Vocera Case Write-Up

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What are the pros and cons of Vocera selling through indirect channels only? Direct only? Dual distribution? What do you recommend? Why?

Indirect Channel Only

Pros:

- Leverage the channel partners network to reach new customers easily, especially in the early phrase of a products and international expansion. This would help Vocera to establish the brand name and market share

- Low setup cost, compare to direct channel. This is especially important to Vocera, since they were only a small startup, with tied cash flow

- Vocera’s products are relatively straightforward, so it’s not hard to support VARs selling their product

- Cross-selling to the channel partner’s customers, E.g. LAN wireless installation company would able to help Vocera and cross sell their product as an application

- Able to rely on partners for the installation, since setting up and maintaining an installation team can be expensive

Cons:

- Vocera cannot build direct relationship with key customers, less loyalty

- Easier to create conflicts

- If one of the VAR decided to sell similar products as Vocera, they will become competitors

- If two VARs are trying to sell Vocera to the same customer, they might be entering a non-necessary price war

- Since they don’t have direct relationship with customers, it’s hard for them to get first hand feedbacks and improve on their product

- It’s hard for Vocera to predict the company sales revenue, with very limited data

- Require high marketing support

- Need to share part of the margin to VARs, in this case is 30%

Direct only

Pros:

- Able to build relationship with customers directly

- Vocera can have full control of their product experiences, from developing, selling and installing

- Vocera can get first hand information about the market dynamics

- The variable cost is lower when the business expands

- Save cost in standardizing the marketing materials and managing/supporting VARs

Cons:

- Setup cost is really high, it might be tough for start up to support in the beginning

- Hard to enter the market without leveraging partners sales lead

- It might cost Vocera more money and time to acquire a new customer

Dual Distribution (Recommended)

I would recommend Vocera to start with indirect channel in the first two years and then slowly build out their direct channel.

Pros:

- By leveraging the partners sales lead at the beginning, Vocera can increase the sales revenue and marketing share quickly

- Vocera can sell through partners right after they launch the product. Building up a direct sales force might take some time (time is money in rapidly growing market)

- Indirect channel is cheaper to setup, so it would give Vocera less financial burden

- After Vocera has build up some branding and knowledge in the market, they can build up their own direct sales team to sell directly and avoid profit sharing

- With the direct sales team, they can also build relationship with customers and request feedbacks from them

Cons:

- Sharing part of the profit margin with partners

- Provide marketing support to VARs, this might be costly

- There might potentially some conflicts if Vocera wants to sell directly and compete with their partners (One solution might be separate by geographic)