There has been a lot of great discussion on the topic of “Long Tail Partners” – that fairly consistent 80% of partners who contribute only 20% of the revenue. Here’s my contribution to the ongoing dialog – discussed in two parts. This first blog post focuses on structural considerations. Part two, “Optimizing the Performance of Long Tail Partners” i.e. “what to know” and “what to do”, will follow.
When operating with “long tail partners,” an important first step is to make sure you examine all of the factors that could contribute to your diagnosis of less than optimal performance. These can be broken down into five factors:
Has the partner structure for the markets you serve consolidated so that there are, in reality, fewer partners that dominate those markets? If so, what is your position with these key partners?
– Have you established clear selection criteria for channel partners – by portfolio and target customer segment – or is anyone allowed to sign up? Some partners may just not be capable of doing much for you. While others are notorious for collecting brands – especially if the vendors have a strong market presence. Ideally, your criteria should include some level of understanding of: the partner’s coverage of your target markets, capacity for selling your portfolio, competence (both technical and business) and commitment to you.
– Have you communicated your process to all key stakeholders – and do you enforce it?
Has your go-to-market strategy evolved over the last several years? If so:
– You may have partner “misfits” whose business is successful but no longer maps to your portfolio and/or strategic objectives.
– Your channel management infrastructure may now need to align with new-to-you industrial partners whose vendor requirements and expectations can be significantly different than those of more familiar tech channels.
Are your channel policies creating a level playing field – or are you experiencing high levels of dysfunctional channel conflict that is hurting you in your markets? I can’t say enough about the importance of channel conflict management. It’s a critical component of risk management for your partners. In my experience, when partners can choose among vendors with similar offers and margins, the decision usually comes down to how well vendors answer the question: “How do you manage channel conflict?” Questions for your team include:
– How well does your direct sales team interact with your channel partners? Do they cooperate or compete?
– Are the rules of field engagement clear? Are they consistently communicated and enforced?
– Do you have a deal registration program to protect partner investments in important opportunities?
– Do you promote and support partner teaming in solution sales?
Even if gross margin opportunity for your offers is competitive, the net margin may tell a completely different story once the partner costs of doing business are examined. Typically, we find significant extraneous costs caused by poorly designed and executed partner programs. Examples include:
– Burdensome requirements having nothing to do with what partners need to be successful in their target market. A classic example is certification requirements that increase with partner tiers. Partners serving a particular vertical or customer size segment (ex. small business) don’t need or want certification in areas that have no relevance. Therefore, these are extra channel costs. Consequently, partners cannot and do not engage enthusiastically with vendors who structure their programs this way.
– Sales contests that result in the same partners winning – year after year. We’ve seen these programs in every market – tech and industrial. And they always have a demoralizing effect on smaller – but critically important – partners. Better to structure promotions around growth or another metric that creates more even opportunity.
– Limited/no access to meaningful support. Some partner programs focus almost exclusively on marketing support which is necessary, but not necessarily sufficient. Especially so where you have partners that are not familiar with you and your portfolio. In addition to deal registration, your program – and value proposition – to the “long tail partner” might need to include seed units, demo units, joint sales calls, free access to basic training and free or heavily discounted development kits.
– Communication overkill. Communication is a good thing, right? Not when it’s irrelevant or packaged in ways that are difficult to digest and use by partners working with 8-10 vendors or more! Channel partners want to be convinced that you understand their business. Therefore, show structured communications in ways that help them succeed.
Once you’ve gone through the checklist and identified any issues that need to be addressed, you can work with your team to identify the long tail partners that you really want and need to engage with more proactively. These include:
Certainly, these factors and the work that needs to be done to engage the “long tail partner” are not trivial. Happily, though, a powerful channel management platform can help your analysis of the situation and your creation and execution of impactful program components. Blog #2 will discuss how.