Lexmark Set To Bounce Back, With Partners' Help
The result: Lexmark is in the middle of bouncing back from several tough quarters in 2006 and is working to strengthen its incentives for channel partners who have helped strengthen the Lexington, Ky.-based company's brand and standing.
"We're pretty jazzed about 2007," said Sharon Brindley, vice president of U.S. channels at Lexmark. "Really, it kind of boils down to taking last year and listening to what our partners told us and what they liked and didn't like about our programs."
This prompted a significant revamping of the company's channel compensation structure.
Last year, Lexmark's Profit Plus channel program called for solution providers to win rebates of as much as 10 percent, in addition to providing Gold, Silver and Elite tiers depending on sales volume and other criteria. Solution providers who sold into Lexmark's own targeted accounts did not qualify for rebates on those sales.
In 2007, Lexmark is wiping out its tiered structure of partner programs, eliminating the $5,000 minimum sales requirement for spifs, increasing availability of demo hardware and opening up 2,000 direct accounts to solution providers. The vendor also is providing for rebates in its Profit Plus program of up to 12 percent in some situations. And solution providers who sell into Lexmark's previously targeted accounts now will get the same rebates as all other accounts.
"The main thought is, we are investing in you as our partners," Brindley said. "We added a lot of our accounts—our targeted accounts, areas within our direct team—that we'd like to grow with our partners. This is the first time we've done this."
The company also is providing some new incentives under a Profits in Printing umbrella, including additional demonstration units for solution providers and "custom" MDFs for some partners.
Last year was a challenging one for Lexmark. After disappointing Wall Street with several of its quarterly earnings, company executives said they began to see steep declines in the amount of products it sold as an OEM to other vendors. In particular, one of Lexmark's biggest OEM customers has been Dell. The Round Rock, Texas-based direct sales company has seen a precipitous decline in its revenue and profit over the past year.
Under that backdrop, Lexmark's executives promised investors and analysts that they would make aggressive moves to begin emphasizing their own Lexmark-branded products. And with the company's deep reliance on its channel, that meant reinvigorating solution providers behind higher-end hardware, custom vertical solutions and co-marketing efforts to boost the Lexmark name.
Toward the end of last year, those efforts began to payoff as the company once again began meeting and exceeding Wall Street expectations. Lexmark also said that, at the same time, industrywide pricing pressures that had impacted business for some time had begun to appear more benign—welcome news for both the vendor and its partners.
"I look at Lexmark's programs as one of the best in the business," said John Giustiniani, director of sales at Florida Micro, a Boca Raton, Fla.-based solution provider. Specifically, he said the new rebate model Lexmark is rolling out could measurably boost margins in many sales engagements. On Lexmark's plan to open up direct accounts to channel partners, Giustiniani said he was unsure how that might affect his business.
For example, Florida Micro sells into some education accounts in Kentucky—an area where Lexmark has maintained a direct sales presence. "Is that going to open up to me?" Giustiniani asked. "They have quite a few direct accounts. Are those going to be transferred to me? We'll see how that pans out."
Mike Hicks, acting sales manager at Electronic Business Machines, a solution provider also based in Lexington, said he was optimistic about the new relationship between the channel and Lexmark's direct organization.
"I really like the idea," Hicks said. "Now I have the opportunity to work with the direct [sales] reps. We're a small reseller. To go into large corporate accounts—three-hundred employees and up—to have the manufacturer's rep working with you is going to be very strategically important. Both sides can bring things to the table."
Even though Lexmark is opening up its 2,000 large accounts to channel partners, the company still sees opportunity with its solution providers to grow sales in what it calls the "open market," largely small or midsize businesses. A key part of that has been building brand awareness in the form of marketing and advertising campaigns initiated by the company last year.
John Linton, Lexmark's vice president of solution provider channels, said the new channel structure as well as the company's broad product lineup could be an advantage.
"We're very strongly positioned to capture that space with our partners," Linton said. "We're doing more demand generation than we ever have. We really think we're well-positioned to grow that. We've got a good partner set lined up for it."
Brindley and Linton declined to offer up any specifics as to where Lexmark would take its product line this year, but noted the company did bring several new MFPs to market last year. The vendor traditionally has several major product announcements a year in addition to those in other areas, like managed service offerings, which it has begun to roll out to certified solution providers.