hire HR and marketing reports into sales and HR reports into finance, and I think that’s the wrong way round.

I think if you really believe people are your most important asset, then everything should report into HR — and they should be really good — because great HR people are worth their weight in gold. And I think marketing is about communicating to your audience, about creating awareness and familiarity, about creating engagement, about taking people through a process of self-diagnosis and discovery so that they volunteer themselves. Sales is where the rubber meets the road typically. And I think sales has a critical function, but the reality is that sales and marketing should not be separated. But too often they’re in conflict and competition. And that’s a huge mistake.  Without that alignment and underpinning it all is something that’s become something of a fad, but it’s not, is customer experience: because you’re in business because of the customer, not in spite of them.

So if you don’t put the customer front and center of everything that you do, I think you’re on a slow hiding to nothing. And people can get away with it for only so long before they get found out. And I think sales and marketing need to be in total alignment. There needs to be an absolute focus on identifying who they can best help, being ruthless in the disqualification of the marginal prospects so that they can focus their attention on the customers and prospects that are bang in their sweet spot. And this is where marketing and sales can really work hand in hand because marketing can help gather that intelligence, gather that insight to help feed sales, and ensure sales is having the right conversations with the right people in the right way at the right time.

Louis:   Yeah, well I totally agree with what you were saying. In many tech companies, or in some tech companies anyway, there’s a movement towards a title of chief revenue officer, which often is over both sales and marketing and sometimes customer experience or even product. But I was surprised in your description there of the evolution of companies as they grow because a lot of times I don’t see that marketing hire being very early at all. Certainly a lot of companies are started by people who are great at their business, great in their industry, they’re really an expert at that. And they have to become at least competent at sales or the company doesn’t survive at all and then they do hire more salespeople.

But they generally don’t know very much at all about marketing. And when I’ve looked at it, I actually have a digital marketing scorecard I use to score the marketing depth of companies. I’ve looked at hundreds of companies. And what you see over and over again is that software companies have very robust marketing, and B2B companies in most other industries — and I’m talking about, ones with say 50 to a 1000 employees in manufacturing and medical devices and professional services — often have very little marketing. So they’re really missing out on that part of the equation there about understanding the customer and what are the emotional drivers of the customer and how sales can communicate better with them.

Marcus:           Well, I’ll have to defer to you on that Louis, because that’s really more your domain, but certainly my experience has been that very often they do go through that cycle. It may be that marketing comes in quite late. Bear in mind, I was saying that they may have burnt through 10 salespeople by the time they get round to hiring the marketing person. So they’ll have recruited any number of different people in the operations, in logistics, in all the other areas of the business. So yeah, I think it may well be the case that marketing comes in late, but it normally comes in way after sales.

Louis:   Yeah, totally agree on that. So you really put a lot of emphasis in your book on the first 120 days, on the onboarding of new partners, and making sure that they have quick wins. Can you tell me a bit about what you think are some of the critical ways that vendors can be successful in doing that?

Marcus:           Absolutely. Well, the first thing is, if a partner has come to you with an opportunity, it’s the second sale that really matters. And if they’re not making money — they’re coin operated –so if you’re not putting money in their bank relatively quickly, then they’re going to get distracted and they’re going to go after other opportunities where there’s more money to be had. Because they’re in business for their reasons. They want to grow their business for their personal reasons. It may be that they want to put their kids through school. It may be that they have aspirations to be the biggest, best and brightest. It may be that they’re trying to pay for their kid’s education, whatever it happens to be. But they need to make money and they have payroll to make.

So if you’re not putting money into their business quickly, they’ll get very quickly distracted and they’ll go for the low hanging fruit. And in order to do that, I think what you need to be able to do is onboard them properly, and I believe the first 120 days are critical. In the first 120 days, as with any employee, they’re thinking, Have I made the right decision? Do I like these people? Can I work with them? Is this going to work out for me? I think in that process there’s a requirement to really understand what they’re trying to do with their business. So take the time to investigate what they’re trying to achieve. How are they trying to develop their business? What does their ideal customer look like? And spend time really understanding that and understanding the type of business that’s right in their sweet spot.

Then I think they need to segment their marketplace and their existing customer base into those that they keep, because there’s no expansion potential, but it’s good bread and butter business. Attains:which are new business wins, completely new logos. Recaptures: because they’ve already got a pretty decent understanding of that account. So what do they want, can they recapture those accounts because they either lost it through bad salesmanship, they were outsold, they blew it for some reason, or there was a change in management. And Expand. I sat down with one of my MSP clients fairly recently and they were sweating blood over how do we grow our business by 20%. And within 20 minutes we found an average across five different divisions of 153% growth potential within their top 20% accounts.

Louis: That’s great.

