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“Channels Channels of the Future Future” ” Using Social Media and Virtual Communities to Improve Channel Communications and Productivity

White Paper Partner Execution

Why resellers need to establish a customer presence using next generation social media tools and how vendors can empower their partners to build successful virtual communities.

Gilwell Group, LLC Silicon Valley 925-855-0678 www.gilwellgroup.com

© Gilwell Group, LLC. 2008


Using Social Media and Virtual Communities to Improve Channel Communications and Productivity Executive Summary The buying behavior of consumers and corporate buyers has changed substantially over the past five years as a result of Web 2.0 social media advances. Salespeople and their sales presentations are being replaced by the world wide web as the primary source of information leading up to a sales transaction. The end end-user education process now most commonly involves virtual networking and peer group education through blogs, forums and online communities. Salespeople (reseller and vendor) are increasingly isolated from their customers and the traditional person-to-person person sales “funnel” process has been irrevocably altered. As a result, resellers (and their ven vendors) dors) must increasingly have a strong “Social Media” presence in order to stay connected with their customers as purchase decisions are made. Virtual or online communities are now proliferating at all levels of the value chain, but especially involving end-user user customers. Vendors must help form these communities or risk being further isolated from end user purchasers and their channel partners. Enabling this transition are more than 100 suppliers providing social media tools and/or branded community platforms to an increasingly diverse group of vendors and their channel partners. According to eMarketeer, advertisers spent $920 million on communities in 2007 and are projected to spend more than $1.6 Billion in 2008. Already, more tthan han 500 virtual communities professionally connecting resellers with their end end-user user customers have already been built and many more are being planned. There are good reasons for this fast adoption. Individually designed and branded professional communities ies give channel partners an ability to provide valuable informational services to their customers in a very cost effective manner. Before, during, and after a purchase, users can meet, discuss, learn and exchange ideas in a virtual and non non-threatening threatening community co environment. They can express their interest in new products, solicit answers to their questions, seek collaborative problem-solving solving forums, contribute content of interest, and become more relevant among their peers. Often, no salespeople are invol involved ved in the interaction at all. In return, online communities help channel partners learn from their customers. Resellers can gain a deeper insight into the needs of their market by monitoring the activity in their communities. Channel partners also benef benefit it from engaged community members that can be powerful advocates for the reseller (and their vendors). All of this is done under the watchful eye of a “community director” employed by the reseller. Vendors must be involved in the development of these end u user ser communities because every e successful community can become an important venue for advertising, marketing messages, and even sales transactions. Those vendors who hesitate run the risk that their competitors may take control of this virtual “real estate” more quickly -- and control it forever. Therefore, vendors who encourage their resellers to move forward and establish their own communities now may realize a significant “first movers” advantage. (A customer who is happily engaged in their reseller’s community will be less willing to jump ship and engage with a newer community and vendor down the road.)

© Gilwell Group, LLC. 2008

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Using Social Media and Virtual Communities to Improve Channel Communications and Productivity Technology vendors must adapt their channel programs iin n response to the availability of Web 2.0 tools and technologies,, especially Social Media Media. Social Networking is as old as civilization. It involves the sharing of information among friends and acquaintances in order to socialize, discuss topics of inter interest, est, reduce risks, and make more informed decisions. Social Media is how the internet has changed social networking. It includes the use of Web 2.0 tools like blogs, wikis, video file sharing, and social networking sites like Facebook to expand the reac reach h of social networking and more effectively capture and share relevant information. Virtual Communities combine many social media capabilities in one secure place to facilitate communications, collaboration, and networkin networking g for social, educational, or business purposes to improve the condition of the individual and the group. (Matt Goddard, R2i.ntegrated.com) Reselling organizations in all industries should be encouraged to build Virtual Communities in order to revitalize their business, provide an attract attractive ive service to their customers, and enable an important channel for their vendors.

