10 Guiding Principles for an outstanding Channel Strategy

If you run a B2B company, selling IT hardware-, software- or service solutions via Value-Added Resellers, System Integrators or Managed Services Providers, here are my Top 10 recommendations to you, in order to establish a successful and profitable indirect business:

1. Channel Partners are Customers

Don’t think about your Channel Partners just as an extension of your Sales Force. They are not around to help you achieve your targets. Only if you understand, that they are also looking for a profitable and sustainable business, you will find the right approach to partnering

2. Stay easy to do business with

From your point of view, it may appear crucical to install a variety of programmatic components allowing you to measure the impact of your Channel Partners. You obviously have to show a ROI on your sales- and marketing investments into your Partners. But beware of asking for too many reports or introducing too much complexity to the life of your partner. In partiuclar, don’t expect them to work in your systems, such as maintaining opportunities in your CRM. Always keep in mind, that you are not their only vendor partner and that all this Admin work sums up to a significant burden for your channel partners

3. Think value-oriented and not about requirements

Traditional Channel Programs are often based on a requirement model. The vendor requires his partners to constantly prove sales- or technical skills, sometimes even asks for a program fee and expects a constant revenue performance in order to grant program benefits such as medallion levels, technical support or sales/marketing support. If the partners business shows a period of weakness, program benefits get revoked and the partners business performance suffers even more. So think about a value-based channel program model, that rewards a channel partner with a growing profitability whenever he demonstrates commitment to your business. On the ther hand, refrain from demoting loyal partners in thimes of trouble.

4. It’s all about Margin

Typically, your end-customers are somewhat aware of the discounts you are granting to your Distributors or Channel Partners, so in a generalized view, channel margins are alway under pressure. In addition, corporate enterprises have the nasty habit to buy from the cheapest supplier, not necessary from the one who has made a lot of investment into the deal. Profitability programs such as Deal Registration or volume-based backend rebates can make are a great instrument for ensuring a healthy margin. Such programs are also quite helpful in order to drive the desired focus or behaviour of your channel (e.g. focus on new customer acquisition with a higher deal registration reward for new- vs. exisiting customers)

5. A Renewal is not easy

Software companies, selling subcriptions or licenses which are frequently up for a renewal, tend to believe that a renewal deal is easier than selling new solutions to an existing or new customer. Therefore they adjust their internal compensation models with accelerators ot decelerators, emhasizing on  “new” while taking the closure of a reneal for granted. While this may work with some vendors’ sales forces (I’ve never seen great results with this model…), it’s absolutely counterproductive for the motivation of your channel partners. A renewal is typically the result of your channels hard work and customer service during the entire period of a maintenance term. Therefore, make sure that you reward a renewal transaction appropriately as well.

6. Share Leads, Risk and Opportunity

Assuming you have great products and good people, successful recruitment of Channel Partners can always be done. With the right training programs in place, an appropriate enablement and skill transfer from the technical and sales point of view, is no rocket-science either. The tricky part, is to get going in the day-to-day business execution. Your new partners don’t have an installed-base to serve and no new business pipeline yet, so you have to make sure that they have some opportunity to work on in the early days of your partnership. Lead hand-overs, Co-selling, opportunity-sharing and service-shadowing are great ways to bridge the chasm between the first enthusiasm, investments and the first independend wins of your new Channel Partners.

7. Don’texpect Channel Partners to do marketing for your brand (only)

The majority of Co-Marketing programs or -campaigns, expect the Channel Partner to promote the brand of his vendor partner. A great Channel Marketing Program allows the Channel Partner to promote his own brand, his services and to demonstrate his track record of success. The vendor brand ideally only rovides further reevance, credibility and tailwind.

8. No Push without a Pull

As a vendor, you can’t  refuse to generate some customer demand yourself. Channel Partners expect you to ensure a certain degree of brand- and solution awareness around your offerings. you hve to make sure there are Customers asking actively for your products. Ideally, you make them knock on the doors of your Channel Partners. With a decent pull from the marekt in place, you can accelerate and push via your Channels. If you don’t manage to generate at least a minimum level of acvice demand fo your offerings, even the best designed channel strategy will fail.

9. Design a clear Coverage and Compensation model

However your sales- and compensation model may look like (Key Account Sales, Territory Sales, Verticals etc.), make sure you have dedicated and experienced sales people on board, who are only  measured and paid on the success of a portfolio of key channel partners. Avoid compensation model nonsense such as not paying your channel people on revenues which their partners generate at a designated Key Account they do serve also. Of course, paying comission to two or more of your sales people for the same chunk of revenue is not a great thing, but my experience shows that constant arguments about quota attainments is one of the biggest productivity issues in indirect B2B solution sales.

10. Channel Loyalty needs to be newly earned – each and every day

Ultimately, Channel Partners serve their Customers, not your company. As long as your offerings and services provide unparalleled value-add to the business of your partner, everything is allright. But always bare in mind, that all in a sudden, there may be competitors of yours, offering similar stuff for a cheaper price – driven by popular market demand. Don’t expect channel  loyalty in times of market pressure – your only choice is to regain the lead by making a difference to your channel – again.

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