In almost every channel program roughly 20 percent of the partners participating in that program wind up driving 80 percent of the revenue generated via indirect sales. This rule is almost as old as the channel itself. Hence the importance of Channel Partner Leveling or Partner Tier Management.
Naturally, an organization’s best partners demand to be recognized for their efforts in the form of rewards spanning everything from an increase in margins to better sales enablement tools. Those partners inevitably become the foundation on which “Gold” or “Silver” tiers of a channel program are built.
While that sounds simple enough, it turns out managing multiple tiers of a channel program is a complicated endeavor that is becoming significantly more challenging. Most channel partners are assigned a specific tier after an annual review of their previous years’ activity. But a lot can happen over the course of a year. Channel partners for one reason or another can lose focus or become distracted. They may, for example, be putting more effort behind a competitive offering, or they may have simply shifted their strategic sales focus.
Waiting a full year to discover what’s occurring among your best partners is a recipe for trouble for all concerned. Shareholders and finance departments the world over are demanding more accurate visibility into the amount of revenue that will be generated via indirect sales.
To eliminate any financial surprises, many vendors are now instituting channel partner leveling reviews that occur more frequently. Channel partner leveling reviews may not lead to a change in partner status. But they do provide the vendor and the channel partner with an opportunity to level set expectations on either a semi-annual or quarterly basis.
Of course, it’s not possible to have a meaningful conversation about partner performance without having visibility into how a partner is performing relative to rest of the channel. What appears to be a lack of focus in one may turn out to be an endemic problem impacting the entire channel. Conversely, it may be an issue in a specific region. Whatever the issue it’s clear channel managers need access to granular business intelligence reports that can only be provided via a channel automation platform.
In the event there is an issue specific to a channel partner there needs to be a backup plan. Sometimes that means making more sales and support resources available to a partner or changing the incentives being provided. But it may also signal a change in the relationship. Channel managers then need to know what other partners they can rely on to pick up the slack.
That usually means shifting more business in the direction of a top tier partner or being able to identify an up and coming partner that has the potential to break into the top tier. Regardless of the path chosen, determining partner levels is only the beginning of the channel management process. Making sure that expectations, as defined by those partner levels, are met requires daily care and feeding of the channel ecosystem.
After channel partner leveling, it may not be advisable to change the status level of a partner mid-year. Most partners are engaged in long-selling cycles, and there’s an expectation of trust between the partner and the vendor that is hard to regain when a status level is suddenly changed. Status level decisions should be confined to an annual review. But when it comes time to have that discussion, there should be no surprises. Both the partner and the vendor need to be equally aware of the strength of the bonds between the two organizations at any given moment. As President Ronald Reagan once observed when it comes to making any deal, it’s essential to be able to trust but verify.
At Channel Mechanics, we believe channel partner leveling is critical to the success of any program. If your organization is yet to invest in channel automation to verify partner performance, we recommend you watch our webinar: Top 5 Benefits of Channel Automation.
If your organization has invested in channel automation, then we would ask what degree of visibility into channel partner performance does your platform really provide. In either case, we’re confident we can help your organization do better. For a demonstration of the capabilities of our channel automation platform, we’d be delighted to put together a customized demo for you here.