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Agents and Influencers: The Same Yet Different
By Diane Krakora
These two types of partnerships are so often discussed in the same breath, that one begins to wonder, aren't they really the same? Close, but not exactly. The differences between agents and influencers is often overlooked when developing programs – however there is a difference in how they are motivated that must be taken into consideration. From Dictionary.com:
Influence: the power to sway or affect based on prestige, wealth, ability or position.
Agent: One empowered to act for or represent another.
For our purposes of creating indirect channels to target end-customers Agents are typically individuals or companies connected to a vendor, who does not take title but sells products and services. Think of State Farm Insurance for a quick example of the agent model. In high technology, these agents are typically solution providers serving SMB customers with a mixed product and services model. These are specialists that lead with particular vendors' products, but aren't high volume players and thus can't compete with a typical reseller. Vendors engage agents to drive demand – typically fulfillment is either directly from the vendor or from another reseller partners. Through educating and empowering agents, vendors hope to reach markets untapped by their direct and reseller channels. Agents are paid a commission on their sales (they have to close the business) – for example, 10 – 15 percent for new customers, 8 – 10 percent for additional business within a customer and 5 percent for renewal business. The agent model allows vendors to alter the commission structure or enhance the agents earnings with additional incentives for a specific product focus, like a new product launch, specific timing, like year end close or around specific promotions, such as a new solutions bundle.
Market and competitive factors are challenging companies engage partners in innovative ways. And thus more companies are focusing on partners that influence sales by developing agent programs to reward demand generation. We see two factors driving a shift towards influencer and agent programs. The first is a move from shrink-wrapped off the shelf software to a subscription license model. A software license model emphasizes selling a long-term customer (2-year subscription is standard in the industry). The old packaged software model rewarded the delivery and installation of the product. Increasingly, software products are simply downloaded over the web. So with the growth of licensing models channel compensation has focused on selling and managing customers rather than handling transactions. Declining margins is the second factor contributing to the interest in influencer and agent programs. As products become commodities and margins decline, channel partners are changing their business models to focus on services and new, higher margin emerging technologies.
To continue to drive new business generation, innovative companies like Cisco develop agent models to encourage resellers to recommend and sell Cisco technology. The Cisco e-Agent program improves a partner's bottom line indirectly by introducing new efficiency measures to the sales fulfillment and fee collection processes. In the model, the partner creates the demand for the product directing the customer to order directly from the Cisco web site, indicating the partner they are working with. The partner earns an agency fee in lieu of margin. The distributor drop ships the product directly to end customer. This agent program allows partners to take the resale off their books and receive a fee for the hardware sale. This model also allows the partner to focus on its value-added services instead of tying up resources in hardware inventory and managing receivables, which are lower margin businesses than network architecture design services. Thus, Cisco's partners do not have to compromise their services-based business model by passing lower-margin hardware through their books. Cisco's own efficiency also benefits considerably from this totally web-based process.
A company's complete go-to-market strategy should include several channels to end-users, including direct, OEM, resellers, influencers and agents. The goal of all influencer and agent programs is to reach target end-user customers through the channels they engage for advice and consulting services. Thus the influencer and agent programs should be consistent with the reseller channel programs. So, in building an influencer or agent program, we start by aligning customer needs and preferences with the channel partner type. We examine how different segments of end customers, from enterprises, to mid-size companies to small businesses and individuals, learn about technologies and products and who their
About the Author
Diane Krakora is President & CEO of Amazon Consulting, consulting firm based in Silicon Valley, dedicated to helping high tech clients increase profitability by effectively developing and leveraging partners. For more information on Amazon Consulting, please visit http://www.amazonconsulting.com.
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