Successful Channel Partner Relationships Begin by Identifying what End-Users Deem Valuable
It is either arrogance or naivety to assume manufacturers dictate the fate of their channel partner relationships and the way end-users purchase products.
At the end of the day, end-users possess power in how products are consumed. Therefore, leveraging the channel partner model depends largely on how well manufacturers understand the demands and needs of its end-user customer-base.
In the eyes of the end-user, no one channel is created equally, which means the final procurement of products occurs by design, not through fate. In other words, end-users will purchase products from the channel based on preference and business objectives, not the manufacturers.
Manufacturers that base partner decision-making on low investment and support costs versus how end-users want to purchase and/or use products put themselves at a disadvantage.
Author Stephen Covey once coined: “begin with the end in mind,” and it seems manufacturers frequently overlook this poignant, yet simple life/business philosophy. Ultimately, end-users choose the path by which products are purchased, and it is up to the manufacturer to adjust accordingly in how they sell thru the channel.
Once you have a comprehensive understanding of end-users wants/needs, you can begin to create a channel sales strategy.
Let’s get started…
1.) Know Your Channel Partner’s Values
Regardless of your channel sales schema—partners must possess some monetary value in your relationship. Implementing well-defined channel programs are, for obvious reasons, one of the best mechanisms for helping your partner establish a financial gain.
However, in order to get the best ‘bang for your buck’ from your channel partner relationship, you should segment incentives based on “transactional partners” and “strategic partners.”
- Transactional partners – “order takers” that focus on moving product thru channel; SPIFFs, deal registration, volume incentive discounts, Ship and Debit, Special Pricing Agreements, etc. are programs that offer value. Transactional partners may require less margin.
- Strategic partners – companies that proactively sell your offering; solution providers that offer end-users niche services, support, consultation, etc.; gamification, marketing development funds, co-op advertising accruals, rebates, etc., are programs that offer value. Strategic partners may require more margin.
An effective channel sales strategy should be able to distinguish between “transactional” and “strategic” partners so that the correct (coordinated) marketing program is applied.
2.) Create a Strengths, Weaknesses, Opportunities, Threats (SWOT) Analysis
During the “production process” of designing your channel sales program, a comprehensive SWOT analysis table will give you a 360-degree perspective of your partner model.
– Strong value proposition to partners to sell your offering
– C-level support to fund channel programs
– Competent, experienced channel account management team
– Strong partner mindshare and interest in programs
– Cloud-based partner portal enables program participation
– Partner(s) have little trust and confidence in you
– Difficulty standardizing POS data for partners’ native formats
– Channel conflict continues to cause price undercutting
– Slow turnaround of incentive reimbursement causes partner dissatisfaction
– Accelerate deal closing opportunities
– Achieve lower end-user support costs
– Enter international markets and/or untapped demographics
– Difficulty managing channel conflict may motivate partners to seek other partners
– Reluctance in partners to submit POS data may hinder ability to control costs and make smart marketing decisions
– Fluctuations in international markets; exchange rate
– Incentive overpayments may comprise margins and program ROI
– Lose control of retail price by selling via distributors
Once you have defined what makes your channel sales program/partner model a strategic asset, you will have a better understanding of the operations needed to make it successful (e.g., additional support staff, a web-based module to assists with high-volume partner reimbursement claims submissions, increased marketing funds, IT support, etc.).
3.) Smart Channel Partner Relationships Focus on Profitability Data, Not Just Revenue
You may be surprised to learn that many of the partners you thought were your biggest profit-generators were actually the ones hurting your gross margins—and vice versa.
Getting smart about channel distribution means you’re looking past partners’ ability to drive conversions and transfer cost analysis, and more at closely profitability data and growth potential.
Assessing channel partner performance exclusively on revenue generated could potentially swindle you into believing which companies are most profitable. Consequentially, you could be investing time, energy and resources on the wrong partners by forgetting about the “smaller” revenue performers (that are more profitable).
The more effective solution is to combine sales data with profitability analysis.
Profitability analysis includes, but is not limited to:
- Unraveling the mix of SKUs sold, channel incentive programs, and accounts receivable
- Allocating overhead cost by function (e.g., channel teams, CAMs, services, and support)
- Partners that submit timely, complete and accurate POS data to manufacturers that lead to better understanding of product performance
- Number of registered (qualified) opportunities partner generates (i.e., deal registration)
In summary, creating an effective channel strategy that is valuable and profitable for partners begins with a strong understanding of the end-user. Once you develop a comprehensive portfolio of your end-customer-base, you will be more efficient at leveraging your channel partner relationships, and the programs, resources, staff, incentives, and solutions that go into successful implementation.