Channel Partnerships: The key accelerator for B2B sales and business growth
In the first article of the year, we discuss one of the most important themes for the growth and internationalization of our companies: the ability to manage and develop distribution and sales channels at home and abroad. Let’s explore channel partnerships.
Petteri Sivula is an experienced business developer and part of the Proof network. He developed this article and much of our thinking on this important topic.
Growth is close on the horizon
According to McKinsey (2019), the proficient management of a channel partner network is the most important distinguishing factor between successful and average B2B companies.
Companies that have good products and the ability to clearly show their benefits to new markets have very significant potential to improve their business through more effective channel partner management. This is realized in practice by reaching new geographical or business areas, new target groups and/or new types of buyers.
However, growth through channel partnerships can only be largely utilized for existing products and business. New business often requires new partners. Channel partners are almost always actors who incorporate the products that they offer into their business. It is rare for a partner to promote proposals from only one provider.
This situation requires the ability to stand out significantly from competitors and the ability to demonstrate the growth model and business potential of their products, both in terms of sales and use – and presence in the soul and will of the entire company in developing the channel.
Challenges of differentiation and trust
Studies have shown that many B2B companies face significant challenges in distinguishing their products from competitors. Channel partners simply do not distinguish between different companies’ different products and services. For example, the following observations on the theme are available:
- 69% of channel partners are unable to distinguish between offerings (SiriusDecisions Command Center, 2018 ).
- 72% of channel partners do not see how their offerings relate to customer challenges (SiriusDecisions Command Center, 2018 ).
Trust has been identified as a key explanatory factor in the effectiveness of partnerships. It is created, for example, by actions to (1) develop co-operation between partners and (2) increase collaboration and sharing. However, trust and benefits via it are not easy to achieve. They require the company to invest significantly in partnerships, both in terms of resources, tools and operational models. The figure below illustrates a typical channel partner development path from channel partner program start up, scaling, and continuous development.
The program needs to be partner benefit-focused
A company developing its affiliate program needs a clear program / operational model to be launched to potential channel partners. However, according to multiple research reports, channel programs from partners are often far too complex. As many as 73% of channel partners considered channel programs too complicated or useless for themselves (360Isights, 2019 ).
Therefore, when developing a channel partner program, it is good to keep things simple and not to complicate them too much. The key is to keep in mind 1) their value to the end-customer along with channel partners, and 2) the trust building elements for channel partners. In addition, 3) a realistic assessment and development plan should be developed to ensure that:
- Channel partners are invited to register or agree to participate in the program.
- The channel partners develop the sales capability to fit, meaning the company should invest in training and product support.
- Marketing materials are readily available and, if necessary, the company supports channel partners in marketing.
- The channel partner’s staff and senior management are motivated and committed to achieving the partnership goals.
Shared culture increases the chance of successful cooperation
Increasing sales, through enhanced lead management and joint marketing for example, are known to increase collaboration in partnerships. Similarly, sharing resources for sales and customer projects also increases trust. Sharing and utilizing data will further enhance the functionality of the partnership, for example, by taking into account predictability and market changes, or developing new data-based products and services.
Data sharing can also be challenging because channel partners tend to hold on to their own data. Therefore, it is essential for a company to identify and communicate exactly how 1) the data to be shared will be utilised by each party and 2) who owns the data. Typically, the data to be shared can create value by using elements such as:
- Effective support and implementation of customer paths
- Guidance and development of channel partnerships
- Determining and targeting the level of incentives
- Customer feedback and ideas for further development
- Constantly updated customer and market information
A partner programs needs continuous maintenance
Once a program is launched, partners get involved and collaboration expands, the work is not really complete. Success requires continuous development and relationship maintenance – as if it were a relationship that would turn into a marriage.
