Vendors Need an Outside-In Approach to Channel Programs
Too often, vendors build programs solely to service their own needs. They need to take more consideration of what partners need and partner business models to drive better channel results.
By Larry Walsh
Every vendor wants to grow its indirect revenue, and with good reason. Partner sales are less costly, thus more profitable. And a well-developed channel extends market coverage, potentially reaching many more customers than possible with a direct-sales model.
Okay, that much we know.
So why is it so hard to get partners to do their job — namely, to sell more product?
I’ve been thinking about this a lot lately. It’s the time of the year when vendors are resetting their channel programs based on their overall corporate goals and expectations. They’re trying to figure out how to drive more performance out of their channels, which are largely underperforming. As I’ve written about many times, the channel operates on a 90/10 ratio, with 90 percent of the revenue going through about 10 percent of the partners. Vendors want one of two things: the 10 percent of performing partners to increase their sales or the underperforming majority to pick up more of the burden.
What’s the vendor prescription for increasing partner sales? Typically, it’s incentives – or, in other words, more financial compensation for performance.
Inside vendor conference rooms, the conversation typically goes like this, “We need partners to sell more. How much do we have to pay them? What incentives do we need to put in place to get them to sell more?”
Granted, my description of that conversation is a bit truncated, but you get the picture. The questions that are asked include the following:
- Who are the customers of our partners?
- What purpose does our product serve in customer environments?
- What does it take to make our products operational to fulfill customer need?
- What role do we need partners to play in helping customers make the most of our products?
- What are the business and profit models of our partners, and do they align with our go-to-market vision/strategy?
Too often, vendors look at channels simply as a means for pushing more product through the sales pipeline and generating revenue. They take too little consideration of the value partners bring to the table in terms of enabling customers and satisfying their needs. Further, they assume all partners are motivated purely by compensation — front- and back-end. So it’s no surprise when channel programs and partner initiatives generated by vendors look one-sided. They reflect an inside-out perspective.
This inside-out perspective is the root cause of many channel conflicts and difficulties between vendors and partners. If you’d like to read about one partner’s experience as a VAR, check out the perspective of Andrew Plato, the founder and CEO of security solution provider Anitian. In his blog, “Goodbye Yellow Brick VAR,” he describes the immense barriers, challenges, and inconsistencies in the two-tier channel model that make reselling product undesirable.
Check out the Pod2112 podcast with Andrew Plato.
Many of the issues Plato describes can be chalked up to the way vendors structure and try to control channel processes for their own self-interest, regardless of partner needs or models. These problems are real, and they’re causing increasing numbers of partners to abandon reselling vendor product in favor of focusing on their own services. As many former VARs tell me, they’ll sell a product incidentally, attached to a service, but they’re not going out of their way to plan or apply resources to product sales.
Vendors need to do a better job of putting themselves in the partner’s position and work through their programs backward. By taking an outside-in approach, vendors can create more rational channel programs that focus on real outcomes and are aligned with the way partners go to market. The net result of this approach is reducing the burden of partners to comply, thus paving the way for smoother, easier go-to-market relationships.
The 2112 Group specializes in channel go-to-market strategies and channel optimization services. Let us validate your strategy through our channel program assessment services. 2112 can help you tune up your channel go-to-market strategy and processes to generate better results. For more information, e-mail me at email@example.com.