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Channel Matters Blog > December 2014 > Creating a Case for Channel Partner Investment (1)

Creating a Case for Channel Partner Investment

by Cristal Herrera
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Business Partner Ship In our last Channel Performance Tip, we shared a useful finding from our 2014 Channel Enablers Channel Performance Study:
 
When channel managers build and present a business case for partner investment, financial target attainment was 45 percent higher.
 
The post focused on the importance of creating a business case tailored to the way the partner makes money and how they are evaluating alternative investments. It cannot be emphasized enough—when we say "tailored" we mean a business case designed for that specific partner. While marketing can create the template for a business case, it must be adapted to each and every partner based on that partner's unique growth strategies.
 
Many of the channel organizations we work with find it helpful to model partner growth strategies using the Ansoff model that is often used to evaluate two strategic alternatives. In this case, these alternatives are:
 
Customers/Markets - Does the channel partner's growth strategy focus on adding new customers or are they building their business from existing customer revenues?
 
Products - Is this channel partner open to offering new products to their customers or do they prefer to focus on existing products?
 

 
It's not always easy to place a partner in the model. You can ask about their growth strategies, but what they tell you doesn't always jibe with the decisions they make.  They may be reluctant to share what's really happening in their organization, especially if you haven't yet built up a base of trust. Sometimes, you'll need to make a judgment call.
 
Understanding where the channel partner is in their life cycle can help you evaluate where the partner fits on the customer/markets spectrums. For example, the newer the partner's business is, the more they are going to need to focus on adding new customers. They simply won't have enough existing customers to support the business by selling into their base.
 
Openness to new products is a little more challenging to judge, but often, a channel manager has a pretty good gut feel for how well a channel partner handles new offerings. For example, channel partners who don't respond well to change are less likely to want to expand by adding new products to their portfolio. There may also be special circumstances, such as a temporarily reduced headcount, that restricts their ability to expand their product portfolio—no matter how much they might want to.
 
Where the partner is on these two spectrums will determine the type of business case they are most likely to be open to. Let's take a look at each of the four quadrants and the type of business case that might be built for a particular partner.
 
New customers/New products - This type of partner is often in aggressive growth mode, and a diversification message can work well. As long as there is a business case to be made for the investment you are trying to promote, this may be the easiest type of partner to convince. That said, it's helpful to know what other investments the partner is considering, as there is a limit to every partner's resources.
 
Existing customers/Existing products - In the opposite corner of the model are the "lifestyle" partners who are content with revenues from their current customer base and product portfolio. These are not necessarily bad partners to have as they may contribute quite a bit to your revenues, but the opportunities and business case this partner will be open to are very different from those that will resonate with a partner in aggressive growth mode. Put simply, your business case must focus on selling more of the same to the same customers.
 
New products/Existing customers - This partner's growth strategies are similar to the lifestyle partner in that their focus is on existing customers, but they are open to selling new products into these accounts. Good at establishing long-term customer relationships, account penetration is often a business case strategy that will resonate. In this scenario, the business case must not only show how they can grow by picking up new products, but also emphasize how your organization will help them cost-effectively assimilate these products into their product portfolio.
 
Existing products/New customers - This partner wants to remain focused on their existing portfolio. They may have challenges hiring and retaining new talent or they may just be very focused on a narrow niche such as a specific industry. The business case you present needs to show them how they can reach new customers with existing products, either in new geographies or new industries.
 
As I mentioned, the Ansoff model is helpful for understanding growth strategies, but you'll notice that I gave several hypothetical examples of why the partner might be in one particular quadrant or another.  As they say, the devil is in the details. To construct a truly effective business case, the channel manager needs to not only understand which quadrant the channel partner is in, but also why.
Last modified on 12/16/2014 11:45:44 AM
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