Funded Head Experiment Yields Positive Results

Last year I wrote about the advantages, disadvantages and my skepticism about use of a "funded head" at a distribution/reseller partner. The term "funded head" refers to paying a portion of a sales rep's salary at a partner with that person functioning as a surrogate employee. To review, the advantages are: no employment contract, lower cost than hiring your own person, increased mindshare from the sales partner and a way to incrementally invest in a market with a lower budget. The disadvantages: less control, less loyalty/focus than hiring your own person and less equity accrual to the manufacturer/publisher.

As an experiment, we went ahead and signed a contract with Sigma Software Distribution in the U.K. for a partial funded head. (My client, a software company with a long history as a leading Internet driven sales & marketing company, had never done this before but was interested in selling larger licenses through international channels.) We paid a portion of a sales rep's salary on a quarterly basis and in return the Sigma sales rep focused a commensurate percentage of his time on our software evangelizing resellers and assisting them upsell larger licenses to corporate and government accounts. Because of our investment in Sigma and willingness to put "skin in the game" we gained increased mindshare from Paul Jackson, Sigma's talented and experienced Head of Business Development (who guided the more junior Funded Head) and Sigma's executive management.

The results: although the U.K. saw a double-digit decrease in sales from our client's pay per click on-line sales during the last 12 months, Sigma (with the Funded Head) increased sales of the software by 40%. While the client's on-line sales are mostly to individual end users and consumers, Sigma's growth came primarily from an increase in the number of corporate and government accounts sold to by resellers, and follow-on upsells of larger licenses to accounts the Funded Head penetrated more deeply. The sales increase was approximately 5X the cost of the Funded Head. In other words, the Funded Head's cost was 20% of the increased revenue. No other marketing expenses were paid by the client for Sigma during this time, so growth is attributed primarily to Sigma's and the funded head's activities. Although a cost to revenue ratio below 10% would have been preferred, given the overall decline in the UK market in the last year for software products in general and the client's software, the return on investment was favorable and supported a profitable business model.

Another important "control variable" in this experiment is the client's other U.K. reseller, which received neither support for a funded head nor marketing funds. This reseller was able to maintain its level of sales compared to the previous year, but unable to significantly grow its business.

For anyone using or considering a funded head, I strongly recommend treating the surrogate as you would any other member of your sales team with respect to training, providing sales resources such as WebEx and employing your standard metrics and analytics to measure the sales pipeline and performance.

In conclusion, the investment in funding the partial salary of a distribution partner's sales rep yielded a positive return without cannibalizing or interfering with the client's core on-line business.

What has been your experience?

Dan Griswold: Free Trade Is A Main Street Issue

San Diego, CA (Dec. 10, 2009) --Daniel Griswold stood before members of the World Trade Center holding a Swingline stapler in one hand and an iPod in the other. The stapler was manufactured a 15-minute subway ride from Manhattan, NY. The iPod, designed in California by Apple, produced in China. "The value added in China is a few dollars," said Griswold, while the remainder of the price paid goes to Apple and the retailer who sold it. His point: most of the value from the design and sales of the iPod goes to American firms, while the consumer benefits from the lower price of producing it overseas. He rhetorically asks, holding both products in his hands, would you rather live in a society that designs staplers or the iPods?

Griswold is the author of "Mad About Trade: Why Main Street America Should Embrace Globalization" and Director of the Center for Trade Policy Studies at the Cato Institute. His research shows that American consumers are the biggest beneficiaries of world trade, and the money saved by main street from lower prices from the global economy is far greater than any Washington stimulus plan. Globalization elevates the quality of life of everyone. "Consumers are the biggest winners from free trade," he said. "Working families benefit from lower prices." And while he expressed for workers who have lost their jobs to factory closures, according to his research "imports are responsible for 3% of joblessness. For every one person who looses their job to trade 30 people loose their jobs for other reasons." As an example, thousands of people from Kodak lost their positions because of the rise of digital photography -- a technology shift -- not because of the imports of digital cameras. And while 4-million manufacturing jobs have were lost to trade (prerecession), his research indicates 18 million service jobs were created from economic growth with pay higher than manufacturing wages. "Globalization is in the interest of Americans," he said.

Griswold recounted a globalization moment that occurred while doing a case study of his closet. Of the 120 items he inspected--mostly clothes--10 were made in the U.S., and 9 of those were neckties. Of particular note was an item from Mexico labeled: "Hecho en China."

New AVIO iP-01UE Projector With Built-In Camera Breaks Price Barrier

Until now, AVIO projectors, a uniquely styled projector series with a camera built inside, have cost between $5,000 - $10,000. The company announced it will begin shipping in November the iP-01UE, a cost-reduced model with an estimated street price of only $3,495.

