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Channel Matters Blog > August 2013 > How Many Resellers Do You Need?

How Many Resellers Do You Need?

by Geoff Wright
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Predicting the number of channel partners needed in a given geography or market is an important but difficult part of developing your channel plan. With a direct sales force, all you need do is divide the revenue goal by the average (or expected) output of an individual salesperson. Some salespeople will exceed quota and others will fall short, but by averaging their output, the company should hit goal.

Planning for a partner channel is a lot tougher. We need to first determine to which customers we allow the channel to sell and which products we want them to sell. Of course, we also need to ensure a viable financial model for our partners. If we appoint too many partners, we may see increased competition, lower margins and probably lower quality. Too few, and we leave business on the table.

We all know that when working with a channel rather than direct sales, we have less control. While we work with channel partners to set revenue and other targets we both commit to, at the end of the day, channel partners do things for their own reasons. While it is the job of the Channel Account Manager to keep the "train on the tracks," any number of events and circumstances can get in the way of the channel partner staying focused on the goals.

When we work with our clients, whether running a specific partner recruitment project, implementing a Channel Field Guide to increase the productivity of a channel sale team or in delivering our curriculum of training programs, our ChannelPRO™ framework provides the methodology and templates to identify both the right number and right type of partners needed in a given geography or market. I won't go into details here, but let me share some of the most important considerations.

Reasonable Expectations

Emphasis on the "reasonable" here! I've seen more than one organization think that a flurry of recruiting activity will drive revenue. Of course, it will if you don't have enough partners or if the existing ones are not the right partners. But for most of us, just recruiting partners does not lead to an instantaneous revenue hike. In fact, the recruitment is worthless if no investment is made in enabling the partners to sell and deliver. Even when they are enabled, if there is no customer need or demand, or if the partner focuses on the wrong customers, there will be no revenue anyway.

The channel team needs to work with marketing to determine the targeted customer segments, market opportunity and expected market share. Knowing the customer is the start of all channel decisions.

Partner Value

Channel organizations need to strike a balance between partner opportunity and market coverage. Simply adding more partners won't increase the number of opportunities in the pipeline for a complex sale nor will increasing the number of outlets for a retail product. However, it can make the partner opportunity significantly less attractive for the existing partners and the very type of partners you're looking to recruit.

Specific Market Requirements

We always see different types of customers requiring different types of partners and sales approaches. This is because the location of the products or services on the Adoption Lifecycle determines the cutomer buying choices and therefore how to sell. Manufacturers who develop a "one size fits all" channel program are seldom successful. For example, if you have one product line that lends itself well to retail or online sales, you will need a low cost, volume partner model. On the other hand, if your product contains new technology that is yet to become the norm, or has highly technical, industry-specific applications, you will need partners who can run deeper and longer sales cycles into specific vertical markets. Where volume models typically operate off lower margins, a channel partner is required to invest in longer and deeper sales campaings. Channel programs need to reflect this with rewards such as higher margins. Often a manufacturer is wise to restrict the number of partners in the market sector to uphold the partner value and strengthen partner commitment rather than to see the best partners move to competitive offerings.

Hybrid Channels

If, like many of our clients, you also have a direct sales force, you have to take that into account. We all know that unmanaged channel conflict between direct and indirect sales channels is one of the fastest ways to destroy your channel business.

Manufactures who are truly channel centric spend time clarifying the rules to clearly identify the market segments or even specific accounts that are open only to the direct sales force and which are open to channel partners. The rules around this segmentation need to be clear prior to determining the number and type of partners needed.

When we work with our clients, partner coverage is one of those areas that prompts a lot of discussion and questions. We'd love to hear what you think and the situations you have experienced. How does your organization decide how many partners you need to achieve your goals?

Last modified on 11/18/2013 9:12:50 AM
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