Driving Revenue through Channel Partners

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If you decide to go with either a pure- or a hybrid-channel sales model, make sure you create the best foundation for success. You don’t have to do everything yourself. Channel recruitment and management are highly specialized, and there are companies that can handle parts of this process, including channel program setup, reseller recruitment, vertical strategies, territory models, incentive and loyalty programs, lead generation, training, and support. If you decide to find your own channel partners, here are some good sources:

Your competitors – This is an excellent source because the channel partners who currently do business with your competitors are already familiar with the industry and the types of products and services that you offer. Target your competitors’ resellers with pricing, margin, marketing, and training incentives. You will need to make your offer enticing enough to overcome the history that your potential partners have with your competition. Also remember that some of these companies will have loyalty to your competitors, so you will be exposing your business methods.

Industry conferences and events – Willie Sutton said that he robbed banks because “that’s where the money is.” Likewise, you should go to industry events because that is where you can find potential partners. Many will not be looking for a product or service line to handle, but a few will. You need to nurture these relationships over time, so be patient and make sure you keep prospective partners in your email and social media communications loops.

The internet – Most, if not all, of your potential channel partners will check you out on your website so make sure your partner pages display a clear vision of the benefits of doing business with your firm, as well as the process that a new partner will need to follow in order to do business with you.

Referrals from existing partners – Partners will be happy to refer other companies to you as long as they are non-competitive in their specific market area.

Perhaps the best source of new channel partners is the character and integrity that you practice as a partner-friendly organization. Partners know the good companies to do business with, and you always want to be perceived as one of the good companies to work with. Here are five ideas on how to co-market with your partners:

  1. Have a published, co-op marketing program.
  2. Make your channel partners put skin in the game.
  3. Don’t waste leads on partners that won’t work them aggressively.
  4. Always maintain control of the leads you give to partners.
  5. Manage leads as part of each partner’s business plan.

If you choose to offer co-marketing programs, make sure you have the proper metrics in place to measure items such as sales volume, growth rate, product share, history of making quota, lead closure rate, and customer satisfaction.

If your product is not currently channel-friendly, you will need to make it more attractive to your partners and their customers. Start by looking at ways to standardize and reduce the number of model choices. Likewise, simplify products by reducing the number of features, and use every method you can think of to streamline the buying process.

How to Manage Channel Conflict

Companies run away from the potential of channel conflict as if it were the plague. They cite issues such as the fact that channel conflict can kill deals, leads to friction with your direct sales team, causes the channel to leave you for your competitor, and forces you to make ill-informed, business decisions. These are the negative aspects of working with a channel that you will have to take into account.

However, if managed properly, channel conflict can be a good thing. At first blush, this statement may seem counterintuitive. After all, who wants a bunch of channel partners who are fighting over deals with each other or with your direct sales reps? Nonetheless, a little conflict can be healthy and cause everyone to work harder and give you the security necessary to terminate under-performing partners. In fact, a lack of conflict can mean that your deal flow is weak and that nobody cares (a very bad sign).  Effectively managed conflict can create competition that benefits all parts of your business.

If your partners are not pursuing deals aggressively, they are not making you money. And if you have several partners in a particular geography, and they aren’t bumping in to each other, it indicates that you have anemic coverage in that area. There are ways to manage the conflict, for example, by tightly defining who gets which type of lead (by industry, size, geography, solution type, etc.). But my basic philosophy is that you should err on the side of whoever has the best chance of bringing in the business.

For more ideas on how to work get the best out of your partner relationships, visit Important Lessons for Working with Channel Partners.

4 COMMENTS

  1. Hi Chris: thanks for posting this article. In channel partners, I look for three key attributes: 1) strong domain expertise, 2) reputation for consistently delivering and maintaining high value and satisfaction for customers, and 3) my company’s product or service has a strategic fit for their solution portfolio. The saying, “two out of three ain’t bad,” doesn’t apply. For a partnership to work, a company needs all three. And as long as the partner sells at my target gross margin, I don’t care much about their close rate, growth rate, and market share. (Oh – I just thought of an important exception: the partner provides access to a market, industry, or account that I covet.)

    That leaves the open question of partner marketing chops. Who is responsible for lead gen? Some vendors engage partners to augment their limited marketing reach. Other vendors sell partners on partnering because the vendor possesses powerful marketing, strong brand equity, and industry stature, but has limited direct sales resources to harness the revenue potential (translation: awesome lead pipeline). There is no “best” reason for engaging partners. In addition to the variables I have mentioned, there are other considerations. A good program is bilateral when it comes to leads.

    Regardless, partner strategies must dovetail into each party’s risk strategy. Partner programs spread risks. The better ones spread them equitably, and ones that fail tend to load or skew onto one end or the other, but without reciprocal revenue, profit, or other benefits. Something that often surfaces in the root cause analyses my company performs.

    I’ve sold IT solutions through channels for over thirty years, and have served on both sides of the coin. One thing I’ve learned is that no system is perfect, and therefore, channel conflict is inevitable. But I’ve never found channel conflict positive for partner or provider, other than maybe it gives them a chance to work out their differences, and hug it out in the end. If that happens (important if), the relationship can grow stronger. Or not. Too many stories here. Care for talking over beers?

    But most prevalent condition for selling partnerships can be described as frayed. In my experience, “rock solid” partnerships are less common. Vendor-Partner relationships take constant communication and nurturing. The moment either partner takes things for granted, an opportunity opens. And if you know where to look, and how to ask about them, you will find they are plentiful.

  2. Hi Andy, you make a lot of great points and for the most part, they are spot-on. As for your three attributes, I would add one more: the ability for the partner to find and close business. I have always preferred to work with channel partners who can do their own lead generation. And yes, vendor-partner relationships do take a fair amount of communication and nurturing (like any good relationship).

  3. I worked for a tech reseller for a time after leaving IBM (and before starting CustomerThink). And my early work in the CRM industry was focused on partner relationships.

    Partners are sort of like customers in that they have choices and so partner loyalty strategies are important. Partners can shift their attention quickly due to declining margins, lack or support by the vendor/brand, lack of trust, or other issues.

    But unlike customers, partners are also supposed to bring something to the table — be it distribution, specialized skills, additional “feet on the street” or whatever. The must be sufficient value for both parties.

    Channel conflict is part of the game, but healthy partnerships manage it well with good communication on expectations, clear territories, and action against bad actors. Vendors can stuff channels, partners can dump goods on the gray market, … the possibilities are vast. Agree with Chris that a “little” conflict is good because it means the territory is well covered (some overlap).

    Regarding leads, my experience (and observation) was that few VARs were capability of generating leads. So that was usually a clear role for the vendor. On the other hand, vendors lacked application skills and needed help closing deals. Conflicts inevitably occurred with large “deals” where the vendor rep wanted to “take it direct” or the partner was just “moving boxes” without adding much value. Clear rules of engagement helped minimize these risks.

  4. Thanks Bob. We can definitely agree that channel partners need to bring something to the table. Of course their technical competency, customer service ethic, etc., are important, but I also like to see access to new markets or groups of prospects that expands our market footprint. Your point about how good communications, expectations and clear territories can minimize channel conflict is accurate.

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