Chapter 5. Satisfied Customers and Gratified Partners: Direct Touch and Leveraged Influence
“A devastating, horrible mistake.”
That’s how third-generation car dealer Randy Painter described U.S. automaker Chrysler’s decision to sever its relationship with his family’s company. After doing business together for more than 65 years, Chrysler gave Painter just three week’s notice. “This doesn’t happen in the U.S.,” he lamented to The Wall Street Journal.1
But alas it did in 2009, and not to just Painter, but to nearly 800 of Chrysler’s 3,200 other dealers, too. They were told they would be cut from the ranks of Chrysler’s channel partners as part of a last-ditch effort to save the beleaguered company. As Chrysler management saw it, the company was over-distributed in the United States—a situation that caused a lot of headaches.
Among other things, this meant too many dealers recruiting too few trained mechanics and experienced salespeople. This limited the success of each individual dealer. While Toyota sold nearly 1,300 vehicles per dealer in 2008, Chrysler sold just 303.2 And dealers struggled to distinguish themselves from one another, which led to price wars and deflated margins for all. With profits hard to come by, dealers were challenged to keep their show rooms new, their repair shops up-to-date, and their salespeople properly trained. Because of this, customer service suffered and Chrysler’s image took a beating.
While in Chapter 11 bankruptcy, Chrysler terminated hundreds of dealer contracts. The company hoped that this would help improve the overall climate for selling Chrysler products. Instead, the move turned out to be a public relations nightmare as dealers dug in their heels and turned to the government and the media for relief. Rather than eliminate one problem, Chrysler found itself staring down even more.
So much for a fresh start.
Instead of emerging from bankruptcy in June 2009 with a bold, new agenda, Chrysler found itself at odds with the dealer community—the very dealer community it needed if it were to cultivate ties with new customers and restore its image with existing ones. For a company that was already struggling with product quality, this was a significant setback.
Every business knows that having satisfied customers is fundamental to long-term success. The story of Chrysler illustrates that gratified partners are just as important.
If your company relies on dealers, retailers, resellers, or any number of third parties, then you likely understand just how true this is. Without partners, many companies would simply cease to exist. That’s especially true of those companies who have no direct sales models. Think book publishers, gasoline refineries, automotive manufacturers, and a myriad of other organizations that do not conduct business with end customers directly, but instead through a network of intermediaries. Among other benefits, these intermediaries provide geographic reach, market access, and subject matter expertise that companies lack in-house.
For all these benefits, partners are not without challenges. They can be difficult to manage, expensive to support, and hard to retain. No problem, however, is greater than balancing the opportunity for the profitability of partners with the satisfaction of customers. And companies must find a way to do both without compromising either.
The key to doing this is to think about profitability across an entire value chain and to develop mutually beneficial strategies that build loyalty among allies while prioritizing customer satisfaction.
If your company finds itself in a struggle with its business partners, as Chrysler did, then doing both might sound counter-intuitive, if not impossible. But it isn’t. A significant number of companies, from IBM to John Deere, have built loyal, dedicated followings of partners that successfully cater to end customers’ needs. IBM, for one, has maintained solid partner relationships even though its direct sales force sells many of the same IBM products to many of the same customers that its reseller partners target. How does IBM keep the peace? It avoids the abrupt policy changes, wholesale strategy shifts, and punitive or confusing restrictions that sour business relationships.
In the automobile market, there may be no better example of a company that excels at this more than Lexus. Ever since its 1989 U.S. launch, Lexus has endeavored to satisfy customers and partners both. In addition to developing some of the world’s most reliable cars, Lexus has meticulously addressed some of the most difficult issues facing both customers and dealers.
Hoping to avoid the challenges that plagued U.S. brands including Chrysler, Lexus management decided to limit the number of its dealerships in the United States to 250. This ensures maximum profitability for dealers and makes it easier for Lexus management to monitor quality standards. To date, there are approximately 230 authorized Lexus dealerships in the United States compared to roughly 1,400 for fellow luxury car-maker Cadillac. Despite the disparity, Lexus outsells its American counterpart by almost 2:1.
