Is Channel Management an Art or a Science?

Channel Management. Mostly Science, Some Art - Channel Mechanics

Howard M. Cohen, Technologist  |  

calednar Channel Mechanics8th May 2019

Channel Management. Mostly Science, Some Art

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New ISVs and manufacturers starting to build a partner sales channel often don’t know where to start, when it comes to Channel Management. Fortunately, the inner mechanics of channel building, development, and management have become richly developed over years of practice. This high-level introduction demonstrates how much of channel management is pragmatic. And how much requires the arts of persuasion and relationship building.

 

Channel Partner

Few words are more overused and abused than the word “partner”. For many years “partners” were any entity that resold a manufacturer’s products. They may not have added any value to products beyond shelf-space, yet they were referred to as “channel partners.”

Today’s channel partner has very different drivers that not only define the word “partner” for them, they also define those partners’ businesses. Where profit margin was once the primary driver in the long-ago distant past, today’s channel partner seeks products that require accompanying services which they can provide. Sales of these services bring meaningful margins, creating most products as the classic “give them the razor and sell them the blades.” Your product is the razor, and you enjoy your full revenue from each sale. The partner has no expectation of profit from the sale of your product but is gratified by the opportunity to attach many potentially significant services.

 

Channel Management – How to Better Manage Today’s Partner

Start by recognizing that behavior is always predicated upon reward. Ask yourself what your partners want from your products and your company.

 

From Your Products

First and foremost, your partners want products that work well, perform as advertised, deliver excellent customer experiences, and are readily supportable. The last thing a partner wants to have to address is customer complaint headaches associated with your products.

The more needed or desirable services that are driven by your products, the better partners will like them. Consulting, planning, and design services up front. Provisioning, configuration, deployment, and integration services during on-boarding. Training and ongoing support services post-delivery. These last ongoing support services serve to increase the highly sought-after monthly recurring revenue (MRR) that every partner craves.

Adjacency to other products and services are also very attractive to partners. By bundling your products with others, and their own services, partners succeed in maximizing their deal size as well as their MRR. Best of all worlds.

 

From Your Company

Any experienced partner will avoid you should they determine they cannot depend upon you for support where the customer’s problem goes unusually deep. They must have recourse in these situations, or they risk their own all-important reputation.

Most of your partners will have come from a world in which their major OEM partners routinely provided them with Marketing Development Funds (MDF) and co-operative advertising. For many these funds were the sum total of their spend on marketing functions. As their dependence upon product sales has diminished, so too has their MDF. Therefore, partners will welcome providers who value their partnership in marketing to the point where they’re willing to fund or at least help fund those efforts.

The best way to cement a channel partner relationship is to become a source of revenue for that partner. When your own marketing efforts result in sales that are better served through a regional or local partner, and you give those opportunities to partners who have taken the time to train on your products, you earn a heightened level of partnership with them as they become a delivery arm of your company.

 

Leveling Partners

The structuring of many channel partner programs tends to be along the classic platinum/gold/silver/bronze arrangement. Those that were based on revenue realization have become somewhat outdated as service providers prefer not to fulfill product sales. Yet, service providers who furnish products through catalog warehouses or other resellers, may still be your best source for new sales. Some of the oldest and most highly regarded channel compensation programs have been based on sales influenced rather than processed.

Additionally, consider leveling your partners based on the servicing burden. How much of the servicing burden they have trained in and are willing to take on. This aligns well with the nature of their business now. Most consider themselves service providers, not resellers.

 

Relationship

For most channel partners, the most important ingredient continues to be the relationship they have with the Channel Account Manager (CAM) assigned to them. The best way to assure a productive relationship is to counsel your CAM on focusing on that last word in their title, “manager.” Channel Partners value the assistance of an objective outsider with useful insight and experience. When they can sit down with your CAM and talk frankly about their business, their concerns, decisions they need to make, and other strategic issues, the resulting relationship becomes highly valued and all but indestructible.

 

Further Reading

  1. What Channel Partners Want Most from You. Hint: It’s not Channel Margin!
  2. Why Vendors and Distributors Should Care About Back-End Credits and Rebates
  3. Top Ten Things Channel Managers Want from Partners
  4. Whitepaper: Building the Business Case for Channel Partner Leveling Automation

 

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