Embracing the Compulsory Partner
Customers may force vendors to sell through a preferred supplier, creating an uncomfortable and seemingly valueless temporary relationship. However, compulsory partners are opportunities to expand sales after the initial shotgun deal.
By Larry Walsh
Management loves hearing the sales-floor bell chime. Every sales floor has a different threshold for clanging the brass bell to mark a win. Everyone knows when they hear the claxons sound, a sizable sale is going on the books.
Among the few times management turns a tin ear to the clanging bell is when it comes with conditions, such as when a customer compels a deal to go through their preferred seller – or what we call the “compulsory partner.” In these cases, the vendor must scurry to form a relationship, establish compensation terms, and process the order before the customer’s interest goes cold.
Sure, management appreciates the revenue, but they don’t like the accompanying cost that comes with such shotgun weddings. Vendors will end up surrendering several points of margin to the compulsory partner for just processing the paperwork. No value-add. No assistance in the logistics or implementation. No risk accepted or shared. The compulsory partner is just along for the ride – and a short one at that.
Channel-friendly vendors understand the value of partnership. They appreciate how partners increase sales capacity and reach, providing access to customers with whom they have long-standing and trusted relationships, and delivering technical capabilities that expand field engagements. The attributes of true partners are a net-positive in the vendor go-to-market equation.
On the other hand, the compulsory partnership forced upon vendors by customers is problematic. The only reason for the engagement is the one-time sales event. The compulsory partner has expressed no interest in the vendor’s products, services, support, compensation, or incentives. To them, the sale is an unexpected windfall.
Customers Set the Rules
Customers often force these arrangements between vendors and their preferred suppliers out of necessity, expediency, and – frankly – convenience.
As most people recognize, vendors create channel programs to standardize their partner relationships. If they were just dealing with a handful of companies, they could establish unique contractual terms with each partner. When you want scale and speed, and minimal risk, you standardize contracts, providing uniform terms across multiple partners of similar types.
Customers have similar approaches to their suppliers. In fact, customers often seek to minimize the number of suppliers in their stable to simplify account management and payment terms. Consider this: Vendors have sales reps or partners to manage their accounts. On the other side, the customers have purchasing managers who manage the other side of the relationship. In practical terms, purchasing has costs, and costs increase with the number of suppliers.
Pushing a vendor to sell through a preferred partner is expeditious and convenient for buyers/end users that already have a contractual relationship with the partner. They don’t have to assign any additional resources. And they can insulate themselves somewhat from future purchasing expectations with the vendor.
Yes, it’s annoying to have to pay a third party for customer access, but that’s a cost of doing business. If anyone asks why a vendor would agree to this arrangement, just remind them that the vendor wouldn’t get the sale without the third-party. Final analysis: It’s the customer’s choice. If you want to play with the customer, you have to abide by their rules.
Making the Most of Compulsory Partners
The real challenge isn’t avoiding compulsory partners; it’s how to leverage them for future sales and potential growth.
A solid technique for identifying companies for potential partnership is asking customers from whom they source products and services. If you can identify existing relationships, you can tap into a ready revenue pool.
Vendors should use this pairing with a compulsory partner as an opportunity to form a new go-to-market relationship. After the initial deal, vendors should work the newly established connections to identify similar accounts and sales opportunities, and to expand on the fledgling relationship.
Some of these compulsory partners may have little interest in furthering the relationship. That doesn’t mean a vendor shouldn’t try. Productive partnerships don’t always come easy, and convincing a company to make the investments to expand a relationship and expose existing accounts to a new vendor requires salesmanship and risk management. In other words, a vendor needs to keep knocking until they’ve exhausted any possibility for a true, productive partnership.
Customers may push a vendor into a partnership that it neither seeks nor wants – at least initially. But that doesn’t mean the compulsory engagement can’t lead to bigger and better sales engagements. It’s up to the vendor to define that opportunity and benefit to the would-be partner.
The bottom line: Letting a single-sale partnership go unnurtured is simply an opportunity wasted.