In a dream situation, channel partnerships evolve into a powerful and vivid ecosystem. One result of sharing data is that it makes it easier for the end user customer to deal with different types of channel players in the acquisition, deployment and use of the product (e.g. solution provider, sales partner, delivery partner, service provider, content provider). This also makes the channel program more attractive to other potential channel partners.
Business is better with a better customer experience
Involving channel partners in new marketing efforts, faster lead management, and product and service development (e.g. through SaaS models) improves the channel offering and ecosystem performance. While partnerships are at the core of scalability, customers are at the heart of continuous development and maintenance.
Customer experience development should guide actions:
- Depending on the customer’s purchase path and usage situation, the customer has the necessary product and service selection
- Customer service and problem management is fast and hassle-free, with clear roles and capabilities for channel partners and B2B
- If necessary, the customer should have easy-to-use digital solutions, i.e. a multi-channel and always-on digital service that supports the customer’s process, especially for re-ordering.
- When purchasing a complex new product or solution, the customer must be able to contact the service provider directly.
The cold reality is that most partnerships are under exploited
Unfortunately, in many cases, channel partners fail to achieve their goals and cooperation is almost non-existent. Promises are not fulfilled and commitment is low. Partnership do not take anyone forward if there is no joint action.
Research shows that cooperation is often low. Observations include:
- In terms of marketing collaboration, less than 15% of channel partners participate in B2B company marketing programs (DemandGen Report, 2019). There are several reasons for low participation:
- Over 75% of channel partners felt that the lack of co-branded content was a major or major challenge for collaboration (Forrester Consulting, 2018).
- About 53% of channel partners found content shared with them weak (A Fluent Vision: State of Partner Marketing Report, 2018)
What to do? What to do?
In order to make channel partnerships operational, a B2B company must critically evaluate its operational model or program. Themes to be evaluated include:
- Product funnel suitability
- Functionality of incentive models
- Adequacy of partner competence development i.e. training
- Success of go-to-market support
- Channel partner access to product information and its clarity
- The quality of marketing materials and the channel partner’s ability to use them co-branded
- Lead management and the potential for new business
- Technical (PRM etc.) ability to support channel partners and control channel activity
- Clarity, functionality and control of performance indicators
- Adequate resources for the channel partner management organization
Based on an audit, it is possible to rebuild a channel partner program by defining the above topics as clearly and simply as possible. There are six questions to answer:
1. What types of partners are there in the value chain?
2. What is offered to them through training, marketing and product information?
3. What kind of incentives are being built for channel partners?
4. What are the key ways to build trust in a channel partnership?
5. What tools are needed to support channel partners?
6. How are channel partnerships, their success, and their performance in customer relationships, measured?
For example, to help you redefine your program and redirect it onto the right path, you can create:
- Affiliate activation plan (focus groups and tracking tool)
- Program communication plan (content for partners in different phases and roles)
- Training plan (guide the program activities and products to partners)
- Implementation plan (key boundaries and timetables for the implementation of the various activities).
Summary: channel partnerships are key to competitive advantage
Channel partnerships are challenging and require significant commitment from B2B companies looking for growth and internationalization. However, leveraging channel partnerships can be a key way to accelerate business growth in new areas or target audiences. It is not always profitable to build your own sales or service channel, or it may not be credible to reach new buyer types with your own organization.
We believe channel partnerships are the most important strategic and tactical method for generating growth.
At Proof we have built capabilities to help Finnish companies meet this challenge. Let’s talk more about your views and your challenges!
Petteri Sivula has been working on strategy projects for 25 years, focusing on developing the capabilities of the corporate client interface in marketing, sales and customer service. Digitalization has been a central theme in various development projects. Petteri has served as Senior Vice President, Consulting at Accenture and Fonecta, Senior Vice President, Strategy at TBWA / Tequila and D11Helsinki and Head of the Consulting Team at Satama Interactive. Petteri has also worked as a Strategic Leadership Researcher at Erasmus University Rotterdam. Petteri is the newest consultant in the Proof network and is a very active archipelago boat driver in the summer.