Channel Sales Organizations & Next Generation Social Media Web 2.0 powered social media engagements in the form of virtual communities can help dealers, solution providers, system integrators and distributors reduce expenses, increase customer satisfaction, and revitalize sales within their installed base of dormant customers.

A Shift In Buying Behavior: As recently as five years ago, technology consumers typically educated tthemselves hemselves about the products they needed to purchase by reading reports from industry experts, arranging onsite demonstrations, or listening to their sales reps. Vendors created and provided the majority of the information. Meetings with salespeople (eit (either her direct or indirect) were common and frequent. Even though customers might eventually purchase from a surprising source (e.g. an online storefront for a lower price), many sales people from different organizations at least had the opportunity to offer differentiated, value-added added services and win the business most of the time. Today, small consumers and large corporate buyers collect much of their information through “Social Media” sources before reseller sales people even become involved. Instead of scheduling cheduling a product pitch from their reseller (or vendor), end end-user user customers now check forums, read blogs, and connect with peers through social networks. They also participate in virtual communities to get important product reviews and recommendations. When a decision is eventually made, the customer then contacts a reseller (or vendor) to make the purchase – at the lowest price mentioned online. This kind of information sharing is a typical use of Social Media tools being increasingly popularized in the technology market due to the efforts of vendors like MySpace (200+ million users and 230,000 new users a day), LinkedIn (30 million users), Plaxo (20 million), and several others. In the past two years, more than 100 companies have entered the market to provide Web 2.0 social media services (communities) aimed at improving business networking and communications at all levels of the value chain (vendor, wholesales, reseller, and end user). This shift in customer referencing and buying behaviors has chan changed ged the way resellers (and vendors) need to manage their business in order to stay informed about changing customer needs. For example, according to the sales manager of a large electronics retail distributor © Gilwell Group, LLC. 2008

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“Customers now come into our store and ask for very specific brands and product types by name. They can tell us that model A A-12 is better than model B-12 12 for their situation because they participate in forums with similar companies and by reading the blogs of experienced users.” This wholesaler assigned gned people to study the forums, groups, and blogs of their target customers and to participate in their virtual communities. As a result, the wholesaler modified their inventory practices and in-house sales training programs. Profitabilit rofitability has grown by almost 10%. And because their manufacturers had no comparable customer information, the wholesaler began selling information back to their vendors. (Reported by Xeequa,, an online community supplier supplier.)

The Emergence of Virtual Communities In addition to the millions of blogs and wikis available to resellers and end end-user user customers, there are thousands of groups and forums where people educate themselves about products and technologies. Customers, therefore, must search out required information ion from a variety of sources in many locations.. During this process, they can occasionally collect contradictory or questionable information from anonymous and unverifiable online contributors. Rather than forcing users to visit a blog here, a group the there re and a forum at yet another URL, virtual communities put everything in one place. Participants can monitor the discussions, read white papers and product literature, solicit information, and even ask specific technical questions. Information sources ar are e obvious and more easily verifiable. Active community participants can even gain an understanding of which community members provide the best, most relevant, and dependable information over time. The use of “white box” community development platforms pro provides vides an easy and inexpensive way to build new communities quickly. There are several community vendors that can provide a social media template and help any organization launch a functioning branded community in a matter of days or even hours. Within the technology logy value chain, several layers of communities are being formed. •

End-user user Communities managed by resellers

Reseller Communities managed by vendors

Channel marketing/sales communities managed by vendor management

Comprehensive market communities managed by vendors or trade associations

From the community organizer’s perspective, these communities all have common and important objectives: increase revenue, reduce costs (improve productivity), and improve customer satisfaction. Not all communities are successful ccessful at meeting the needs of participants. In fact, many early communities have been indiscriminately created without a central focus, still have low trust levels among participants, and have never achieved the results envisioned by their the creators. This is lack of universal success has caused many potential business sponsors to hesitate or reevaluate their use of virtual communities with channel partners. However, hesitation and over over-analysis might be a huge mistake for vendors.. The community model of collaborative communications has proven itself to be extremely effective when implemented in the correct environment with a cohesive group of participants. Moreover, the technology to link communities together and improve shared communications will advance and the quality lity of the content will increase as “alpha” contributors syndicate their specialized knowledge across a wider audience of participants in linked communities. Eventually, Eventually users at all levels will become more familiar with the business benefits -- and the success rate of new communities is likely to rise quickly.

