This article provides an in-depth look at a value-based channel management model at Cisco Systems for managing the Value-Add Reseller (VAR) channel. In March 2001, Cisco initiated a change from a volume-based channel management model, which had been driving out partner value, to a value-based model that tied channel rewards to specific channel value-add activities. Critical components of this new model include: identifying opportunities for channel value-add; architecting channel programs to enable channel value-add; tying financial rewards to value-add channel activities including a “holdback system;” and exercising significant discipline to manage field pressures for volume-based rewards and diluting certification requirements. It demonstrates that VARs can serve as a significant sales channel, profitably selling complex solutions to satisfied customers under a value added channel management framework. They can also uncover demand opportunities that are incremental to the pull marketing of even a strong brand like Cisco. However, companies need to exercise significant discipline to avoid mixing volume-based rewards with a value-based framework.
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