Is More Margin for Your Channel Partners Good for Business?

more_margin_for_your_channel_partners

Not always. Not - if you’re not addressing the ‘what’s in it for me’ factor for all stakeholders. It depends on the problem you are solving for, the qualification requirements for earning the additional margin, and who gets the margin. Still not easy.

Here’s a common scenario. You’re a vendor with 10 product lines. While the product lines are complementary, they are often sold on their own. Some product lines have been solid performers for many years, while other lines are very new. Problem – many of your channel partners only sell your core products – the ones that you originally made you enormously successful.  And many of your resellers barely quote, let alone sell, your newer lines – and these are the products that you are strategic to your revenue growth, differentiation and long term viability.

And here are some of the common moves we see. Vendors offer accelerating margins to channel partners in return for:

  • Gaining technical certification on one or more product lines
  • Building a plan that shows commitment to a new and higher revenue level
  • Getting customer success stories
  • Strengthening delivery capabilities
  • Deal registration

Getting alignment – often the missing key –where do the additional margins go?

Often these initiatives do not deliver the desired sales growth.  And it’s often because of lack of alignment between the vendor and the channel partner at the owner/management, technical pre-sales and delivery, and sales functions. And lack of alignment in this case refers to where the additional and accelerating margins go.

All too often, the margins go to the channel partner organization and help offset the costs associated with getting the technical certifications and strengthening the technical pre-sales and delivery teams.  Sounds logical – there are costs and as a vendor you are helping your channel partner manage costs while ramping to sell new lines.

How do you get the sales teams on side?

The sales teams are the front line – identifying and developing new opportunities. They determine which opportunities to pursue, and which products to quote. And they often make those decisions based on two factors –

  1. Where can they make the most money, and
  2. Are they confident that they and their organization can sell and deliver the solution.

You can spend a lot of time and money investing in pre-sales, but if the rep thinks he can more money – in total as well as easier and faster – with a competing line that the partner also carries, than that is often where the rep’s focus will go.

Get the channel sales rep’s attention...and commitment.

Take some of that additional margin that you are prepared to provide and ensure it goes directly to the channel sales rep in the form of a partner program incentive/spiff. It gets lost or watered down when it rolls through the partner organization on its way to the rep. Enhance your communications directly to the rep, in addition to partner level communications. With an effective partner rep incentive program, your rep level communications will cut through the ‘noise’.  And make the programs easy and strategic.

Check this infographic for an example of how one vendor built a large pipeline leveraging its partner channel.

Want to learn more or discuss your specific scenario? Give us a call or schedule a demo of our software platform.


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