© Gilwell Group, LLC. 2008

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What Is A Branded Online Community? A professionally designed online community can be a branded “home” for the customers or resellers of a specific technology or product. Branded Communities include important and appropriate features, including logos, blogs, forums, events, groups, video libraries, marketing messages, member management, and comprehensive reporting tools. Branded Communities can accurately be described as next generation websites wi with th Web 2.0 collaborative tools embedded to facilitate open communications for the benefit of the group. If a branded community template is created using standard community development tools, tools it can usually be replicated thousands of times, allowing rese resellers llers and vendors to introduce these communities to an entire channel (and their customers) or market very quickly. In some cases, branded communities are technologically connected so that the “owner” (vendor or reseller) can update a blog on their master community platform and simultaneously syndicate that blog entry into all participating communities for the benefit of their registered members. The same syndication can be done with blogs, advertising, promotions, competitive information, and more. For example, Xeequa is a leading supplier of social media platforms for technology vendors. An organization can, for a small fee, create a customized branded community with trial content content. Once this first community has been tested, tested Xeequa quickly creates one copy of the community for each channel partner to use with their end-user customers. The communities (all hosted by Xeequa) are provided to the resellers, who are encouraged (compensated) by the vendor to provide their own limited customization and conten content before getting their end users registered.

What Do Branded Communities Mean For Resellers? Solution Providers, VARs, System Integrators, and Dealers should consider building, acquiring, and/or promoting branded communities as a service for their install installed ed base because these virtual communities provide a rich set of benefits to end end-user participants. -

Networking with customers that have similar needs or experiences

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Learning from each other about product usage, maintenance and other topics

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Getting answers to o questions and solving problems (more) quickly

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Making fewer mistakes on product or service purchases

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Keeping current on relevant events (conferences, exhibitions, seminars)

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Viewing pre-selected selected educational/interesting videos that are relevant to their business bus

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Staying connected with the industry as a whole

While much of this is possible with blogs, forums, or social networks, virtual communities provide them more expeditiously to users. In return for providing the community, there are a number of potentiall business benefits for the reseller: -

Lower customer support costs (faster answers to customer questions, pre and post sale)

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Reduced customer churn (increased loyalty and repeat business)

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Increased likelihood of reinvigorating “dormant” customers

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Shorter sales ales cycles (end (end-users users reference each other prior to the sale)

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Improved customer satisfaction ((often better than telephone or email contact)

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Increased understanding of customer needs, issues, and potential solutions

© Gilwell Group, LLC. 2008

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To improve their results, an n effective b branded randed community may be the least expensive yet most effective initiative a partner can undertake in 2009 – with or without the assistance of their vendors.

Vendor Branded Communities Vendors can create branded community templates and provide them to resellers, who in turn can tailor them and introduce them to their customers. In this way, vendors can influence the look and feel of the community, embed important graphics (logos and trademarks), and even collect information (transparently) about the use of the community. Vendors are showing a lot of interest in the concept of distributing and controlling professionally designed branded online communities within their channels. For partners there are advantages and disadvantages of introducing a vendor sponsored community to their customers: Advantages: -

The reseller has no cost other than the normal community management work

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The community is up and running quickly

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Content is provided by the vendor leaving less for the reseller to worry about

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A vendor may eventually invest in (expensive) added functionality

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The reseller’s eseller’s reputation may be boosted by enhanced by using a vendor-branded vendor community,, especially if the vendor is a market leader