Manufacturing companies and schools have been a major user of AVIO projectors. The lower price is expected to make the projector more affordable for the North America K-12 market. If the U.S. $ strengthens against the Japanese yen in the months ahead, it's possible the projector may break the $2,995 price point for multiple unit sales. A significant improvement to the iP-01U is a wide angle lens, which allows a teacher to use the projector at the front of a classroom and to fill up the projection screen with an image.

Production departments of manufacturing companies have been using AVIO projectors to allow shift employees to communicate process status updates without a computer, by writing notes on paper and placing them on the projector. AVIO projectors are quite popular in Japan, although they have never taken off in North America. Cost has been a hindering factor. The $3,000 price point is expected to open up the general corporate market and also law firms.

Although Nippon Avionics, a subsidiary of Japan's NEC Corporation, has been manufacturing the AVIO style projector for 15 years, they are not well known in North America. Because the projectors are unlike any other projector (they resemble a flatbed scanner), they need to be seen to appreciated, leaving the company caught in a vicious Catch-22 circle as most resellers prefer to offer their customers well-known brands. Moreover, the AVIO projectors are a "concept sell", which require a sales person to demonstrate and explain the advantages of an all-in-one unit (something which many projector sales people would prefer not to do). AVIO plans to take advantage of advances in Internet technology to create videos showing how the projectors work, increasing their exposure to a broader audience.

Personally, I have found AVIO's projectors to have a very crisp, clear image when using the camera to show documents and clippings from newspapers. Small print is legible. Also, the unit is easy to set up, because it is just one piece of equipment.

Key specifications of the projector include: 2,500 lumens; single chip DLP engine with 6-color wheel and BrilliantColor(TM); 11 lbs; camera with 3.15 million pixels; USB image capture.

For additional information, and current pricing try visiting AVIO's Facebook page and the Alliance Warehouse. Alliance International is an authorized distributor and repair center for AVIO in North America. Tel: (858) 558-2030. E-mail: claudia (at) alliance-intl (dot) com

China: 20 Years Earlier

My first visit to China was in April - May 1989. I was a bird flying over an ocean who could see its vastness but not comprehend what took place beneath the waves. I walked past 10,000 people with 10,000 stories and I missed them all on that first trip. But during the next decade I shed my wings for fins and swam among the fish of the Middle Kingdom sea, keeping my distance from killer whales.

What were your first impressions visiting China and how have they changed?

I was working in Japan for Mitsubishi Corporation in 1989. It was the "Golden Week" holiday and I was itching to visit the world's most populous country. Knowing precious little of China's history, spoken language and what I was getting myself into, I traded my 3-piece suit for a backpack and landed in Shanghai. Students were marching in Beijing's Tiananmen Square. Two of my colleagues based in China had recently perished in a China plane crash so I was leery of flying on a domestic flight to Beijing. (The acronym of China's airline in those days stood for "China Airlines Always Crashes"). I decided to stay in Shanghai two days, then travel by train to Hangzhou, Guangzhou and Hong Kong. Little did I imagine that during the next decade I would rack up a million miles flying to China and become a witness to economic history. Here's what I remember about that first trip.

The road from Shanghai's Hong Qiao airport to the downtown Bund was dark (I arrived at night; there were few lights). My host, the local Japanese manager for Mitsubishi, warned me not to change money on the black market. At that time, visitors were issued a special currency for foreigners (FEC) in exchange for hard currency and were not supposed to use RMB (renminbi) the people's money. My hotel was the Seamen's , just off the Bund where you could smell the river. The cost was $125 night and the quality was similar to that of a standard Holiday Inn. At that time, Pudong -- just across the river-- was a dream (now, one of the great metropolises of the world.) The first day I walked, walked, walked. Along the French styled buildings of the Bund, along Nanjing Street up to the No. 1 Department Store, and then the People's Park near the old convention center (a Soviet style building). Purchasing a sweater at the store required picking up chits from the department, then paying a central cashier, then going back to the clothes department to get the sweater. (It seemed to be a complicated process -- perhaps a way to employee more people at a state run store?) Mao suits were common. The trams were jammed-pack with people and seemed to move at a snail's pace. I ventured into a restaurant and, not speaking Chinese at the time, pointed at the menu and was served a mystery dish (tripe in a yellowish sauce?). I soon learned about Shanghai's steamed dumplings (xiaolongbaozi) which could be ordered on many street corners. I took in the architecture of the old French quarter and the bustling of outdoor markets, walking to the Jin Jiang Hotel where President Nixon stayed during a state visit. Much of the morning was spent trying to secure a train ticket to my next destination. (Not a simple process.) I remember finding a travel agent at the Peace Hotel, a historic hotel which would have been a better place to stay for the money. (In later years I visited the hotel several times for the jazz and banquets, including one held by the organizers of PC Expo.)

The next day it was raining and I took off by foot trying to get that train ticket, then visiting more markets. I made it to the Yuyuan Garden, but what I missed was enjoying tea and Shanghai dim sum in the surrounding tea houses. And, I missed Shanghai's historic restaurants, such as Mei Long Zhen (which I was taken to several times on subsequent visits). This is the price you pay for being "spontaneous" and going to a country without research and plans. Of course, today's China is a moveable feast of culinary delights (and business opportunities) and my appetite was whetted for more.

It was May Day, a traditional holiday for "communist states" and I made inquires, unsuccessfully, about official parades and marches, and unofficial demonstrations such as those at Tiananmen. (I didn't know about Fudan University, but ended up visiting that institution several times on later business trips.)

Hangzhou was a 3-hour express train raid from Shanghai in those days and five hours or more by local train (now there is a super expressway for buses and cars which has cut the time significantly and the trains are improved). I was determined to stay in a backpacker's style hotel to save money. I remember walking from the train station and somehow getting to the famous West Lake for my first glimpse, then, needing a place to stay, boarded a jam packed bus that took me into a countryside of tea plantations and a hostel and a room which I shared with 3 others costing a few dollars per night. Making an international phone call involved calling an operator and requesting a call. It took 15 minutes to get an international line.

Instead of walking, I rented a bike and biked everywhere, starting with the magical West Lake just a couple of miles away. I was captivated by it and fortunate enough to return several times in later years . I found a tea house next to ancient ruins and enjoyed green Dragon Well Tea, a local speciality. I met a Canadian student who was requested by his host institution in Beijing to go on vacation (i.e. "get out of town") because of the storm brewing at Tiananmen. I invited him to dinner and we found a hole-in-the-wall seafood restaurant. The eels in the fish tank piqued my interest and I ordered one for us steamed to perfection in a soy-based, ginger sauce. Delicious! And, I relearned my lesson about asking how much things are before ordering them. (The dinner was over $20, which seemed very expensive for the time and place, but for us it was priceless.)

The next day it was raining (again) and I needed to go the train station (again) to try and get a ticket for my next destination. There I had my formative experience of the Chinese definition of waiting in line (opposite of the well mannered British queue). Ticket in hand, I was back on bike, and I had not been as soaked to the bones since riding to school at the University of Washington in Seattle. Peddling through town I saw a line of people at a noddle shop, stopped and met a couple of university students from Japan studying in Hangzhou. They ordered for me and I had the most inner-warming bowl of Shui Zhao (soup dumplings) I had ever had. (In subsequent years I learned the joke about shui zhao which in Chinese also sounds like "sleep" so when you ask the soup lady how much the dumplings are you could be propositioning her.)

I climbed a mountain and found a temple where couples soldered metal hearts engraved with their names so their hearts were always together. In town, I shopped for little nick-knacks that would fit in my backpack to bring home. In Japan, I was expected to bring back as many souvenirs as I could possibly carry, so I started filling up with items made from Hangzhou silk. What I missed in Hangzhou (having not done my homework) was the Lo Wei Lo restaurant by Westlake (but I was taken there and to many fine restaurants on subsequent visits). I do not intend to over romanticize a location -- there is a flip side to this Shangri-la also to be contemplated -- litter, polluted waters and the hardships of life. (In later visits, I often came across people engaged in violent arguments. So much tension, right beneath the surface.) Hangzhou made an impression, and as I departed I said, "I will come back here someday and stay in the Shangri-la instead of a hostel."

The next memory is a 36-hour train ride from Hangzhou to Guangzhou. The chicken bok-choi over rice tasted delicious the first time I ate it but by the 4th serving I had learned it's important to stock up on snacks before a long train ride. We passed scenic areas of steep mountains, and fields flooded with water for rice cultivation as we moved further south. (I was impressed by the scenery to attempt a painting after getting back home.) I shared the "soft seat" cabin with a gentleman from Taiwan and a gregarious fellow from Guangzhou who had emigrated to Hong Kong. They argued for hours about Taiwan this and Hong Kong that and China this, and at the end of the voyage with me wiped out from the fourth serving of chicken bok-choi he hired a taxi and took me to my lodging, another hostel, and this time I splurged for a private room with bath (cost, about $20/night). I had escaped the rains, and, dried out, found a bike to rent, and biked, biked, biked everywhere. Memorable sites: all of the cottage workshops, people making this, people making that. Busy. Micro industry. And then there were the markets, with the cats in cages, badgers and everything. I remember a visit to the snake restaurant to drink snake bile and to eat snake soup. (Fried snake is a delicacy I learned to love, and we have quite a supply of them on our ranch at the Blue-Merle Vineyard). I made a quick trip to Foshan to see a temple, and it was there that I noticed a younger woman in a white dress for spring. The Mao suits were giving way to modern fashion. Eating at the many tea houses in Guangzhou was easy with dim sum, because you could look at servings before choosing them and the portions were small. (What I missed were the trips to the factories in Dongguan -- there would be time for that later. I also missed evenings of karaoke, which had been forced upon me in Japan, and was also very popular in China. But this is what you get for not planning ahead, not knowing the language and the culture.)


I had lunch with a Japanese manager of the local Guangzhou branch of Mitsubishi and he brought one of his Chinese staff. What I really wanted to know was how he, as a Chinese, felt about working for a Japanese-based company?

Unprepared, I got what I asked for on this first trip to China. There would be many more visits and I would study the language and everyone I met on a train or in a snack shop would become my teacher. I consumed the stories of the people in books, and caught up on the history and read and re-read the Three Kingdoms for political insight and Dreams of Red Mansions for entertainment. In later trips, I would earn a living introducing the Chinese to desktop projectors, then interactive whiteboards, then, American-designed "Made in China" JABRA earphone microphones (the first time I ever saw one of those devices being used was in Shanghai by a suave businessman). Travelling to China over the years I met repeatedly with "mom and pop" dealers which gave me an opportunity to see how their lives were upgraded with each visit in subsequent years: improved plumbing, a toilet that works, dining at good restaurants, heating that works, more furniture, then a bigger office, then a car, then their trips abroad to our trade shows in the U.S. You could see it in peoples' eyes; their hunger to learn more. Their hunger for a better life. Their willingness to work for it, unleashed after the economic reforms that followed Tiananmen. Twenty years from now will we look back upon the events of June 4, 1989 and say the students actions led to "economic freedom" for China?


What did you experience on your first trip to China and how have your perceptions changed with time? (Or, if you are Chinese, what were your first impressions of America?)

NATO 60th Anniversary: Reflections From 29 Years Ago

My life has tracked NATO. I was born ten years after the organization was founded and worked there the summer of 1980 as an Intern in the U.S. Mission. NATO was just entering middle age during my sojourn. Our major concern at the time was the modernization of theater nuclear forces (TNF) and making preparations for the installation of Pershing II missiles on West German soil. The Alliance was firm, united, and resolute in this decision, despite a rise in the peace movements in Europe and the U.S. and concern among millions of citizens. I also remember Deputy Secretary of State Warren Christopher stopping by NATO headquarters to announce progress with the CSCE talks (Conference on the Security & Cooperation in Europe) between East and West. Besides an elegant lunch one weekend at Ambassador William Tapley Bennett's residence featuring an amazing, fragile as glass, caramelized desert, the most memorable historical moment was attending the farewell address of NATO's West German Ambassador Dr. Rolf Pauls.

Dr. Pauls was West Germany's first ambassador to Israel after the Holocaust and is widely credited with helping to heal diplomatic relations between the two countries. On that summer day in 1980, the retiring NATO ambassador reminded the other 14 member states of the Atlantic Alliance that the number one objective of West German foreign policy was the unification of his divided country.

I grew up in an era of East Berlin and West Berlin; East Germany and West Germany; North and South Vietnam; North and South Korea; NATO and Warsaw Pact -- and as a 20-year-old youth listening to Dr. Pauls I lacked historical perspective. I just assumed there would always be two Germanys, not knowing any better. Dr. Pauls opened my eyes.

I went back to school that summer (a little wiser for my experiences), graduated, and returned to Europe as a reporter following my interests in German politics, the rising Green Party, the peace movement and NATO's policies. I always remembered Dr. Pauls, and the German Ministry of Information was able to arrange an interview for me at his lovely home outside of Bonn in the Spring of 1982. We sipped tea and I recalled his NATO farewell address. We talked about the current political situation, the state of NATO and the Alliance's resolve. He was a gracious man.

(After moving to Seattle, I attended a reception in honor of West Germany's President, Karl Carstens, and saw the same official who had arranged my meeting with Dr. Pauls in Bonn the year before. He poured me a class of white wine asking, "Can you tell what it is?" I took a sip and answered without hesitation, "Rheinland Pfalz," a premonition of a future in the wine industry, perhaps?)

It is heartening to see President Obama warmly welcomed in Europe first as a candidate and now as President commemorating NATO's 60th Anniversary. He is one who can talk eloquently while carrying the big stick.