The Proven Formula for Vendor and Partner Success

May 1, 2008

Individually, vendors and reseller organizations are relatively well-run, rational businesses focused on driving revenue. Why is it then that so many complications arise when these two groups start working together? It starts with little or no business alignment. Then distrust seeps into the relationship. The finger pointing begins. The relationship gets bad fast.

It doesn’t have to be this way, and we’ve seen a number of vendors who are approaching it in the right way: as a true partnership based on bi-directional value, accountability and trust, and most importantly, joint revenue growth. There are a number of simple steps that vendors and partners can take today to begin the process of building an effective relationship.

Vendors and resellers both share a focus on driving sales and have similar internal organizational structures, but a key difference lies in the fact that if things aren’t going well at the vendor level, the regional VP can always walk down the hall to administer the right level of “encouragement” for employees. On the other hand, indirect channel partners may seem less predictable in their results because they are lacking the motivation to behave in a predictable way.

One reason why channel partners may not feel compelled to behave predictably is that they question the vendor’s lead distribution process. Even in fairly enlightened channel organizations, lead distribution generally goes something like this: Marketing runs a campaign, and the leads are sent to the direct team for qualification and assignment to the most appropriate sales team member.

This approach seems to make rational sense in coordinating opportunities, but this also gives the direct team some flexibility in how they interpret the “named account” list and handle these leads. It is not surprising then that usually all of the A and B scored leads go to the direct team, then the C, D and “not qualified” and “missing data” scored leads go to the channel team for distribution to their partners. Data from a recent CMO Council study that we sponsored called the Channel Performance Outlook confirms this: only 7 percent of channel partners consider vendors a key source of their leads. 

Two interesting things occur as a result of this. The first is that the partners begin to follow up on the leads only to discover that they are garbage, so they cease further follow-up. Secondly, the direct team takes the highly qualified leads, contacts them, converts 30 percent of them to opportunities and ultimately turns 30 percent of those into revenue.

Now, when marketing runs a report to find out what happened to all the amazing leads they generated, they discover that the direct team is predictably amazing and partner organizations are predictably a “black hole.” The next time leads come around for distribution, the same thing happens. However, in this second go-around the partner organizations don’t even bother to review the leads at all. The situation spirals downward until a meeting at the partner conference where both the partners and marketing are extremely frustrated.

Another example of this disincentive for partners to behave predictably is in deal registration. The concept behind deal registration is that reselling partners graciously surface their opportunities to the vendor and in return, the vendor will offer the partner compensation and protection on the account. The result is reduced channel conflict, improved pipeline visibility and accuracy, accelerated sales cycles, increased close rates and improved closing margin.

In theory, this is all well and good, but when a partner alerts the vendor of an opportunity, it usually ends up looking more like this: The partner sends the opportunity information to the vendor. It is routed to the direct sales team for review and approval which, again, makes rational sense so that a large named account does not have multiple representatives from the same vendor wandering around interacting in an uncoordinated way.

The issue arises when the opportunity sent for approval is not on the named account list, and the VP of Sales, feeling a huge amount of pressure due to a rough quarter, offers the excuse that he or she deserves this deal because the channel partner won’t be able to close it anyway, etc. You get the picture. Resellers immediately stop surfacing deals, conflicts erupt, street price goes through the floor and the channel forecast has no validity. Again, the Channel Performance Outlook report shows that conflict and deal registration are indeed issues. Forty percent of channel partners say they experience vendor conflict, and 54 percent said vendors don’t provide a means to register an opportunity and secure exclusivity.

The fix here is operationally easy, but requires some executive alignment at the vendor level and commitment by the partner. First, the channel chief needs to have a discussion with the VP of Sales regarding the purpose of the channel for the company and then create the rules of engagement where there is bi-directional value and accountability for both the vendor and partner. If a partner organization exists to drive revenue in small and mid-sized businesses (SMB), for example, then the vendor should agree to send all qualified SMB leads to partners. Equally, any deal registered for an SMB, if it meets the program criteria, should be approved. On the other side of the equation, if the vendor makes this commitment, then the partners also need to agree to certain conditions such as contacting a target number of qualified leads within 24 hours or converting a set percentage to opportunities and revenue. Under these provisions, a vendor may choose to cut off the qualified lead pipeline for 90 days if a partner falls off their commitment.

The key here is building business alignment around the channel and having each party commit, setting up rules of engagement and enforcing the rules with rewards and consequences. This is only one small step in helping vendors and their partners drive revenue more effectively together, but it will certainly reduce the “connection anxiety” these two groups encounter when working in tandem.

Charles Watson is senior vice president of marketing and sales of Blueroads