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HP ads point SMBs to the channel, not direct to HP

Beyond simply promoting the channel, new Hewlett-Packard ads will tell SMB customers a VAR is the best option by linking them to local partners.

Hewlett-Packard Co. is ready to launch an advertising program that explicitly promotes the value of local service providers for small and medium-sized business (SMB) customers.

The ads will debut Jan. 16 in the Wall Street Journal and possibly other national newspapers, appearing in a total of 78 markets according to Tom LaRocca, vice president of product and program development at HP.

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"We will evangelize the value of small businesses looking to a local partner to supply solutions," he said. "We're saying in the ad: 'Meet your friendly neighborhood technology provider.'"

Web addresses in the ads, which focus on servers and PCs from the Personal Systems Group (PSG) will point potential customers to an HP site on which they can easily click to identify all the authorized HP partners in their own areas.

A later phase of the campaign will promote one specific partner in each of 21 markets, using ads that run in local business journals and newspapers. To qualify for the program partners will have had to do a certain amount of business with HP, and be willing to commit resources to back up the campaign, though LaRocca wouldn't offer specifics.

"The SMB space is a partner-led space for HP," LaRocca said. "That's our go-to-market in the U.S. and we feel we need to be out there with the end users and let them know the value of having a local asset, rather than picking up the phone and calling HP directly."

The promotion will go on as a test for two or three quarters, LaRocca said, and be continued if the results are positive enough.

The campaign is a continuation of HP CEO Mark Hurd's July 2005 promise to "double down" on the channel by adding resources and eliminating conflicts between channel and direct sales efforts at HP, according to Tiffani Bova, analyst at Gartner, Inc.

"He's said repeatedly that he's very focused on doubling down on the partners and that they support common goals," she said. "HP's not going to put feet on the street to go after the SMB market, and that's what you need. So he wants the channel to grow and he wants a larger share of the market. The channel is the way to get there."

"Plus they're taking advantage of the fact that Dell has had a couple of challenging quarters," she said.

In October analyst reports from Gartner and IDC indicated that HP's PC sales had edged ahead of Dell's by a razor-thin margin, and that HP had closed the gap in market share on Dell in the U.S. HP's own PSG revenue grew 10% in the fourth quarter, while shipments were up 16%.

Last June HP also increased financial incentives for VARs, in some cased as much as 50%, and increased its investment in channel support by 20% for resources designed to help VARs win business, Bova said.

HP's relationship with the channel has been rocky at times, though it's been improving over the last couple of years, Bova said.

A recent survey from R. W. Baird & Co. showed that HP partners were among the most optimistic about their sales potential for 2007 and that a majority believed HP had improved its relationship with the channel.

"Most of their promotion has been at the enterprise end or consumer end. So I'm happy to see them promoting so much more in the SMB."
Tom Senecal
PresidentLaser's Resources, Grand Rapids, Mich.

Among the key elements in that change was the dissolution of the Customer Solutions Group, which ran telemarketing operations that targeted SMB customers.

"That call center was in a directly competitive stance against the channel and eliminating it is a strong statement in the other direction," Bova said. Similarly, though it was initially taken as an increase in the competition between the two, Hurd's decision to expand HP's salesforce turned out to be an effort to drive more demand for HP products, and drive much of the sales through the channel, she said.

That shows up most clearly in changes in the compensation plans for HP sales reps, many of whom get credit for sales closed by channel partners, rather than losing money every time a VAR made some, according to Tom Senecal, president of Laser's Resource, Inc., a print-services management company in Grand Rapids, Mich.

"We report our sales to HP under [the resale sales out (RSO) program]; we engage with the direct reps, and they get credit for what we sell," Senecal said. "It fosters more cooperation."

HP has been investing in training, co-marketing and market development for local partners as well, Senecal said, though it's good to see more solid focus on the SMB market.

"HP needs to leverage their channel more than they have," he said. "In the SMB space most of their promotion has been at the enterprise end or consumer end. So I'm happy to see them promoting so much more in the SMB."

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