The substantially higher sales volume per dealer translates into greater margins for Lexus dealerships. In fact, dealership broker Sheldon Sandler says Lexus dealers enjoy higher profits per vehicle than any other mass-marketed luxury car dealer. “When you and I die, we should hope to come back as Lexus dealers,” he told Forbes magazine.3
Thanks to the profitability they achieve, Lexus dealers have become full partners in the manufacturer’s push to provide the best customer experience possible in the car industry. Lexus dealerships have installed customer-friendly features like indoor driving ranges, gourmet food counters, and even fully-functional guest offices where working professionals can hunker down while their vehicles are being serviced. And many of those investments were offset by generous contributions from Lexus back to these dealers.4
These outlays, along with ongoing investments in training, tools, and other resources, have distinguished Lexus in a crowded field. In 2009, the company again achieved the highest scores in both the J.D. Power and Associates Customer Service Index Study of dealer service5 and in the University of Michigan’s American Customer Satisfaction Index study.6
For its ability to satisfy both customers and partners, Lexus has been handsomely rewarded in the marketplace. Today, it holds the number one position in luxury car sales in the U.S. market.
Like Lexus, Cisco maintains an unwavering focus on both customer satisfaction and partner loyalty. Today, doing both is well-engrained inside the company. But this wasn’t always the case.
Going the Extra Mile
At Cisco, customers have been a part of the company’s focus since day one. In fact, it’s the stuff of legend inside the company.
Cisco Senior Vice President Joe Pinto, for one, recalls being jolted from a peaceful slumber one night by a phone call from a company security guard who caught a man breaking into one of Cisco’s engineering labs. As fate would have it, the man was a company employee who worked for Pinto in Cisco’s customer support organization. What was he doing in a locked engineering lab without authorization in the dead of night, Pinto asked? Stealing a networking card from an internal company server. The card was out of stock at the time, but the employee had promised to secure one for a customer before visiting him later that day.
“Let him go,” Pinto told the security officer, “with the card.”
From CEO John Chambers on down, Cisco has carefully and meticulously cultivated a culture that prioritizes customer interests. Take Pinto. Each quarter, he meets—and even shares his home phone number—with hundreds of customers. He often begins presentations with observations about those interactions, and personally monitors the satisfaction of customers big and small.
Pinto credits his upbringing in one of New York City’s toughest neighborhoods for giving him the skills to get along with others and defuse stressful situations.
To him, soothing customers’ concerns and focusing on their satisfaction just came naturally. He remembers one Easter Sunday, when he took a dozen calls at home and spent the entire holiday on the phone. “We treated customers like family and made sacrifice just a part of how we did things,” he says.
That work continues to this day.
Cisco invests a significant sum into measuring customer satisfaction on a daily basis. The company has gone so far as to develop a real-time, customer satisfaction dashboard that is available to the entire workforce. At the mere click of a mouse, every employee can see up-to-date satisfaction numbers for every country, product, and customer segment. Walker Research, which administers these surveys for Cisco and other technology leaders, reports that Cisco’s satisfaction level today hovers around 4.5 on a 5-point scale—well above the industry average.
To make sure that employees take these numbers seriously, Cisco ties their compensation directly to customer satisfaction. Today, the customer satisfaction index can influence employee bonuses by as much as 40 percent. To no one’s surprise, fluctuations are among the most closely monitored business indicators inside the company.
