My channel just isn’t growing
My partners are not doing anything
Why won’t they work with us anymore?
Three statements that are made by vendors who are seeing their channels failing. We look at 5 things that will kill your channel.
Some of these items are down to greed from the vendor, others are from misunderstanding the why a conflict could occur.
Let’s dive into it!
- Stealing deals direct from your partners
You may think this sounds like it would never happen but we’ve seen it happen first hand MANY times. The partner is working on a deal and the vendor claims that they were working on the deal first and thus close it direct. Even when the partner has been working on the deal for months on end, they have registered it and the vendor is aware of it, the direct team still go ahead and close it direct. Lack of communication between direct and channel teams often culminates in this outcome but this can also be from the vendor wanting more revenue from a deal than they would get from working it through the channel.
This is good for the vendor in the short term but a sure fire way to kill your channel because news travels fast on how vendors work with their partners.
A mechanism to understand what is being worked direct and what is registered to partners is a good method of knowing if there is conflict.
If you “steal” those deals from the channel, you are going to destroy the way in which you can scale globally.
The same stands for renewals as well. If a partner has transacted a particular deal and they get the renewal, pulling that renewal back to direct before close is not going to do you any favors.
We know vendors that work with less margins on renewals than new business. Is this fair?
That’s a long topic all on its own but reducing margin on renewals vs new business is a good way to ensure that new business is concentrated on as a priority.
Stealing that renewal direct is going to kill it because everyone wants recurring revenue these days. It’s what businesses are built on.
A mechanism to track renewals prevents this from happening but also having the ability to move that renewal to another partner is needed in case of struggles from the partner side to fulfill the renewal.
Look after your partners and your channel will grow quickly.
Steal deals / renewals from your partners and it’s going to kill any progress you have made very quickly.
- Cutting margins
Seen it time after time again. The vendor puts a distributor on 50% margin at the start of the relationship to incentivise the distributor to build a market. After the first year when there is progress in the region, the vendor suddenly cuts the margin down to 30% to get inline with every other distributor on the planet that they have onboarded since.
This kills the momentum of what has been done by the distributor in the face place. Why not keep the margin the same as it was as way of a “thank you” for creating a region that needed building from scratch?
Without this distributor, you wouldn’t have the market as it was.
You can always cut the distributor out after they have built the market and take on another distributor in the region with the lower margin but is this going to help you?
News travels fast in the channel and it removes trust from anyone that you are going to onboard after doing this.
There will always be a fear that margins are going to be cut at any time.
The same applies to cutting margins for renewals mid term. We’ve seen it before where distributors were given 40% margin the same as new business for renewals and then mid term is was cut to 20%. If you start the relationship with this planned in, then there will be no problem but if you cut the margins like this mid term, you are affecting the projected revenues for the partner over time which is essentially halving their recurring revenue stream.
Really bad move.
Stay consistent with margins! If you need to change margins because you messed up at the start of the relationship, do it for your new partners and keep your original partners at the same levels that they have always been at. You will reap the rewards later down the line because less revenue because of higher margins is better than no revenue because your best partners have stopped working with you!
- Selling direct as well as through channel
Big vendors do this. Big vendors can do this. Smaller vendors try to do this. Smaller vendors rarely get away with it because it’s a blocker on being able to scale.
We hear partners requesting for the “buy now” button to be removed from the vendors website regular. They ask for this because all of the work that they put into their customers including awareness, measuring specifications, quoting and advising and then the customer can just go to the website and buy it themselves, cutting out the partner.
It’s even worse when you are building your channel with distributors because that distributor is creating awareness in a market on a grand scale and the option is there for customers to just buy direct.
It’s a blocker on people being able to build the market for you externally because they will be building with reduced reward for them.
We can look at vendors who are full channel vendors like Datacore and 3CX for example who work through partners and have massive channels and massive loyalty. It’s because they look after their partners and reduce conflict.
- Expecting partners to do everything
How many times have people stated that their partners don’t do anything? Vendors expect to sign up a partner and they just crack on with no training, support, planning or even a single meeting in some instances.
It’s a partnership after all and you need to work with your partner to build the business. Once it’s built, the support becomes less and less but it will always be required.
Taking on a partner and expecting them to run with it is just asking for it to fail.
To read more on how to onboard efficiently, see our article on onboarding your first distributor.
- Over recruiting at the start
A market takes time to build. Over recruiting distributors is a sure fire way to cause conflict from the very start. If a partner can buy from multiple sources and you have one distributor putting all of the efforts into creating awareness and the other distributor is just offering higher margins then the partner is going to buy from the distributor offering the best terms on the back of the awareness generation from the one putting in all of the efforts.
Over recruiting on distributors at the start will destroy it. Exclusivity is OK from the start for a specific period of time to give the distributor time to build the market.
Over recruiting partners on a 1-tier basis can also be problematic. Depending on the size of your team internally, you will have to onboard, support and maintain that partnership. It’s all well and good having 100 partners in your system but if there is only 1 person to support those 100 partners, it’s going to fail.
You can do a managed / unmanaged structure but you still need to onboard. They still need to be able to work with you.
At the start of the channel, concentrate on a select number of partners that you can work out the quickest route to success with and then replicate that across geographies.
There are many other aspects to channel management that can kill your channel but these are the main factors for not succeeding.
Partner experience is the key to everything. Look after the partners and you will have a long and fruitful relationship.
Annoy the partner at any point and the word is going to spread.
Support your partners and they will aid in the scaling of your company.
Replicate it across geographies and you have a blueprint for going global on a shoestring.
To book a demo to see how Channelyze.io can help with all of these conflicts: