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For decades, channel marketing forecasts have been rooted in the Pareto principle. It works on the assumption that 80% of sales will come via 20% of partners. And this rule of thumb helps guide channel management effort and investment.
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But anecdotal evidence suggests that the average percentage of active partners is shrinking – especially for vendors with smaller networks. Conversations I’ve had with vendors over the past six months indicate that in some cases, 95% of channel sales are generated by 5% of partners. Does that sound familiar? If so, you’re probably nervous about having too many eggs in too few baskets.
With marketing planning for 2018 well underway, now is a good time to interrogate and optimise channel management. If you’re heavily reliant on a 5% tranche of tier one partners, urgent action is needed to move towards an 80/20 split. Vendors with larger partner networks could take this further, aspiring to a 60/40 scenario.
Taking channel sales to new heights is hard work. But analysing your existing strategy is a good place to start. I carried out a straw poll on LinkedIn asking channel management experts what questions should be asked of existing partner trading programmes. Most of the responses pointed towards three key areas: relevance (both of the partner to the vendor and vice versa), network breadth and resources for enablement and engagement.
So how can vendors address these three factors to lay foundations for a stronger and more prosperous channel in 2018?
Understanding your ideal partner profile enables more purposeful decision making when plugging gaps in the network. Start off by analysing the core business, specialisations and target industries of existing tier one partners. Then consider why they sell your product and which other vendors they work with. Find out whether they have vendor certifications and partner program registrations. And look at the number of sales people they have, and potential revenue per year.
Assessing commonalities between current tier-ones can underpin a blueprint for the ideal channel partner profile. It enables recruitment, enablement and communication strategies to focus on the most relevant partners, which have the greatest potential to deliver sales.
Striking an effective balance between the quantity of partners and their fit is also important. A carefully managed set of well-matched partners is much more effective than a large unwieldy network.
Clearly, it’s not a good idea to be overly reliant on an ever-decreasing number of tier-ones. But it’s not a simple numbers game either. Having more partners doesn’t necessarily translate into more sales.
Once you have an ideal partner blueprint in place, cross reference it with existing non-managed partners that could be a good fit. Any that have a strong propensity to become tier ones are likely to respond well to a more focused support programme.
If this approach fails to deliver enough partners to meet your sales goals, a partner recruitment drive is the next step. This activity can also be enriched with the tier-one blueprint, enabling more proactive and targeted recruitment.
Engaging and enabling partners
Recruiting channel partners typically takes a lot of effort and investment. But much of the time, onboarding and enablement doesn’t get the same level of attention. This is especially challenging for larger networks with tens of thousands of partners. Building a meaningful relationship with 20% of a 30,000-strong network is no mean feat. And the problem usually boils down to lack of resource.
But are there ways to redeploy resources, or to use them more effectively?
Research by Aberdeen Group in April 2017 indicates that vendors using dedicated channel partner technologies experience 48% greater annual revenue growth that non-users. They also increase year on year profit margins more quickly. Technology isn’t going to solve all the problems at the flick of a switch. But when deployed effectively and aligned with a good depth and breadth of relevant data and marketing assets, it can drive consistent, high value communications for partners and their customers.
Three steps to success
If you’re looking to boost channel sales in 2018, focus your efforts with these three steps:
- Analyse your partners – make sure they’re relevant and have the potential to help you reach your targets
- Determine the best course – do you need to recruit more partners? Or could you work smarter with existing unmanaged partners?
- Implement your plan – ensure partners are fully trained and supported with data and assets to help them nurture and close sales more efficiently.
Existing unmanaged partners might have everything you’re looking for. With a little more care and attention, you can help them flourish.