But this customer-centric culture goes beyond mere measurements and metrics. At Cisco, there are well-defined and finely-honed best practices for virtually every conceivable type of customer interaction. Be it troubleshooting support, designing networks, or even locating spare parts when none are available through traditional channels, Cisco has developed replicable, scalable, and proven processes to help customers at every turn. And if these should somehow fail, Cisco has back-up procedures in place, too. Critical account lists are monitored by the hour, while teams of support engineers are on standby to mobilize resources instantly. When Saudi Telecom, for example, had a critical network issue, Cisco immediately dispatched one of its top U.S. support engineers to the Kingdom. The mission: do whatever it takes to satisfy the customer. For seven straight months, the engineer worked three weeks out of four in Saudi Arabia. In that time, the customer went from one of Cisco’s most disappointed to one of its most loyal in the Middle East.
Cisco provides its support personnel and sales reps a great deal of latitude and flexibility to make on-the-spot decisions, no matter how unconventional they may be. In some instances, junior employees with intimate customer knowledge will take charge of critical situations, even if it means elbowing more senior ranking executives out of the way.
“What carries a meeting is the person who spoke to the customer last and knows them best, not the one with the fanciest PowerPoint slides or the most impressive title,” says Pinto.
As a result of its focus on customers, Cisco’s profitability remains among the highest in the industry. And its customer loyalty, as measured again by Walker Research, is significantly higher than that of the average technology company—almost 80 percent versus mid-50 percent, respectively.
For all the benefits that Cisco has derived from its customer-centricity, its ability to scale would not be possible without the help of business partners. Here’s the story of how Cisco created momentum for its business partners and how it unlocked additional value for itself by doing so. Given the backdrop of the story, the solution arrived not a moment too soon.
From Volume to Value
Shortly before the dawn of the new millennium, Cisco bought a company it believed had the next new thing that every business would eventually want and that every rival would wish it had. That company was Selsius, which produced phone systems that worked over the Internet for a fraction of the cost of traditional technology that ran over telephone lines. Eager to extend its reach in the telecommunication market, Cisco paid $145 million for the Dallas-based company.
But there was a problem. Two, actually. The first was Selsius’ breakthrough technology, which had a tendency to break down when pushed too hard. That could be fixed with the right engineering investment. The second issue was Cisco’s go-to-market channel, or in the case of voice communications equipment, the lack thereof. Cisco had few ties to business partners that sold voice communications products, so growing market share seemed like a tenuous proposition at best. Addressing this problem taught Cisco volumes about working with partners that recommend, sell, or support products to customers on its behalf. In particular, it showed Cisco how important it is to reward its partners adequately without compromising its own long-term goals.
Some background: At Cisco, close to 80 percent of revenue flows through a community of third-party companies, known as the channel. That amounted to nearly $32 billion in fiscal year 2008. Cisco has more than 55,000 channel partners all over the globe today, giving it what is known as a highly leveraged model. Think about it. Alone, Cisco employs more than 15,000 salespeople, but when you factor in those who work for partners, the figure swells to 282,000 worldwide—almost twenty-fold. To put that number into some sort of perspective, this provides Cisco with enough feet on the street to call on every substantial manufacturing company in China and every commercial business in Germany, just to name a few examples. It’s a staggering reach.
“Our goal is to have the right partner for the right opportunity every time,” says Keith Goodwin, senior vice president of worldwide channels at Cisco.
Channel partners resell virtually every product in the company’s portfolio—everything from the most sophisticated CRS-1 routers to small Internet access devices. Those that don’t resell products still contribute to the Cisco partner community by offering managed services, professional services, outsourcing services, consulting services, or even software development expertise. This chapter, however, focuses on reseller partners.
While Cisco boasts an award-winning partner program today, the company spent years building it and acknowledges that the program is still a work-in-progress. The reasons are many-fold. Partners’ business models change constantly. Likewise, technology evolves, and customer buying habits shift. For these reasons and more, it is extremely difficult for Cisco and its partners to work in perfect harmony year in and year out. But by adhering to basic tenets and adjusting specific policies to suit market conditions, Cisco has grown its business more through partners than what it could have achieved on its own. It hasn’t been easy, of course. Cisco has struggled at times to maintain peace with its partners. That’s especially true on those occasions when the company’s value proposition for partners has appeared less than attractive. IT business partners react unfavorably when they believe that they do not have a level playing field on which to compete. That led to tremendous ill will and frustration in the late 2001–2002 timeframe when the dot-com bubble burst. It was more, Cisco would soon learn, than a mere sign of the times.
