How to Build Successful Channel Partnerships

How to Build Successful Channel Partnerships

I recently met with Dell’s new business team in Oklahoma City to extend one of Microsoft’s strategic initiatives across its sales force.  During the meeting, I re-confirmed the importance of structuring channel partnerships correctly to ensure success.  This is because channel partnerships today require both art and science.  For example, while Dell is a key reseller for Microsoft, it is also a key reseller for 200+ other vendors, including key competitors (e.g., VMware).  So, how do you balance these competing interests?  What makes channel partnerships successful?

What is a channel?  A channel is anything that stands between the company and it selling directly to customers (e.g., resellers).  Why do companies use channel partners?  Because direct sellers are expensive and they can scale their sales/services efforts in exchange for a percentage of the margin.  Channel partnerships are generally structured to broaden the partner’s portfolio or supplement their existing product or service.  In theory, channel partnerships drive revenue for both parties.  In reality, the vast majority of channel partnerships fail.

Why do most channel partnerships fail?  People sell what they know how to sell to hit their quotas.  If your product or service is easy to sell, channel partners will position it to customers all day.  If it is not easy to sell, they will never position it.  In addition, staying up-to-date on their own products and services is difficult enough, so positioning something new and unproven can be a challenge.  Consequently, channel partnerships must be structured correctly to successfully benefit and motivate all parties.  Accordingly, below are ten points for consideration.

1 – Be Responsive.  If you want your channel partners to work for you, be responsive to their needs.  If a sales person from a channel partner has a question, get back to them ASAP.  Help them be successful.

2 – Channel Forecast.  Do not expect channel partners to provide you with a forecast, they will not.  Your channel managers will have to interview them to get it.

3 – Channel Management.  Channel partners always need to be reminded about your product or service.  Channel managers must constantly be in front of partners making things happen.

4 – Competitive Advantage.  Partnership agreements can help you eliminate competitors using the same channel partners.  Channel partners can also help you keep competitors out of customer accounts.

5 – Create Excitement.  Offer incentives or non-monetary gifts to the channel partners’ sales force to build enthusiasm around selling your product or service.  This will help you stay top-of-mind.

6 – Limit Partners.  Unless your product or service sells itself, channel partners require nurturing and training.  Target “strategic” partners (mention you in every deal) versus “portfolio” partners (mention you when convenient).

7 – Partner Size.  If you are small, aligning yourself with a large channel partner can create credibility and open doors.  Two large companies partnering together is good.  Two small companies partnering together can be a red flag.

8 – Product Support.  Make sure that supporting your product or service does not overly burden channel partners.  While it can take 1-3 years to create momentum, it can be lost in a day if you overly burden them.

9 – Sell Together.  Co-selling with partners is common.  Never delegate part of the sales process to channel partners until after the deal is closed.  Do not let anyone stand between you and the sale.

10 – Share Margin.  Invest in your channel partners success in the early years so they are motivated in the scaling years.  Sharing 30% of the margin is common; 50% if they are heavily engaged in marketing and sales.

Channel partnerships require you to invest your blood, sweat, tears and time to make them successful.  Choose your channel partners wisely.  Ask yourself if you would invest $1 million in the channel partner.  If you would not, think twice about entering into a partnership with them.  Ask yourself if the channel partner would invest $1 million in you.  If the answer to both of those questions is yes, the foundation for a successful partnership is laid.  Their strengths should complement your weaknesses and vice versa.

All contents copyright © 2012, Josh Lowry. All rights reserved.

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