'Selling PCs still makes good sense'

When Lenovo acquired IBM's PC business, it created murmurs across the
industry. Initially, many wondered what will happen to the decades of brand
building that IBM had done. Many also pondered over the kind of channel strategy
Lenovo would adopt. In an exclusive interview to Dataquest, Vivek Malhotra,
director, Sales and Channels, Lenovo India spoke to Shrikanth G of Dataquest
about the Lenovo's channel initiatives in India. Excerpts:

What channel initiatives has Lenovo embarked on in India?

Lenovo has introduced channel programs on a monthly basis. The idea has been
to introduce fresh ideas and purchasing options for the community, and create
excitement in the marketplace. Our recent channel initiatives have been the July
Monsoon Hungama, August Kranti and August Fury; the most recent being the
September Surprise. The July Monsoon Hungama was basically a cash payout based
on PC (both notebook and desktop) purchases. August Fury and August Kranti were
designed to address ThinkCentre and ThinkPad, respectively. These initiatives
focused on increasing purchases in each product category, by targeting the metro
and non-metro markets separately.

Post this, we launched September Surprise, which aimed at maximizing profits
for partners by the end of the quarter. Within these schemes we had sub-schemes,
where our objectives were to attract bulk purchases and increase the purchase of
high-end PCs. Being an official sponsor of Turin Winter Olympic Games in 2006
and the Summer Olympic Games in 2008, we introduced in October the 'Go For
Gold' channel program. In this scheme, top-performing partners in the metro
and non-metro regions

can win trips to locations such as Turin and Singapore.

What are the key challenges in managing channels?

We do not distinguish the channels by product lines, whether they buy a
ThinkPad or a ThinkCentre. Equal importance is given to both types of products
in terms of channel management. Our partners typically make their sales in two
forms-relationships and transactions. The sales made by partners through their
relationships with the business community offer the consumer more negotiating
power and customized deals. The transaction business is driven by channel
partners directly, where they initiate new sales orders from the SMB/SOHO
segment. Some partners do more transactional sales than relationship sales,
while others do the reverse. Lenovo, as a company, is more involved in the
relationship sales cycle. Transactional sales are important too but this
requires more of the partner's involvement than ours.

PCs have become a low-margin business. Given that, how do you encourage
channel partners to push more boxes?

The PC business might be a low-margin business, but channel partners can
still make substantial profits. For example, in a transaction sales model, a
partner earns a percentage on each transaction made. Thus, a profitable run-rate
can be maintained if he is able to achieve multiple transactions during that
month. Apart from this, a partner working in a relationship sales model will
also act as a system integrator, selling not only PCs products but also software
and other peripherals. Due to this complimentary nature of the business, channel
partners still find PC selling an encouraging business.

What are the incentive methods for channels?

Apart from our channel programs, we have introduced the Think Warrior
initiative this October. Briefly, it is a sales-based incentive, which entitles
them to reward points for every sale initiated by them. Lenovo is implementing
this scheme in collaboration with an online store.