After the dot-com meltdown, Cisco partners were enduring the effects of several setbacks all at once. Cisco’s business had grown rapidly in the previous years and attracted a great number of resellers. When the market slowed, however, these resellers suddenly found themselves competing with more partners than ever on a smaller number of deals. In just a few short years, the average number of partners bidding on enterprise deals skyrocketed.
Former Cisco reseller Michael Fong recalls the problem: “Even small deals typically attracted a few local resellers, a national mail order company and even a global service provider like AT&T.”
Customers soon recognized that vendors were in a pinch and frankly took advantage of the situation to drive down their costs. With more resellers competing for the attention of fewer customers, it was only a matter of time before a vicious price war erupted. When it did, margins fell through the floor, and partners struggled to make a dime. For some, it was the end of the road. Up to 20 percent of Cisco’s resellers dropped out of the business, according to company estimates. Those that remained were fighting with one another and with unauthorized brokers who took to eBay to unload Cisco gear left over from failed dot-com companies.
By then, business was beginning to concentrate among a few larger partners. Of Cisco’s 55,000 partners, only 3,000 have achieved high certifications. But the top 10 accounted for over 30 percent of Cisco’s total business. This posed a long-term challenge to Cisco’s overall channel objective, which was to create a healthy climate for all partners, no matter their size or scope. Doing so, Cisco believed, would enable it to serve the maximum number of customers possible, no matter their size or industry.
Cisco’s channel executives huddled with their partners to better understand the problem. The crux of their complaint: Few could make enough money reselling Cisco gear. Cisco recognized that it had to change the economics of its reseller channel if it were to pull out of this downward spiral. After much study, the company concluded that it would have to discard one of the staples of its partner program: volume discounts.
Rewarding those who buy in great quantities with greater discounts is as old a practice as retailing and distribution itself. It’s practical, efficient, and intuitive. But was it an effective business policy or an old habit that had outlived its usefulness? Cisco had its doubts, especially after reviewing how larger resellers used their discounts to undermine other, smaller resellers. In several instances, some of Cisco’s largest business partners used their volume discounts to buy as much Cisco equipment as possible. Whether working directly or through the channel, Cisco has always maintained its customer focus. The concern in the early 2000s was that large discount partners were moving large volumes quickly, without focusing on the sophisticated pre- and post-sales needs of the customer. At times, Cisco had to step in to ensure the end customer got the value that it needed.
That’s what led Cisco to rethink its volume-based discounts in March 2001. Abandoning the structure was hugely controversial because it meant asking some of Cisco’s biggest allies to accept different contractual terms unless they were willing to change their ways. But it also turned out to be a fundamental game-changer for the company, especially after several additional program tweaks were added later.
“The truth is that our volume-based rewards program was failing us, particularly since we were interested in having channel partners add value,” says Surinder Brar, Cisco’s director of channel strategy and programs.
Brar’s revelation got the company rethinking about what constituted a “best partner” and what distinguished these companies from others. Were those who destabilized product margins for all really good partners? What about those who toiled in far-flung markets or who served lower-profile customer segments but who nonetheless delivered top-notch service: Were they really less valuable partners? Brar didn’t think so.
“It dawned on us that volume isn’t the right yardstick by which to rate partners; value is,” he says. To him, this value could be many things, including the ability to tackle customers’ most difficult technical challenges, unrivaled knowledge of a vertical market segment, access to critically important customers, or even the number of specially trained and certified employees a company hires. Companies who could consistently deliver on any of these or other fronts—all of which enable the end customers’ success—should be rewarded for the value they brought to bear, he believed, so Cisco radically restructured its tiered volume discount structure.
