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Channel Matters Blog > June 2012 > Where to invest for improved channel returns

Where to invest for improved channel returns

by Philip Moon
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Every VP of channels is a professional investor; choosing where to invest limited time and funds to get the best return from the indirect channel. Every investor knows they must invest in order to get a return, but which investments bring the best returns?

The first thing to keep in mind is that it’s your end-customers who have all the money to give you a return on investment. End-customers pay for everything you and your channel partners so ultimately any investment in the chain between your company and your customers has to be about returning more of your end-customers money.

Partners are a vital link in that chain, it’s obvious that when channel partners focus on your customers with your products and services, you receive a higher share of your customer’s funds. So what we need to think about is how to get partners to invest and focus. Where should you invest to change partner behavior?

Channel Enablers research reveals that high tech vendors spend up to 3% of their revenue on Channel Programs in an attempt to motivate and influence partner behavior, but it might not surprise you to learn that on average 25% of partner programs are regarded by partners as a total waste; the programs are not important to partners and don’t differentiate the vendor.

A further 40% of partner programs do differentiate the vendor, but are still regarded as unimportant by partners. If you’ve been adding up, you’ll see that some 65% of programs do little or nothing to drive partner behavior.

The fact is that most vendor partner programs look very similar to partners and many vendors feel there are few real opportunities to differentiate themselves. However, improved partner engagement is one of them. The way your company engages with partners is the only other way you can influence partner behavior and focus.

Investment in partner engagementPartner engagement

 

Partner engagement is more than just the ability of the channel manager to interact with a partner, it’s also about the partnering environment your channel managers operate in – including processes, systems, programs, attitudes, skills and company direction. On-going two-way communication and mutual understanding between partners.

 

Partners will almost always have different business goals than vendors and that’s OK as long as the goals of the two organizations are cooperative goals leading to mutual success. This comes about through effective planning and review; plans that get executed and are not just completed by the channel manager to get their manager off their back

Because Channels are about lowering the cost of sales and market coverage, they must also be about effective scalable process and automation too. If your channel sales people are touching too much of the sales process you are continuing to bear this cost and this undermines the fundamental reason vendors to go to market through indirect channel partners in the first

 

place. Ease of doing business and taking the cost out of the relationship, for both parties, must remain an ongoing focus area.

Effective engagement means the right combination of leading and outcome metrics are in place, and collecting the data to track these is not a costly and burdensome task. Engagement means partners are enabled to generate revenue without constant vendor interaction and support.

Partnering doesn’t just happen, skills and processes of effective communication and teamwork are foundations of channel success.

Outcomes of improved partner engagement

What’s the return from improved partner engagement? Partners know which vendors engage with them effectively and are easier and less costly to do business with; and they know which vendors don’t.  If you are in channel sales the chances are you know you are in competition with other vendors for the time, attention and investment of the best partners. If your company earns a reputation as a ‘channel centric vendor’ it will help you recruit the best partners.

Another key outcome, and one that should be a key metric for your channel program, is the time it takes to get new partners to become productive. If you are actively recruiting partners, doing better in this area alone could give you the channel revenue growth you need.

But what about vendors who are not so actively recruiting? Partner contribution rate means the percentage of your partners who are actively contributing revenue. Channel Enablers research shows that on average 20% of partners produce 80% of the channel revenue, some 40-60% of partners produce 20% of the revenue but want to do better, and most of the rest should be transitioned out of your channel program. The opportunity of improved partner engagement is to get more of this middle group producing for your company – and for themselves. These partners generally want to succeed, but don’t really know how.

Better engagement leads to partners who invest and focus:

  • They can sell and market independently and aren’t relying on your resources at every stage of the sales process
  • They cross sell and develop their installed base
  • They assemble the other products and services needed to complete your whole product solution, they are technically competent and satisfy your end-customers’ needs
  • These ‘Achiever’ partners know how to run their own business. They plan with you and then they execute on the plans with real commitment of funds and resources

How well does your company engage with the channel?

Here are a few quick questions to ponder as you decide on your investments in improved partner engagement

  1. How consistently does your channel team execute through a set of scalable and repeatable step-by-step processes? Are they equipped with the tools they need to do their jobs? Do they follow a best practice play-book that tells them what to do and what resources to leverage at each stage of the partner engagement lifecycle?
  2. Do your channel sales people speak the financial language of senior partner executives and business owners? Do they have channel business acumen?
  3. Channel sales skills are not the same as direct sales skills. Do your channel sales people have the skills to influence partners towards needed change and investment?
  4. The best channel sales people already know that time spent in effective planning is time saved and resources focused on growth; but what about the rest of your channel sales people? Do they follow a consistent process to plan with partners, bring goals into alignment, focus on revenue growth and conduct regular reviews?

The fifth question is most directly relevant for more complex partnerships, but also for those 40-60% of partners who really want to succeed but don’t actually know how. We talked about this group earlier, they are one of your best opportunities for channel revenue growth. The question is:

  1. Do your channel sales people have the virtual sales management skills to lead and manage partners through critical stages in the sales process and the partner planning and management process, and the skills to coach and develop partners to identify and resolve their own barriers to success and to become independently able to generate indirect sales revenue?

Typical channel sales behavior is to ‘SERVE” partners in an attempt to curry favor. You will often hear channel sales people digging big holes for themselves and increasing partner dependency by saying things like “If you have a problem give me a call” and “What can I do to help?” Or this classic that has partners filling in their shopping list “Are there any more resources you need from us?”

By contrast – the best channel sales people have the skills to coach partners to recognize and uncover their own issues and opportunities – and to identify what should be done about them as well. Coaching requires a new approach and a new set of practical skills; this is about partner productivity, about partners who are less dependent on vendor resources.

 

Last modified on 6/30/2013 10:11:02 PM
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