Rob Brewster, SVP Business Development at Eloqua explained in a blog post that The Pedowitz Group’s decision to partner with some of Eloqua’s competitors jeopardized Eloqua’s IP (Intellectual Property) and caused Eloqua to make the change.

Steve Woods, CTO of Eloqua, in an online discussion noted that the transparency and clarity of reseller partnerships was critical to Eloqua in meeting customer needs.   To ensure this, Eloqua requires exclusive  relationships with resellers.

The Pedowitz Group (TPG) stated in a press release that by representing multiple marketing automation vendors, TPG is best serving its customers.   Marketo, one of TPG’s marketing automation vendors, supported TPG’s position on the exclusivity issue in this blog post by Marketo CEO, Phil Fernandez.

VARs are led by entrepreneurs with a high tolerance for risk.

Is a VAR who is exclusive with a vendor exposed to excessive business risk?

Too few customers or too few suppliers can create undue risk for a VAR.    A VAR may choose an exclusive relationship with a vendor due to the deep technical requirements on a vendor’s solution that necessitate specialization or the attractive rewards that vendors provide to a VAR in exchange for exclusivity.

However a number of significant events may jeopardize a relationship between a vendor and a VAR.    In extreme cases, this could destabilize a VAR’s business:

A Falling Out

Leaders at VARs can often be described as ‘big personalities’ that don’t fit the corporate mold.

Emotional friction can be caused when the parties approach the business differently: where small business (i.e. the VAR) is collaborating with large business (i.e. the vendor) in selling to large business (i.e. the mid-market or enterprise market).

The Pedowitz Group (TPG lost) is run by a former Eloqua executive and is Eloqua’snumber one reseller, yet the relationship was terminated by Eloqua.    Although I have no insight as to the decision on either side, I suspect that that the issues ran deeper than IP and exclusivity.

The consequences for TPG could have been disastrous should TPG not also have reselling relationships with two other marketing automation vendors.

A Vendor Sells Direct

A vendor may change the mix of direct sales to channel sales.    For example, a vendor may have sold 100% through VARs but determines that enterprise accounts are being under-served.   A vendor may then ‘take-back’ enterprise accounts leaving VARs with only SMB accounts.

In economic downturns, vendors hungry for margin have been observed to increase direct sales.

A Vendor is Taken Over or Bankrupt

If a technology vendor is taken over, a VAR may find that the acquirer has a different go-to-market strategy of selling through the channel.

For example, after Oracle acquired Sun it was announced that Oracle was expanding its direct sales force and affirmed its preference for direct sales.  

In the marketing automation space, Market2Lead was aquired by Oracle earlier this year.

A Vendor launches a Cloud Solution

The Cloud Computing model changes the relationship that VARs have with vendors and customers.  

The lower risk associated with subscription sales and freemium models, creates a unique sales model for cloud solutions (read more on my recent blog post).

From inquiry to close to solution provisioning to renewal, vendors play a larger role and VARs will no longer provide on-site installation services.     Vendors, given their closer customer relationship will have greater customer insight and ownership. 

What is your opinion:  what are the pros and cons of  reseller exclusivity?

Note: Direct Impact Marketing is a reseller (VAR) of lead generation solutions and is currently evaluating marketing automation solutions.

Photo Credit

I just returned from the Sales 2.0 Conference in San Francisco. 

I was stationed at the bloggers table with Geoffrey James, amongst others.   For a great recap of the event and some candid comments, check out Geoffrey’s posts on the Sales Machine blog.

Jim Fisher, Director Sales Effectiveness at Bluewolf, a Cloud Computing consulting organization, spoke at the Conference on how Bluewolf targets their market.

Unlike Bluewolf, most organizations define their market based on industry, size of organization and geography.

Bluewolf selects their customers based on their approach to embracing innovation.   Two of the criteria are notable:

• Prospects who are willing to evolve and embrace a vision.
• Prospects whose culture embraces experimentation and accepts constant change.

That prompted me to ask the question of Jim:

What you have described is an early adopter market that is traditionally a narrow slice of the market.    Is this segment sizable enough to meet Bluewolf’s requirements?

Jim responded that Bluewolf has more than enough target accounts to pursue.

What does this imply about technology adoption and where innovative, Cloud applications (aka Sales 2.0 tools) fall on the bell curve?

It has been almost 50 years since Diffusion of Innovations was published by Everett Rogers and just shy of 20 years since Geoffrey Moore adapted this thinking around innovations to disruptive technology adoption with the release of his book Crossing the Chasm – the revered tome of tech marketers.

BlueWolf’s target prospects seem like visionaries: early adopters who take risks on a new-to-market solution and unlike the pragmatists of the early majority, do not demand customer references or proven ROI in their evaluation.

What are your thoughts on the subject?

1. Have Sales 2.0 tools crossed the chasm to the stage of the early majority?
2. Do these low risk, user-friendly tools accelerate the adoption of technology?
3. Similarly, have these tools changed the shape of the bell curve by enlarging the size of the early adopter phase?

Like a digital smoke signal picked up the watchful eyes of social media monitors, I would like to invite the folks listed below to weigh in on these questions.

Over the past year at the Sales 2.0 Conferences, I have had some great discussions with each (sorry if I missed anyone):

• Gerhard Gschwandtner, Selling Power
• Jim Dickie, CSO Insights
• Barry Trailer, CSO Insights
• Laura Ramos, Forrester Research
• Scott Santucci, Forrester Research
• Joe Galvin, SiriusDecisions
• Umberto Milletti, InsideView
• Garth Moulton, Jigsaw
• Peter Poulin, Hoovers
• David Thompson, Genius
• Anneke Seley, PhoneWorks
• Trish Bertuzzi, The Bridge Group
• Pelin Wood Thorogood, The Aegean Group
• Mac McIntosh, Mac McIntosh Inc.
• Miles Austin, Fill the Funnel
• Nigel Edelshain, Sales 2.0 LLC
• Jeb Castelein, LeadSloth

Further Reading:

• IDC Sees Clouds Crossing the Chasm
• Sales Enablement Tools Make the Selling Simpler
• Sales Enablement in a Sales 2.0 World