Channel Revenue is one of the most complex achievements in the world of sales. On top of all the standard marketing challenges—communicating a clear and compelling value proposition, positioning against a continuously changing competitive landscape, efficiently driving demand, conversion and loyalty—channel marketers have to support hundreds or even thousands of value-adding partners in replicating these capabilities themselves to grow channel revenue. It’s a difficult job to do, much less to do well.
Adding to the difficulty, even though channel marketing contributes 50% or more of most manufacturer’s revenue, it remains one of the least understood and supported marketing functions. The innovation curve typically lags far behind corporate marketing and sales, turning many channel organizations into caretakers of out-of-date partner programs.
Let’s take a look at some of the key challenges for large channel marketing operations, and strategies for how to address those challenges to grow channel revenue.
This is always the first clue that a channel organization is really controlled by sales and finance, rather than marketing. Financial incentives are one of the most critical tools for driving partner commitment to selling your products. But alone they can’t generate channel revenue growth, any more than a contractor can build a house with just duct tape. Incentives don’t teach partners how to create a new revenue model for the cloud. Rebates don’t help partners develop the marketing skills required to address business managers as decision-making migrates out of the IT department.
“Rebates don’t help partners develop marketing skills.”
Channel marketers need to ~enable~ partners with the skills and resources required to be successful in a rapidly changing market, not just dangle incentives and expect the partners to figure out how to succeed. Too many partners just figure out how to grab the cash without doing the harder work of adapting their business model to a changing market—in fact, that’s how many bottom-tier partners, what we call “pretenders”, manage to keep the lights on as the market speeds away from their existing business model.
Billions of dollars of Market Development Funds (MDF) are wasted every year on partners that will not move the needle. The old Pareto Principle has been proven time and time again by channel managers: 20% of your partners will generate 80% of channel revenue growth. So why then do most investments in channel marketing technology focus on automated systems for the 80%? Giving partners commoditized marketing capabilities like email campaigns and telemarketing—tools already accessible to even the smallest company—is a costly investment in empowering 80% of your partners to deliver only 20% of your marketing revenue.
Doesn’t it make more sense to invest those dollars in the small number of partners that can be identified and elevated into the champion column, and thereby change this bad equation?
“Billions of dollars of Market Development Funds (MDF) are wasted every year on partners that will not move the needle.”
The problem is that few channel marketing organizations have the visibility they need to accurately profile partners that are ready to be elevated. Most channel organizations rely on trailing sales numbers—how many dollars of product a partner moved last month, last quarter, last year. But in today’s market past performance is not an indication of future success. Markets are being disrupted and business models overturned. Many partners are on their way out of business, and in some verticals, new kinds of partners are getting into the game, born and bred in the cloud. How would you recognize an up-and-coming partner that has what it takes to grow channel revenue, if they haven’t already hit a home run?
What channel marketers need is real-time visibility into a partner’s ability to generate and manage demand. The days of dumping poorly qualified leads over the transom to partners and piling the table with incentives for them to push those leads through a sales cycle are over. The future is about empowering partners to generate their own leads, and focusing on those partners that are able to step up and execute.
Channel marketing is too often an arms race. Those 20% of partners driving 80% of the revenue are in high demand by every manufacturer that can gain their attention. Rebates and MDF are thrown at their feet, and the stakes are raised to try and buy a little more time and attention from that partner for driving sales. Even among the 80%, many partners represent a dozen or more manufacturers, some more than 100. So how do you gain mind-share and commitment from partners that have so many suitors? Certainly not by offering them the same exact thing they’re getting from every other manufacturer.
What we hear from frustrated channel managers all the time is that partners just don’t have the time to push their marketing programs. That’s true, but usually not in the way that channel managers think. When you sit down and talk to partner marketers, you hear their side of the frustrating story: Every manufacturer is sending them a stream of requests every week, pressuring them to push the same email, telemarketing, webinar, event programs as every other manufacturer. It’s all the same old stuff. It’s not that they have no time—though they’re certainly pressed for time—it’s that they don’t have time for that.
What will partners find the time for? Anything you can provide that helps them develop the skills they need to fill their own pipeline. Teach them how to fish with the latest tools and techniques you can offer, and partners will line up to run your programs every time. Throw them the same pile of stale minnows as every other manufacture, and you won’t get the time of day from the kind of partners you need to grow channel revenue. Instead of pushing over leads and watching the clock on conversions, start offering programs and measuring Partner Generated Demand—leads and opportunities created and nurtured by partners with support from the manufacturer.
Like manufacturers, partners have to work hard to adapt to a radically changing market. Many partners have enjoyed stable revenue streams for decades based on predictable IT equipment refresh cycles. Cloud migration, mobility, security and a host of other IT trends have upended the traditional IT procurement process, threatening thousands of reseller business models.
IT decision-making, once the exclusive domain of geeks who care most about speeds and feeds, is increasingly migrating out of the server room and into the corner office, where business executives can subscribe to cloud-based services without being slowed down by IT. For resellers, this not only means having to sell to new audiences who don’t have much depth in technology, it means having to speak to business challenges and solutions beyond the technology itself. Where “Professional Services” among resellers used to mean keeping the technology up and running, today it means helping the buyer realize the business results they believe the technology should deliver. That’s a big hill for most resellers to climb.
“Today “Professional Services” means helping buyers realize the business results they believe your technology should deliver.”
One of the most critical areas where resellers are struggling to adapt is in marketing strategy and operations. Most resellers are sales-driven cultures through and through. They are waking up to the importance of marketing, but it’s a complex and confusing topic where it’s often difficult to distinguish between trendy fads and fundamentals. Many resellers that want to invest in growth will wander among agencies, consultants, PR and advertising firms, trying on different approaches to positioning, messaging, segmentation and targeting—and nine times out of ten, they’ll get spun in a different direction at every turn.
You can rapidly build rapport with these partners, not by giving them canned campaigns labeled “co-marketing” just because they can slap their logo on it, but by giving them programs that help them cut through the clutter to position their own solutions and brands in a way that allows them to tell their own story while positioning and promoting your products.
Each of these challenges is a threat to traditional channel marketing operations, because they undermine the path to channel revenue growth. They’re not a threat to the channel model—the increasing complexity of IT and information management ensures the need for value-adding partners who can deploy hardware and software solutions to solve critical business problems. The question is which manufacturers will gain a competitive advantage by building channel programs that elevate and empower channel partners, rather than treating them as coin-operated tech slingers.
“The question is which manufacturers will gain a competitive advantage by building channel programs that elevate and empower channel partners, rather than treating them as coin-operated tech slingers.”
The strategy we’ve developed over years working with hundreds of partners is to focus on shifting operations toward Partner Generated Demand. We segment partner communities into groups based not on past sales performance, though that’s important, but on ability to drive demand—particularly through inbound marketing and social selling. Partners that are primed and ready to generate demand get the white glove treatment, with tailored tools and programs to help accelerate and grow channel revenue. Partners far from readiness get on-demand programs and training through which they can demonstrate their commitment to step up and perform. For partners in between—once-champions that are slipping, or partners that are showing new promise—we provide bootcamps, work shops, training and coaching sessions designed to help them bootstrap their own marketing approach as efficiently and effectively as possible.
Because our platform tracks all partner activity in social marketing and social selling, manufacturers for the first time have real-time visibility into leading indicators of partner performance, meaning far greater accountability for MDF allocations and ROI. That’s what differentiates our approach. Instead of simply adding “social” to your channel marketing ecosystem, we provide a system and platform for migrating resellers from coin-operated order takers to strategic partners that can reliably generate demand and grow channel revenue, even in the most challenging markets.