The nature of your unique business model has a large influence on whether you should serve customers directly through your own marketing and sales efforts or use independent channel partners, particularly for CSPs. As part of our Smart Partner Marketing website, we feature an interview collaboration with bestselling author Hans Peter Bech, author of “Building Successful Partner Channels.” Hans Peter’s insights into channel marketing can help partners grow their revenue faster and set the stage for customer success.
“Using a channel of independent, third-party companies to find, win, make, keep, and grow happy customers on our behalf has a long tradition in the software industry. For some software companies, this indirect channel has been a major contributor to global success. But for most software companies, making it work remains a constant struggle.”
– Hans Peter Bech, Author of Building Successful Partner Channels
As Hans Peter describes in our five-part video series, there are several scenarios to consider when deciding whether or not to go indirect.
Scenario A: Go Direct
Comprehensive and customizable solutions for Enterprise customers in niche markets are typically very difficult to reach through independent channel partners. In this case, going direct might be the better option for you and your business.
The learning curve for mastering this type of solution is long and steep as this graphic illustrates. In this scenario, there are very few deals open in the market at any given time, the sales cycles are long, and the customers clearly prefer being served by the vendors directly.
Of course, your unique situation may change as you establish your brand.
When you have built a solid market share in Scenario A, it is not unusual to be approached by implementation partners. These partners are not interested in (and are seldom good at) selling your solution as there are still too few opportunities. Instead, they are attracted by the service business around your product. That said, it may be interesting to build out implementation partners that will enhance your delivery capacity.
Scenario B: Go Direct via the Web
Having a simple, standard solution with short sales cycles addressing a large market doesn’t benefit from using independent channel partners. This is because channel partners have little value add potential and they need to build a volume business to achieve profitability. In this scenario, your best option is likely to go direct with the help of the web.
In Scenario B, you may be approached by potential resellers when you have established your brand. As there is now demand in the market for your value proposition, potential resellers can bundle your products with their current offerings and increase their share of customer’s wallet without increasing their sales expenses. Likewise, you may see an opportunity to reach segments of the market online where your direct reach is weak.
Both scenario A and B may introduce channel conflict, which is typically damaging for your business when you start out. But that conflict may be acceptable and even required for achieving market leadership at a later stage in your business development.
Scenario C: Go Indirect with Channel Partners
If you have a solution addressing the SMB market, with moderate sales cycles and with value-add potential for the channel partners, you may be well suited for the indirect approach. In this scenario, there is enough market volume to support many channel partners and as each partner can make extensions to the product, they do not have to compete head on for the same business.
To go indirect effectively, the value-add potential for channel partners must exist such that the partnership will improve their margins and make the individual business deals more profitable. Ideally, with the support of channel partners’ extensions and implementation capacity, you can reach a much bigger market together.
To learn more about growing successful channel partner relationships from Hans Peter, check out our five-part video series on the Smart Partner Marketing site. In it, he shares insight into how to create and nurture a channel as part of your product offering and value proposition, as well as how to develop and maintain a channel and begin recruitment.
In which of these scenarios does your business fit? What successes have you experienced with channel partner marketing? Share your experiences in the comments below.