Cisco, of course, would never have identified this value unless it first recognized the limits of a volume-based distribution model that consolidated benefits among a few very large players. Nor would Cisco have unlocked the value trapped inside the shops of its smaller business partners who added enormous value but were stymied by these few, large players.
“When you create a level playing field at the transaction level, you create an environment where partners compete for business based on their value add,” says Brar. When companies do that, he adds, vendors and partners both redirect their focus from extracting gain from one another to providing benefits to customers. “When building a channel program, other vendors typically start from their company outwards, rather than the customer inwards. When we switched the focal point, it triggered a completely different channel strategy.”
While revolutionary in theory, Cisco still needed to figure out how to reward those companies that fit this new definition of “best partners.” The answer wasn’t product discounts but performance rewards. That led to the introduction of incentive programs that compensated partners based on their behaviors. For example, Cisco created programs to reward those who devised complete, end-to-end solutions for customers and those who helped Cisco gain entry into targeted accounts or established a foothold into a new vertical market.
One program, which rewarded partners for their ability to sell new and advanced technology, helped change the trajectory of the entire company. Here’s how.
New Math for New Markets
Most newly introduced Cisco products have a built-in following among existing Cisco resellers. But not always. On occasion, Cisco finds itself with a new set of capabilities and no one to sell them. That happened with the aforementioned Selsius acquisition. At the time, there were more than one billion traditional telephones installed around the world. Almost none had a Cisco brand on them. Cisco, of course, wanted to change that.
At the time of the Selsius acquisition, making telephone calls over the Internet was a novel idea, the kind of thing that geeks drooled over but that serious businesses shrugged at. Skype, for example, wouldn’t unveil its first Internet phone until August 2003. Cisco, however, was convinced that Voice over Internet Protocol, known as VoIP, would indeed be a huge business. Why? Because the cost of a VoIP system was a fraction of the cost of its traditional PBX counterpart, yet it offered functionality that was better than what traditional voice equipment makers could provide.
VoIP was important to Cisco because it offered the company an opportunity to show existing customers how they could extend the value of their data networks and to show new customers why putting a Cisco network at the center of their technology strategy would pay off handsomely.
Given that the traditional voice market was fragmented both by geography and by manufacturer, Cisco thought the door was open for a breakthrough company offering a disruptive technology. Before it could open that door, however, Cisco needed a more stable product and a cadre of channel partners.
Initially, Cisco discovered that customers were reluctant to commit. No one wanted to risk the rock-solid reliability they enjoyed with traditional phone equipment with unproven technology from a data communications company. The situation seemed right out of Clayton Christensen’s Innovator’s Dilemma, with Cisco, the challenger, trying to enter the market at the low end and then working its way up to take on entrenched leaders.
Undaunted, Cisco did its best to convince customers to try its products. Within a year of delivering a stable product with business-critical features, Cisco VoIP sales began to grow. They totaled approximately $100 million per quarter by late 2002. But then they plateaued. After engaging early adopters and tech-savvy enthusiasts, Cisco found no mass market of follow-up buyers waiting in the wings. The company had single-digit market share and was stuck in the number six position among leading vendors.
Cisco needed a new strategy. In the fall of 2003, Cisco Senior Vice President Don Proctor, general manager of the voice business, brought his quandary to the attention of Cisco’s Enterprise Business Council (EBC), a cross-functional executive team responsible for the enterprise business at Cisco. Proctor recognized that the failure of VoIP to gain momentum was a company-wide problem that would require a cross-functional solution. So in October 2003, the EBC convened for an entire day to focus on the VoIP opportunity, which was soon renamed Unified Communications (UC). The debates over strategies, technical requirements, and functional responsibilities waged from the early hours until late in the evening.
