5 Reasons Why Your Channel Partners Are Underperforming
Channel sales has so much promise for enterprise software and SaaS companies. The leverage you can get from a performing channel can be remarkable. A direct sales rep in a B2B SaaS business may be able to bring in $2.5M to $3M in revenue. A channel sales rep, making the same compensation, can bring in $5M to $7M in sales through partners. The customer acquisition cost (CAC) is also different between the two. A direct sales rep needs a team to support him. This can include a sales engineer and significant marketing budget for lead generation. A channel sales rep usually works alone with limited corporate resources. This is by design. The software vendor leverages the sales and marketing of their partners. Thereby reducing the CAC for customers acquired through channel partners.
The leverage and lower CAC only holds true in an optimized channel. Despite all the benefits of channel sales, many enterprise software and B2B SaaS companies have under-performing channels. Generally, these are the five reasons for this;
1. You are treating your partners like customers. Channel partners are not the same as customers. Channel partners have different needs than customers. For example, you need to train your partners on how to sell your product. You don’t need to train your customers to sell your product. When a customer calls for support, it is about their install. If a partner calls it can about an issue that impacts tens of customers. When you treat partners like customers you are under-serving them and damaging the relationship.
In many smaller sized software companies, the direct sales force manages the channel partnerships. This is a recipe for killing your channel. They lack the temperament to manage partners. Channel partnerships are about building long-term relationships that will result in a steady sales funnel. It’s not about today’s deal. They will treat channel partners as a source of referrals as opposed to a partner. The biggest disconnect for a direct sales rep is that you have to enable your partners to be successful. Let’s tackle this one next.
2. Your partners are not enabled for success. Signing up new partners is the “easy” part. Enabling partners for success is where all the hard work gets done. Once a partnership agreement is in place, you need to switch to partner enablement. Keep in mind, partners may sell differently than your direct sales force. The channel partner has their sales process. They have a different go-to-market model. They are adding some value to your product when they sell it. Hence, the name VALUE added reseller (VAR). So, you can not hand off your marketing collateral and sales tools and expect the channel partner to start using it. All this content needs to be tailored to support how the partner sells and markets. The alternative is poorly enabled partners who will deliver disappointing sales.
3. You have no coherent partner strategy. Why do you want channel partnerships? How will your partners work vis-à-vis your direct sales force? Hope is not a strategy. Hoping that signing up many partners will lead to incremental sales is not a coherent strategy. A partner strategy should take into account the customers you are selling to and their preference for buying. This can highlight gaps where partners can assist. For example,
- Systems Integrators (SI). If you have a complex product that requires integrations into other systems then a systems integrator partner strategy will be important. Especially if those other systems are from bigger companies than yours. You want partners who have expertise and a good reputation in delivering complex solutions.
- Value Added Resellers (VAR). If there are certain vertical or geographic markets where you have no coverage, then channel partners make perfect sense.
4. You are not managing your channel partners. You should manage partners to a sales plan. The partner manager finds the necessary resources to help overcome obstacles and takes actions to speed up sales cycles.
- It is difficult to do business with your company. Channel partners have lots of other products and services that they sell. Every day, the sales reps at your partners make a choice about what they are going to sell. What solutions they lead with. If your company has a reputation for being difficult to work with they are not going to try and sell your product. They are going to sell products that are easier to sell. They are going to sell the products from the software vendor that provides them with the most sales support. Make it easy to do business with your company. Otherwise, your channel partners will just sell something else.
5. You have the wrong channel partners. In the early days of a company’s attempts at partnerships, there is a tendency to partner with anyone who is willing and agreeable. This leads to “Barney partnerships”. A partnership in name only with no incremental sales or other quantifiable benefits. If you have avoided the mistakes outlined above, but some of your partners are still struggling then It may be time to re-evaluate the partnership.
Channel sales can deliver amazing sales results for enterprise software and SaaS companies at a lower customer acquisition cost (CAC) than direct sales. But you need to be operating a well-oiled machine to obtain all the benefits. Avoid the five common pitfalls outlined above and you will be heading in the right direction.
- 5 Reasons Why Your Channel Partners Are Underperforming - December 8, 2016