It is a well known fact in the technology industry that most companies benefit from business models that include indirect revenue through channel partners such as Resellers, OEMs, Distributors, and Referral Agents. Yet, why do some companies experience great results from channel partners while others struggle or fail? Particularly in a Web 2.0 era when it is much easier to connect and communicate?
I have set out to answer these questions through a series of interviews with subject matter experts on establishing and managing channel relationships and invite your input as well. I will be providing each of these interviews in detail in subsequent blog postings. However, before I do I would like to share my personal perspective on channel partners.
I believe the right channel partners can make or break an emerging company and can help or hurt an established company. However, I have seen too much emphasis placed on the quantity of channel partners and not the quality of channel partners. Perhaps this has a lot to do with how the individuals responsible for this area are measured or maybe it is hard to turn down someone who wants to help you promote your product.
I also believe there is a naïveté when it comes to channel relationships. A great deal of interest and work goes into recruiting partners and signing a channel agreement, however, as you will hear from a few experts that is just the beginning of the process. It takes a considerable amount of time and effort to plan for results and manage the relationship to produce yields. i.e. it takes work and it requires managing. If you’ve read my book about applying management science in direct sales to improve results you know I am a believer in performance management. Well, this is another area where the application of basic performance management can affect a positive outcome. i.e. Set goals, coach/intervene, and assess.
While I know that goals are often discussed, I wonder how many channel partner relationships involve preestablished success plans with detailed goals. How many include a formal quarterly or monthly schedule of reviews to checkpoint progress and provide an opportunity for coaching? How many involve a formal joint assessment to review how the relationship is working for each party and what if anything needs to be changed?
The good news is many large companies I have experienced accomplish the goal setting and the annual or biannual assessment part, however, they could benefit from more frequent check points based on a more detailed scorecard. Of course large companies can afford the staff to accomplish performance management of channel partners but what about smaller companies?
This gets back to the point I was making earlier about quality versus quantity and it applies mostly to smaller companies. Almost all small tech companies should have channel partners and in doing so they should apply performance management in their relationships. If they can’t afford staff to do it then it should be done by members of the management team including the CEO. Given their limited human resources I suggest dividing your channel relationships into two categories.
1. Strategic Alliance Partners:
A select number of relationships that add strategic value to your go to market plan where you can take a quality approach to perform the necessary work to increase the odds of succeeding. i.e. train, joint sell, coach, assess, etc. The right number of relationships should be based on the available resources you have to manage them effectively.
2. Referral Agents:
Companies who approach you to promote your product and refer business to you. I suggest being cautious about who you sign as a Referral Agent because their market activity has a reflection on your brand and can waste your resources if they are continually referring low probability prospects. Referral Agents should be viewed with low expectations and zero touch since they are simply bringing you leads that you still need to qualify and work or pass to a strategic alliance partner to handle.
Through focus on quality and effective management of relationships it is possible to significantly increase your revenue through channel partners.
Stay tuned for subsequent blog posts containing expert advice and details on how to maximize yields from channel partners.