One of the key items addressed that day was the complete lack of channel support. A boundary existed between Cisco and its channel partners, and the culprit, said Cisco Senior Vice President Edison Peres, was profitability. Peres, who had a background in the voice industry, stood before the group and painstakingly explained that Cisco’s traditional reseller programs provided margins of 8–12 percent to data products resellers. Given the additional money they could charge for valued-added services in the information technology market, these margins on Cisco products were acceptable. But those same numbers didn’t work for resellers who worked in the traditional voice world. For business partners in that market, margins typically ran in the 20–25 percent range. Worse for Cisco, its new technology virtually eliminated a lucrative revenue stream for traditional voice resellers: moves, adds, and changes (MAC) to phone systems.
“Unless we change the math, there is no reason for voice resellers to give up their traditional business to help us,” Peres told his colleagues. “Nor can we count on existing partners to jump in. They just aren’t familiar with voice customers and voice technologies.”
As a result, Cisco was effectively blocked from gaining traction in the market, so the council needed to move—and fast. First, it voted to increase spending to recruit voice consultants and analysts who could help influence voice customers on Cisco’s behalf. And then the council decided to do the unthinkable: 20 percent of the revenue from every voice product sale would go back to the partner that helped Cisco secure that business.
It was a tough choice: reduce Cisco’s own return on investment or allow its partners to suffer and miss a major market transition. After some discussion, Cisco recognized that its long-term need for partners far outweighed any short-term gain. So Cisco met with its partners and shared with them a new idea, the Value Incentive Program (VIP), which was designed to overcome several of these shortcomings. Among other things, VIP paid resellers a fee for every VoIP deal they successfully closed. In most cases, partners could literally double, if not triple, their profitability on any VoIP deal. Overnight, Cisco changed the dynamics of the voice market.
But not everyone was happy. Some inside the company thought it was far too risky to give up so much revenue; others thought the benefit should go to customers, not partners. But the decision stood. For the first time in Cisco history, the company would directly share the proceeds of its sales with partners. That meant asking internal business managers to accept a lower contribution margin in exchange for jump-starting sales. It was not an easy decision, but the company saw it as an opportunity. It changed the economics of partnering by looking at profits end-to-end, across the entire value chain.
Then the council made other changes. To improve customer satisfaction and ensure deployment success, the EBC suggested that every complex deal initially be sold with a services contract. In addition, all product testing would be put through an even more stringent review process than other Cisco products—a systems assurance process to guarantee everything was rock-solid.
These decisions and more—increasing recruitment, boosting marketing, bolstering reseller margins, promoting a service contract sale, and extending product testing—added cost and time to Cisco’s sales cycle. But the company felt these measures were absolutely necessary if it were to succeed in selling disruptive voice technology to customers who were accustomed to flawlessly reliable phone service under all but the rarest of circumstances. The council members believed that this would result in both satisfied customers and gratified partners. All of these decisions were mapped to the newly-developed 10-Point Plan, which the council agreed to review and monitor on a regular basis.
Why was this effort so unique? For starters, each council member was empowered to make decisions “at the table.” From this stemmed alignment between the vision and the strategy. The council also played a key role with execution: Once each quarter, the council’s plan was reviewed by the company’s senior-most leaders, including CEO Chambers. Individual names were linked to specific tasks, and those who succeeded were singled out for praise; those who struggled were privately questioned. In addition, the company adopted Cisco IP phones as its standard telephony solution, enabling employees to understand both the promise and the initial limitations of the technology.
In the two years following that October 2003 council meeting, Cisco UC sales rose 40 percent per year. Customer reference accounts stepped forward, and traditional Cisco reseller partners volunteered to invest in training so they could sell the new technology. Eventually, more than 2,000 partners would sign on to deliver UC solutions around the world. Because Cisco focused on rewarding partner investments to meet customer needs, all 2,000 of these partners had an opportunity to profit.
Momentum increased, and Cisco’s market share reflected the gains. The company that once languished as sixth in a crowded market moved to the number one position, with more than 30 percent market share.
