Loyalty: Not Just For the Dogs

If you want loyalty, buy a dog. It's an old adage that the average cynic carries around with him regarding fidelity--in business or in day-to-day life in general.

Maybe I'm a cockeyed optimist, but that saying always struck me as rather offensive, because I do believe that businesspeople--including those in the IT channel--strive to be loyal to their customers and partners. It's just so difficult today for any one manufacturer to generate consistent loyalty in the marketplace. The pressures are obvious: competitive threats, rapidly changing markets, a product that has run its course.

But the vendors are trying, and now I have facts to back up my claim. This year, we've added some questions pertaining to loyalty to the VARBusiness Annual Report Card (ARC) survey, which aims to measure solution-provider satisfaction.

For nearly two decades, we've been measuring partner satisfaction by asking VARs questions about vendors' products, their partner programs and their ability to support partners on the technical, sales and marketing fronts. A few years ago, we tried to find a link between satisfaction and a solution provider's propensity to sell a particular brand. We found some connection, of course, but there was obviously something else at work. Sometimes a VAR was wildly satisfied with a particular vendor whose product wasn't a best-seller. On the flip side, some VARs gave low satisfaction scores to the vendors of their best-selling brands but yet remained loyal to them.

So we started working with Bain and Co., a consultancy, and examined the work of analyst Fred Reichheld, who has been studying the idea of loyalty to see how influential it is in driving long-term incremental sales.

In our latest ARC survey, we asked more than 6,000 solution providers four basic questions tied to loyalty: Would you proactively recommend the vendor's product to a customer? What's the likelihood you would recommend the product to a peer/friend? What's the likelihood you'll remain a partner of the vendor? And does the company deserve your loyalty?

What do the results tell us? For one, vendors shouldn't rush out and craft "loyalty" programs, confusing loyal partners with frequent buyers. That's not what we're talking about here. Loyalty goes much deeper than that. The vendors that have been cultivating relationships with their partners over the course of years are the ones that get the highest ratings. So the challenge for, say, Lexmark or Ricoh, which compete against Hewlett-Packard (whose loyalty scores were high) is to continue recruiting new partners while focusing on ways to keep longtime partners onboard. Focusing on price cuts or spiffs isn't the answer, but it may require investments in the people who manage a vendor's partner network. Nothing speaks more loudly about a company's commitment to the channel than rewarding and empowering the individuals who manage those partnerships.

Let's look at some loyalty score results to see if they pass the "sniff" test.

In Mobile Computers, it's no surprise that Gateway (where Arrow's Ed Coleman is taking over as CEO) received the lowest loyalty score, or that HP got the highest. On the other hand, it may be surprising that partners of powerhouses Sun Microsystems (Entry-Level Servers, Midrange Servers and Network Storage) and 3Com (Data Networking, VoIP/Voice Communications and Business-Class Wireless LANs) said the vendors don't deserve their loyalty, but neither company should give up hope. They'll just have to work harder to instill loyalty in their partners. Even software giant Microsoft is struggling for its partners' loyalty. The vendor lost to IBM in two categories--Data and Information Management Software and Infrastructure and Integration Software--and to Oracle in Business Software.

In Security Appliances, SonicWall may not be the biggest IT vendor, but its partners gave it the survey's highest score in "likelihood to remain a partner."

So, where does all of this lead us? Certainly not to the pet store for a pooch. Loyalty may not be fully understood just yet, but solution providers clearly have pledged their allegiance to vendors willing to invest in them for the long haul.

Check out the next issue of VARBusiness (Oct. 16) for the results and analysis of our latest ARC survey.

To whom are you loyal? Let me know.

Robert C. DeMarzo is vice president/publisher of VARBusiness and GovernmentVAR magazines.