Disadvantages: -

A reseller cannot support multiple vendor vendor-branded communities

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A vendor branded community may be biased and not attractive enough to keep end users coming back

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A vendor branded community may be a great “kick start,” but may not be a long term solution n for the specific market niche of the reseller

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The reseller gives away some marketing and monetizing opportunities

While vendors may have thousands of resellers in their channel, branded end--user communities can be provided to a targeted subset of resellers, like their largest est or fastest growing,, as a special incentive. At a different level of the value chain, branded communities for reseller participants can be embedded in the vendor’s website so that a step into the community is completely transparent to the reseller. Eventually, these vendor vendor-dominated dominated communities have the potential to replace the current partner portals, which are an increasing irritant to resellers seeking important and unbiased information quickly.

Reseller Branded Communities An alternative rnative is for resellers to develop their own branded communities. For the added cost of development, a reseller might be able to create a successful customized community and get vendors to compete for community participation and visibility. This competi competition tion might help accelerate community awareness and increase community velocity. In addition, end users might favor an independent, reseller branded community and appreciate the reseller’s effort to provide unbiased information. In most cases, a reseller can n brand their own community and let a vendor sponsor it at some level. Initially, only the most forward forward-thinking thinking vendors are likely to pay resellers a lot for sponsorship of their communities in the near term. Even so, vendors can likely increase their © Gilwell Group, LLC. 2008

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influence fluence and gain an advantage by introducing the community concept to their channel partners and incorporating it into their partnership program for top top-producing producing resellers. Resellers might also be able to monetize their own communities, creating a new source so of revenue.

Monetizing a Community It is not necessary for resellers (or vendors) to monetize a community in order to justify the expense (mostly time) of promoting and energizing a virtual community. However, virtual communities may quickly come tto o represent valuable properties to owners that can provide vendors with advertising space or marketing exposure to end end-user user customers. Being visible to a reseller’s installed base is extremely attractive to competing vendors, resellers, and alternative suppliers, ppliers, especially when a vendor wants to introduce new products or services to proven purchasers. Many community owners will eventually be in a position to sell sponsorships in the form of unobtrusive and inoffensive vendor advertising. (While overt advertising ertising in a community might alienate participants, in some cases, banner ads and similar promotions might be sold.) For example, a successful Solution Provider may spend $295/month for a professionally designed branded community and charge five vendors $$250/month 250/month each for sponsorship. The $1,250 sponsorship income offsets the cost of maintaining the community and provides an income stream for added community services. This exchange might eventually be made in the form of vendor soft dollar rebates to the reseller for specified levels of exposure and information gathered.

Conclusions Even with the business benefits for partners, not all resellers (or vendors) will embrace virtual communities immediately. Like many other aspects of the Web 2.0 transition, community building is currently a chaotic “land grab” with no clear guidelines for success. Experimentation and commitment are required. Unfortunately, there will be more failures than successes in the near term. However, with the risks, there is a huge advantage for vendors who quickly distribute branded communities and encourage their use and promotion by resellers. Once end end-users users start interacting with a useful community, controlled by a trusted supplier (their reseller), it is unlikely that they will change allegiance and try to build a new network in a community sponsored by another reseller or vendor. Vendors who decide not to provide branded communiti communities es can still provide a significant benefit to their resellers by introducing and promoting communities, even allowing marketing funds to be used for their creation and maintenance. This is an opportunity for smaller vendors to increase their profile and influence nfluence over channel partners at the expense of slower moving, larger competitors.

About Gilwell Group Gilwell Group is a distribution development firm based in Silicon Valley, California dedicated to helping companies in the technology sector increase revenue by developing and leveraging their channels and alliances. We have the experience, tools and expertise necessary to move your channel operations from good to great even as competition increases. Our focus is on the future and how new social media technologies and innovative next generation tools are changing the way products and an services are bought and nd sold. For more information, request a meeting at executivebriefing@gilwellgroup.com.

© Gilwell Group, LLC. 2008

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