An excerpt from the forthcoming book “Organizing and Managing Insanely Great Products” by David Fradin with RN Prasad.
How to Organize Roles Focused on Partnerships and Alliances
In this section, I discuss distribution channels, partners, affiliates and pricing strategy.
The objective of using distribution channels, partners, and affiliates is to meet these customers’ needs and reach the customers otherwise difficult to reach, and they add product value with such things as support and service.
A “distribution channel” would be like a retail store selling your products. The products might be sold directly to the store or to a distributor who in turn sells to the store. In this case, the distributor usually pays for the product at a discount, takes title to it, and then sells it at a higher price to the retailer. The profit margins could range from twenty to as much as 60%.
Another channel might be through the use of a “manufacturer’s representative or rep.” The rep sells the product to the retailer and sometimes the distributor in exchange for a commission. Those commissions could range from a few percents up to 20%.
A “partner” is likely to be technical in nature and contributes their expertise or specialization. They also may be called value-added resellers or systems integrators. Hewlett-Packard Enterprises (HPE) is an example of such a partner for Cisco’s networking products.
The channel might already have market credibility and existing customers, making it easy to sell, support, and service your product to that market. They might have already reached into a new or adjoining market that you would like to go.
An affiliate channel makes money off a referral fee. Amazon, for example, has affiliates that show up on the web with a link having a hidden referral or affiliate link. So if you click on that link on a web site for a book, the affiliate gets a commission if the book is purchased.
Channels may depend on the company’s or product’s maturity, competition, geography, culture, industry, pricing, and customer size. HPE, for example, sells only to very large customers directly and not small companies. Or they might have different sales forces to address the different needs of the customers.
Given the factors outlined above, a product success management organization might have some people focused just on the channel or have all managers handle their own product’s channel. They might also have some specialists by territory, culture, pricing strategy, and customer size.
The key is to have readily available experience and specialization when needed and not spreading the time and effort of the product success manager too thinly.