Marcus: Isn’t it? Because if you as a vendor can help them identify that kind of growth potential, then you’re putting money in their pocket. Now the other thing is they really need to be trained how to sell your stuff. But where I see vendors go horribly wrong is they bore the poor people to death with product information, which the techies might like, but the guy whose feet are on the street going out and selling — finding out, you know, how many carbungulators fit on the Rippitz. So what you have to do then is train them as if they are your own and train them to sell. And if you’re not training them how to sell and you’re not helping them to get business over the line. So I think another aspect of really good channel management practice is deal midwifing. Helping them, because you sell your stuff all the time, they’re new to it. So where are the opportunities? How can we initiate the dialogue? What’s the 30-second commercial that you need to tailor specifically for that organization in order to get an entry point and speak to the people who can actually make decisions.

Once you’ve got the ball rolling there, then helping them pre-call plan, helping them rehearse, and then when they execute the sale, then to come out and debrief them verbally and in writing so that they capture the lessons. But the problem is that if you have a hundred, a thousand partners and that’s spread across, let’s say 10 channel managers, you’re going to really struggle. So my recommendation is take on only a couple at a time. Onboard them properly and then pivot 5 to 10 degrees either way, once you’ve got those people on board, and then get the next partner and help them make money.

People are in a hurry.  I think you have to slow down to speed up. And part of this is cultural because the typical sales or leadership within the vendor comes from direct and they do see channel as the ginger, illegitimate, ugly sister. And unfortunately what that means is very often, and I think it’s a big mistake because I believe that channel sales management is the hardest job there is in sales. Because not only are you cat herding, but you have absolutely no power, the only thing you have is influence. And I think what you need is really good, solid experienced salespeople who are strategic, who have fantastic aptitude in terms of creating effective relationships. Making sure that the people that you’re working with are able to plan, they’re good at business development. They need to be able to understand the basic requirements of the customer. They need to be good coaches, they need to be collaborative, they have to be able to communicate with influence. They need to be highly adaptable.

At the channel chief level they need to be very strategic. They need to be able to direct others and execute for results. Be able to set goals and plan activity and manage resources. And if you look at Jay McBain’s six stovepipe model for a channel manager, there’s over 90 functions that a channel manager has to execute. So giving that to either a failed direct salesperson who they don’t really want to fire, or someone who is brand new to sales,  I think is a terrible mistake. I think what you need is someone who’s seasoned and really understands how to build a business. Because I think a channel manager is closer to a general manager in profile, and a channel chief is closer to a chief executive. And in fact, I think the route to chief executive will come through the channel and the other area will be head of data analytics.

Louis:   I was recently talking for another episode with Rob Rae, who’s the VP of business development for Datto, and they have 16,000 partners all over the world. Their software is being used on literally every continent. He said they now had a customer on Antarctica. And he totally is in agreement with you about focusing on training on sales and marketing. He was saying he thought most of their partners who are managed service providers are very good at the tech side. They don’t need a whole lot of training on that.  But it’s that training on sales and marketing that can really make a huge difference for their business and for the vendor’s business as well.

Marcus:           I couldn’t agree more.

Louis:   That’s one of the areas that we work in is on the marketing, the training and the execution on the marketing side because, like I said, many vendors have terrific marketing themselves, but often they’re partners haven’t really put much investment into that. And so it’s a great opportunity to drive more growth for vendor by driving more growth for the partners.

Marcus:           Absolutely.

Louis:   So you talk in your book a lot about unique effective conversations as a leading indicator of sales success. So, how do you define that. What is a unique effective conversation?

Marcus:           You make the call, you got past the gatekeeper, you get through to the decision maker, you contract with them that you’re going to deliver a 30-second commercial at the end of which they will agree to talk further or hang up. Now you do that five times a day. Typically in most tech businesses, that’s probably enough to fill your pipeline. So I was working with the sales guy for a very successful client of ours. They’ve gone from eighty million to one billion in five years, and this guy was tracking at 25% of target when we first started talking. Now obviously there was other stuff that we taught him, but we trained him to do that. Within seven months he was at 200% of target. Within 12 months he finished the year with 500% of his target in the pipeline. Every quarter since I trained him, he’s hit his annual quota.

Louis:   So you talk about prospecting as, so you’re talking about prospecting here and you say it’s not only your right, but it’s your number one priority. And at the same time you say, salespeople do not like prospecting. Should enterprise salespeople be cold calling every day? What about using BDRs, junior people to get through and do appointment setting and then turn it over to the more experienced people to really develop and close those?

Marcus:           Prospecting doesn’t just involve cold calling. Prospecting involves expanding your relationship within an existing account. So if I’m trying to sell into Barclays Bank and my point of access is their CTO, then what I also want to do is infect deep and wide, and I want to network and I want to understand. Because I mean again, Jay McBain, says that this year 80% of all technology purchases will be made through the line of business. Now partners generally like to sell into IT because that’s historically where they’ve been. And I think the prospecting that someone senior should be doing is using LinkedIn. They should be using their personal and referral network. They should be going to conferences and events. They should be engaging in dialogues with people through the supply chain.

And the initial point of contact can be done by BDRs. But for enterprise sales, I’ve got to be honest, someone who it’s their first or second job making calls to get to the chief executive, because I’m a big fan of call at the top. And that’s not for everyone, but I think if you want to get to the top and then get shunted down with permission to come back to the guy at the top, that’s much more powerful than trying to scramble your way up from an IT manager or a product manager. It’s a lot harder to do it that way. And I think it’s a mistake that a lot of organizations make, which is,  Any point of contact is good enough. I don’t think it is. I believe prospecting is everybody’s responsibility in sales.

Louis:   Yeah, it’s an interesting question, we could discuss this all day long. I head up a group here in Boston called Sales and Marketing Innovators and we had a chief financial officer in to speak one time about selling to the C-suite and starting at the top and he right off the bat said don’t sell to the C-suite. They don’t want to talk to you about that. They want line of business people, as you were saying, to actually be dealing with these kinds of things. He said, the only time the C-suite wants to meet with you if you’re a vendor is if it’s really strategic or they want to beat you down on price.

Marcus:           And I challenge that. I think great salespeople will find the strategic link. I’m not saying it’s always possible. But if I get shunted down, if I’m going into your organization, and I get referred to Bob and I say Louis suggested that we speak, that’s going to carry a lot more gravitas than me trying to call him direct. And so you use that as leverage, but also if you want to sell enterprise, then you’re talking big numbers and someone with C in their title is going to be the rubber stamp.

So it makes sense to invest time and effort helping your partners or going direct to those people and then navigating the organization. Because I think if we’re talking about enterprise, you’re talking about long sales cycles, very sophisticated competition, high cost to pursue, cross-functional sales teams, complex decision structures, a very wide and diverse buyer network, and a need to focus on the business value. And if you’re not covering off all those bases, then you’re going to be missing the mark and you’ll just be treated as another commodity provider. And certainly within technology, as pretty much every vendor is just going to be one component of the overall solution.

So the deeper and wider you can engage within an account, the more likely you are to have good intelligence as to know where you are, what needs to happen next, who else you need to engage with, and whether you should continue the pursuit or get out. Because if it costs you 40 grand, whether you win or lose a pursuit, and you have to go through 12 or 20 pursuits to get one to final stage, you don’t want to be squandering a quarter of a million bucks on non-opportunities. So I think that intelligence is really important.

Louis:   I mean, obviously it all depends on what you’re selling and what your approach is. In terms of setting up these unique effective conversations, filling the pipeline is another one of those areas where you have those joint sales and marketing responsibilities. The best organizations are going to have even written service level agreements between sales and marketing about the responsibility for each to contribute to pipeline and how each is going to respond to new opportunities that the other is able to generate. Marketing — it’s not just a matter of the salesperson prospecting for new opportunities, but that marketing should be focused heavily on lead generation as well — and bringing in opportunities for sales, bringing in new contacts and leads, qualifying them and turning over the potential, the best ones, the ones that are qualified to sales to work.

Marcus:           Absolutely. Where I see a huge disconnect here, as well, is very often, because there isn’t that good communication between sales and marketing. I remember when I first started in this business, I was working with a company that had 3 million pounds worth of leads generated by marketing and sales ignored all of those, and they closed one of them. I think it must have been something like 1200 leads.Because there was a disconnect between sales and marketing. I think marketing is probably the best investment you can possibly make in any business if you do it right.

Marketing should be generating good quality leads, help the salespeople supplement their pipeline. But I think salespeople who can’t prospect are very quickly irrelevant. I think it’s, I absolutely understand that you want to spend your time on high-value activity, but certainly if you’re selling bigger ticket items, you should be prospecting within your account and within their supply chain and within their alumni. And that’s not necessarily something that is done best cold. It’s typically done best where you already have a point of reference and there’s a relationship and you can borrow credibility.

Louis:   You also talked about channel sales managers and partners jointly reviewing pipeline progression at least once a month, possibly even a shared CRM. So that requires a lot of trust between the organizations.

