Effective channel management keeps companies from losing countless numbers of sales opportunitiesand millions of dollars in revenue. It costs 80% of companies $2 million to $20 million each year to distribute leads to through an indirect channel. The channel drops 80% of these opportunities because they are not distributed to the right partner or because there is insufficient follow up and support. It doesn’t require a Ph.D. to figure out that a channel strategy needs to be an integral component of every sales and marketing strategy.
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Four Steps to Effective Channel Partner Management
Have a process to develop effective channel relationships.
The purposeof yourchannel strategy should be to forge partnerships that align the goals of similar companies that are financially attractive to both parties. Effective channel management involves four steps: developing your channel strategy, channel development, day-to-day channel management, and channel evaluation.
a. Channel Strategy:Understanding the desired customer experience and obtaining a comprehensive view of the channel landscape drives a channel strategy. The first question you need to answer isWHY.Why are youdeveloping an indirect channel. Consider which of these questions best reflect your reason:
- Toincrease your customer access, that is, to extend your reach.
- Toenhance your speed to market.
To better understanding what ourcustomers need.
Your reasons for employing an indirect channel will shape your strategy and help you identify appropriate channel partners.
b. Channel Development:It is imperative that youdevelop a channel schema. This allows you to strategically structure your channel. Some companies create a structure around the degree of directness, that is how straight is the line between the channel partner and the target market and customers. The target marketers and customers might be tiered by value, segment, or revenue opportunity. Other tiering approaches might be geographically or by domain expertise.
The structure should be designed to allow yourchannel members to be as efficient and effective as possible. Again, the structure you define and establish has implications on the partners you select.Successfully bringing partners on board requires a win-win scenario, demonstrating not only why the relationship isimportant to you, but also why it will be important to them. Write a partner brief that includes:
- a statement that articulates thecompelling reason(s) for these prospective partners to do business with you
- the rules of engagement so everyoneunderstand how they will gain financially
- the strategy for ensuring a successful relationship
- the terms on whichopportunities each party will pursue
c. Channel Management:Frequent contact with your channel partners is integral to ensuring that the relationship remains strong. Partner retention plays a rolein customer retention. We highly recommend that someone in the company is dedicated to building the channel either as part of their existing responsibilities or as a full-time job.
Establish your metrics for success at the outset. For example:
- Just as share of wallet is an important indicator with customers, share of sales is an important indicator with channel members.
- Just as your goal is to become the dominant provider to your customers, you aim is to become the dominant provider to your channel. Experts recommend that you aim to have a 50 percent share of sales within your partner’s channel portfolio for certain Line of Businesses. To reach this number, you will need invest in training your partners and providing them withall the necessary tools and support they need to succeed.
- Opportunity scoring. Pushing only low-value leads and opportunities to your channel partners will not allow them to be successful and eventually they will defect in search of more lucrative opportunities. Work closely with your partners to develop joint Marketing programs that will help them identifybonafideopportunitiesfor them to pursue. Make sure your partners have solid opportunitymanagement skills and that you are both using the same opportunity scoring model.If necessary, install a opportunitymanagement system for them and train them on how to use it.
Jointly establish performance targets and reward yourchannel channel partnersfor both the initial opportunity and growing the customer relationship throughout the lifecyle.Providecontinuous training programs to ensure your partners understand your offerings and how they compare to others on the market.
d. Channel Evaluation: Establish a formal evaluation process for channel partners and be sure they understand this process prior to signing an agreement. The metrics you both agreed to as part of the channel management steps should serve as the basis for the evaluation. As much as possible tie your channel metrics to measurable business outcomes. For example, some of the measurable outcomes might be a certain amount of market penetration in a segment, a close rate for qualified opportunities, and/or winning some critical high-value customers.
Use these four steps to keep your channel partner relationships on track.
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