Building on Momentum
When Cisco changed the economics of its channel programs, it not only improved its relationships with partners, but also gave them the financial strength they needed to make investments of their own to help their end customers. In the last six years, Cisco has paid out more than $2 billion in rewards to partners.
“What Cisco did was simply create additional touch points that cemented relationships up and down the value chain. For example, we increased our involvement with the company in terms of training, product knowledge and direct interfacing with key personnel. When we did, we passed that same value to our customers,” says Fong. “As a result, there’s greater opportunity that exists between us and Cisco, and between us and our customers. If some other vendor comes along with a single benefit, no one in the value chain is going to jump because there’s simply so much residual value in various relationships we have established.”
To any vendor that relies on business partners to help it cater to customers, that stickiness is worth its weight in gold. Here’s why: Just as unhappy partners often translate into unhappy end user customers, the reverse is also true. Happy partners translate into satisfied customers. Cisco has seen its customer satisfaction scores jump from 4.06 to 4.61 on a 5-point scale since it unveiled VIP.7 Today, the satisfaction of customers served by Cisco partners is on par, and often higher, than the satisfaction of those served by Cisco directly.
Because Cisco enhanced profitability, leveled the playing field, and provided a way for all partners to benefit from a relationship with Cisco, they have increased their commitment to Cisco and its products.
Take World Wide Technology Inc. (WWT), for example. The St. Louis company is one of Cisco’s largest Gold partners. But it wasn’t always that way. CEO Jim Kavanaugh says Cisco accounted for roughly 10 percent of WWT’s sales just a few years ago. At the time, his company generated about $1 billion in total revenue and struggled to make money with the $100 million of Cisco products that it sold.
“Relations weren’t great and the sales environment seemed tense. We wondered if we should be looking at alternative vendors,” he says. “We really wanted to grow with Cisco; we just couldn’t see how.”
Then, VIP was introduced. Almost immediately, WWT’s salespeople saw a way to make money and began pushing Cisco products like never before. And with profitability on the rise, Kavanaugh fully supported the effort because he saw in Cisco a willingness to listen and adapt.
“There is a level of maturity in the [Cisco] leadership team around their ability to listen. They listen better today and in the last five years than at any time in the history of the business,” says Kavanaugh. “They have figured out ways to get into growth markets and take advantage of opportunities in good times and bad. That’s someone I want to partner with.”
Thanks to the changes Cisco made, Kavanaugh saw his business flourish. Overall sales more than doubled within five years of the introduction of VIP. WWT’s sales of Cisco products and services grew 10 times in that same period, eventually accounting for one-third of WWT’s overall revenue. Put another way, by 2008 WWT did as much in Cisco sales as it did in total sales before VIP was introduced.8
VIP, of course, was only part of the equation for improving relations with partners and launching Cisco into a new technology category. Replacing its volume-based model with a value-based one helped immensely. “A model that produces lower margins translates into reduced partner satisfaction, which leads to crummy customer satisfaction. Nobody wins when that happens,” says Goodwin.
There are several other noteworthy things that Cisco did to help build on this momentum. For example, the company began huddling with key partners and jointly drafting business plans and go-to-market strategies. Cisco also provided financial guidance and expertise to partners so that they could better manage their money and investments. And then, to make sure that it was addressing their concerns on a more frequent, ongoing basis, the company began hosting Cisco Partner Executive Exchange (CPEE) conferences around the world. At these events, the company gathered its best partners from a variety of markets and discussed with them what was working and what was not. The events gave partners an opportunity to voice concerns in an open, collaborative environment and to solicit Cisco’s immediate feedback in real time.
The results: Customer satisfaction up from 4.06 to 4.61. Profitable business with World Wide Technology from $100 million to nearly $1 billion. Unified Communications market position up from number six to number one.
Those are numbers even Lexus would be proud of.