Marcus:           It does. There is a workaround, which is instead of giving them the company name, just give it a reference number. Now that’s a workaround, however, what that tells me is that you haven’t developed trust. And there needs to be a clear contract and agreement what the boundaries are. But the problem is because a lot of channel managers have historically come from direct sales and they don’t really appreciate how hard partners have had to work to build those relationships, they can be a bit cack-handed. So I had a client who worked in the security space and her vendor manager insisted on calling the client the week after his mother died and almost blew a 200,000 pound deal because of his lack of respect, so absolutely I get that. But the problem is that their relationship was already broken because it hadn’t been established correctly right from the outset. And that’s why when you’re starting to develop a partnership, you need a prenup. You know who is going to get the kids if things go, what are the boundaries, what are the expectations, what are the responsibilities, the accountability.

So if you look at what you need to do before you take on a partner it makes it a good deal of sense to work out, can you pin your logo to their office door? Because if it’s someone operating out of a back bedroom, probably not. Besides the CEO or the owner, who’s their top salesperson? How do they get new business? Do they only get new business through referral because chances are they are one of those MSPs that constitute the 96% that can never scale beyond 10 people. What kind of reputation do they have? Is their culture more technical than sales? Are your cultures compatible?

There’s a whole raft of stuff. In the book we have 14 key questions to ask before you take on a partner. And I think you have to really understand that you are never more or less important than your partner. Partnership is about helping both sides get better. But I don’t think a lot of partnerships are like that. I think a lot of partnerships are very one-sided and the vendor will often treat the partner as if they’re the second class citizen in the marriage.

Louis:   Yeah, I worked with a partner one time who just did not trust the vendor and wouldn’t tell them about new opportunities because they were afraid that the vendor was sharing it with other partners. I thought it was a terrible position to be in to not trust the vendor, and what it meant for the partner was that they didn’t get leads from the vendor because they weren’t providing intelligence back to the vendor.

Marcus:           Well, this is where it becomes really interesting. If the partner manager, the general manager works with the partner, you don’t really need to know the ins and outs and the details. You provide the relevant tools and you understand how to sell. You can anonymize the name of the prospect or the customer, and you can work with them until you build up enough trust. And what you’re really interested in is what’s new in the pipeline. What’s advanced, what hasn’t, why not? What can you do over the next week in order to move forward or get out, if that’s appropriate? What have you lost, what lessons have you learnt, are there any roadblocks?

Now those are generic questions, it can be just referenced to a name or a color or something else. It doesn’t have to be the full detail. But if you’re really going to be a partner then there has to be trust and that will only come through your actions. That will only come through time. And if you look at the average age of an MSP they’re 58, they’re savvy, they’ve been around the block, they need to know that the person who’s coming in has their best interests at heart. What’s really interesting is the research on this is very telling. At the beginning of 2018, 30% of MSP owners, average age 58, wanted to exit their business. By the end it was 70%. Now that has to tell you something about the frustration that a lot of partners are going through at the moment because their margins have gone down. You’ve got the shadow channel kicking in. You’ve got move to marketplaces. The average for MSPs, their gross margin is 17% at the moment. That’s shocking. That’s barely breakeven. So it’s to help them make money.

Louis:   So what about the vendor direct sales force and the partner sales force collaborating on major accounts. Do you see that happening in the enterprise space much?

Marcus:           I don’t see it happening. I think it should, I definitely think it should. You know, you’ve got some of the bigger vendors where, again, where it goes horribly wrong is because of the legacy. So I’m thinking of one big software vendor at the moment, and they have an enterprise sales team. They only get paid if their professional services people implement. They claim that they want to be a channel business and they want to move into the SME space, but they’re trying to get the big end of the SME space. So these are still enterprise sales, you know they’re complex, they’re big ticket, they’re half a million, million, 3 million plus. And the problem is that if you’re culturally set up to be in direct competition and conflict with your partners, no wonder it doesn’t work.

Louis:   Yeah, for sure. So thank you for talking with us today Marcus.  It’s all been very interesting, you have a podcast as well.

Marcus:           I do it’s called TheInquisitor Podcast, it’s over on Podbean and iTunes, and I’m very much looking forward to interviewing you.

Louis:   Yeah, would love to talk to you about my Bullseye Marketing book. And as I said, in the sports world it’s what’s called a home and away kind of game. So how can, aside from your podcast, how can people reach out to you and find out more about you and about what you’re doing.

Marcus:           The best place is LinkedIn; I’m very prolific on LinkedIn. I’ve got well over 400 articles, 400 videos. I’ve got thousands of short posts. I’m constantly posting around the channel. So LinkedIn, so it’s Marcus Cauchi. Just look me up on there, and mention Louis’ name and I’ll connect with you. The other way you can contact me is through my website, which is southeast.sandler.com or email me at mcauchi@sandler.com.

Louis:   All right, terrific. So thank you. And if you’re listening to this on Apple Podcasts or another App, and you found the podcast interesting and useful, please leave a review, that will help other people learn about it too. And thank you for listening to this podcast and please subscribe and listen to future episodes.