In my last post we discussed ways to maximize your sales via the OEM distribution channel. In this article we’ll look at three ways that you can increase your channel sales (i.e., retail, VAR) through leveraging the OEM software distribution model.

For some companies. their only distribution channel is OEM.  But  many companies, depending on their strategy, utilize multiple distribution channels, the principle ones being the two tiered distribution channel (i.e., “the channel”), direct sales and OEM.  At some juncture discussions about channel conflict will arise.  For instance, if we’re selling our XYZ product direct, what will resellers say when they lose sales to our own sales reps?  Likewise, if we’re OEMing our XYZ product, i.e., selling it at a sharp discount and distributing it through a partner’s product/distrubution channel, will that sale result in a lost sale at retail?

Invariably these questions will arise, and answers can be found through a number of ways, including close monitoring of sell through reports.  

If you are distributing, or are considering distributing, one or more of your products through the OEM channel, there is likely a good reason for it.  That said, it pays to look at your channel strategy in total and try and maximize each channel as well as the sum of all of your channels.

Here are three ways to increase not only your OEM sales, but retail sales at the same time.  

1) Offer the end user a simple and compelling upgrade/cross-grade path to drive incremental revenue.  The upgrade could either be fulfilled by you, with a potential revenue share to your OEM partner, or fulfilled by your OEM partner.  One example would be Corel’s Painter (TM) product.  Corel bundles and entry version of this product, Painter (TM) Essentials with various partners and allows the end users to get a discount when they purchase the full version of Painter (TM).

2) Include a try & die version with a bundle partner (with the same fulfillment options as above), or better yet, bundle a paid version of your product, but on the same disc have a second product that is a try & die version.  Typically these try and die versions give end users 30 days to try it, they can then purchase an unlock code either through the OEM or the manufacturer.  In many companies, the OEM revenue goes in one bucket, why the “upgrade” or “upsell” revenue, could be considered a “retail” sale.  Obviously, this depends on your company’s accounting practices.  In the case of Corel, as an example, they could decide to include a try & die version of CorelDRAW® with their  Painter (TM) Essentials OEM product.

3) Do an in-box promotion for one of your products that is only sold at retail.  One advantage of distributing through OEMs is achieving broad distribution that you otherwise would be unlikely to achieve.  Sticking to the examples above, Corel could decide to provide a special offer to Painter (TM) Essentials users.  For example, users could take a coupon into a retail store and get a discount off of a higher end product, such as CorelDRAW® or one of their other graphics products.  The coupon could also be redeemed online.

The above are only a few examples of ways you can distribute through the OEM channel and still allow your other sales channels to flourish.

Stay tuned for more informative articles on how to maximize your sales through the OEM channel.  And as always, I welcome your comments and questions.

Bruce Chandler

www.mbrucechandler.com

 

www.brucechandler.wordpress.com

 

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Are you maximizing your software sales via the OEM channel?  

As ISVs are aware, there are several keychannels for selling your software.  Depending on the type of products you manufacture and the markets they sell into,  the OEM channel can be a key channel for distributing your software.  However, several questions may arise when discussing your overall distribution strategy. 

Should I OEM, and if so, what are the advantages?  Disadvantages? What is the potential for channel conflict?  How do I go about finding partners?  Can I leverage other sales  through the OEM channel?  I can help you answer these and other important questions and ensure your success in the OEM channel. 

 Let’s take the above questions, in order.

 Should I OEM, and if so, what are the advantages?

 Obviously much of this will be dictated by your corporate or business unit strategy.  Adobe OEM’d software with pricing starting at “free” and going up to over $100/unit.  The goal for freeware might be to expand marketshare, while there can clearly be a profit center around higher priced OEM software.For example, if one of your goals is proliferation, you might be able to gain market share against a competitor by strategically bundling your application with another pieceof hardware, or software.  A key advantage in this type of scenario is that the partneryou choose to bundle with may be able to get you into a  market that would normallybe either difficult or impossible to get into.  In Adobe’s case, if you look at PostScriptlicensing as an example, it would be difficult for Adobe to sell PostScript directly to customers, because this software is typically customized and highly dependent on the hardware it’s tied to.  PostScript printer manufacturers, therefore, are a likely bundle candidate.

 What are the disadvantages?

 Again, this is highly dependent on your company’s goals and situation.  Let’s look atbundling digital imaging software as one example. Adobe bundles their mid-level digitalimaging software, Photoshop Elements, with many different devices including scannersand digital cameras.  If they feel they are losing money by bundling with varioushardware devices (bundling prices are typically lower than channel prices) then theywould not do so.  One caveat is that they might continue to bundle if they felt thatsome other strategic objectives were being met that outweighed any potential lossin profits that occurred through bundling.

 What is the potential for channel conflict?

 This of course is highly dependent, again, on your company’s channel stratey andspecific situation.  In some instances, channel conflict could be very high.  Forexample, you will find few, if any, imaging scanners bundled with the full version ofPhotoshop.  Photoshop sells for several hundred dollars at retail.  Discounted versionsof this product could negatively impact channel sales.  Coversely, if you look at asituation such as a new mobile phone application in start-up mode, if you don’t alreadyhave an existing channel, putting together a bundle deal with a handset manufacturercould be the perfect way to get your product/company launched.

 How do I go about finding partners?

 First, I would recommend hiring an experienced OEM software salesperson or consultant to help guide you.  Part of the process of finding partners will relate back to your industry.  If you developmobile applications, then the handset manufacturers (Samsung, RIM, Sony, etc.) areobvious choices.  But what about the possibility of bundling your app with anothersoftware manufacturer?  Sources for finding partners to bundle with include yoursales staff, existing distributors (in some cases), executive staff, tradeshow andindustry contacts, to mention a few.  It is likely you will find some obvious partners, as in the case above, and some less obvious partners that may only be uncovered through dedicated prospecting.

Can I leverage other sales through the OEM channel?

 The answer is: Yes.  How is this achieved?  There are several ways.  One is based around an “upsell” model.  For example, let’s say you develop handwriting recognitionsoftware and have 3 different versions available, an entry level, mid-level and professional version.  You might consider bundling your entry level version with acomputer manufacturer, and offering an “upsell” to a higher end version, either throughyour partner or direct (more on that in a later article).

I hope you found the above info useful in helping you decide whether or not to utilize the OEM channel as part of your overall software distribution strategy.

Stay tuned for more informative articles, and feel free to visit me at mbrucechandler.com for more articles and information on how to succeed in the OEM Channel.

 Bruce Chandler

bruce@mbchandler.com

www.mbrucechandler.com

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