Channel Overview

Q: What are Channels?
Channels in the technology sector apply to all companies that operate between the vendor (manufacturer or originator of the product) and the customer. These may be influencers, resellers, distributors, or any hybrid company that delivers a product or a service to the customer using another company’s solutions.

Q: What is Ecosystem Orchestration?
There is a lot of discussion currently around “Ecosystem Orchestration” in the technology sector, which was born out of the need for partners to have a place to connect, interact and engage with one another as well as with the vendor (who owns and curates or orchestrates this ecosystem). Partner-to-Partner has become synonymous with these communities.  Business ecosystem orchestration and management goes a little beyond this and enables the market players to support different brands and businesses in the one community or on the one platform. In this way, it expands channels to market by enabling the selling of services through other ecosystem partners so transactions can happen across brands and businesses.

Q: What is a Parent / Child relationship?
Frequently companies have subsidiaries and businesses across regions or countries and a parent/child relationship usually enables the reporting of metrics to be rolled up to the “Parent” but allow drill down to the “child”.

Q: How do Channels Work?
There are lots of ways in which channels operate as “channel partners” assist in the process of delivering products and services to customers. 

• They may resell the product, i.e., purchase from the vendor and then sell that product to the customer thus acting as a middleman or broker. 
• Some channels may deploy, install, support, or simply recommend the products and so be selling a service alongside the product, not necessarily the product itself.  

A vendor will usually know and have a relationship with those companies that operate between them and their customers (their channel), and the details of that relationship make up the Channel, or “Partner Program”.

Vendors can have a “downstream” channel i.e., a collection of companies that “represent” them in the market to customers. 

• Tier 1 – if, the relationship is directly between the vendor and the partner it is described as Tier-1 
• Tier 2 – if however, the vendor only has a commercial relationship with distributors, who in turn manage the logistics and relationships with the downstream channel, then the distributor is described as Tier-1 and the partners as Tier-2. 
• Market Places – there has been a growth of marketplaces where customers, or partners, can purchase products directly from the vendor. A commercial transaction may trigger a credit to the partner of record (POR) who can be identified to have “driven” that customer to the marketplace. A system of unique links may be provided to partners to identify them and enable them to be credited with the opportunity.
• Pure Channel – some vendors only sell through Partners and not to the customer, (e.g., crediting partners for Marketplace purchases).
• Hybrid – some vendors may have a hybrid model whereby they sell through and with partners but also sell direct to some customers. 

The channel GTM strategy (go to market) will define these different models.

Q: What is GTM?
Go to Market (GTM) is the universal phrase to describe the way a company delivers a product or service to a customer – this may involve how they find, attract, influence, and lead prospects through the sales process to purchase and become a customer.  And this may involve 3rd party companies.

Partner Type Definition

 Q: What is a Channel Partner?
A recognised company that has a symbiotic relationship with a technology vendor. They form a business relationship to be able to offer advice, re-sell, influence, or recommend the vendor solution or service to their customers and they are usually recompensed by the vendor in some way. 

Q: What is a reseller and a VAR?
A reseller is a company that re-sells another company’s product. Around 75% of global trade flows through a “channel” which is the aggregate term for all companies that resell or influence the sale or wrap services around the sale to a customer. The original manufacturer uses a channel of resellers (and other partner types), to access a wider market than directly selling themselves to customers. A VAR is a Value-added Reseller, so a company that resells but also adds value to the sale by offering additional services or support.

Q: What is a Distributor?
In the technology industry these offer much the same service as other industries; providing slick operations, credit and commercial terms that enable resellers to acquire products for resale to their customers.

Q: What is a Vendor?
Vendors build products. In the technology sector these can be collected into broad headings of hardware, software, networking, and services and invariably all these are needed to complete the solution required by the customer.

Q: What is an MSP and MSSP?
Managed Service Providers (MSP) accumulate and own the hardware, software, networking, and infrastructure required to deliver a solution. In turn they sell that whole package as a service to the customer – rather than the customer having to purchase each component.  An Managed Security Service Provider (MSSP) is the above but with “Security” as the solution provided to the customer.

Q: What does a Referral Partner mean?
Referral partners are those who recommend a vendor technology and suggest a customer work with that vendor. Referral partners do not “transact” the sale but provide the necessary signposting for the customer to the vendor.

Q: What is an Affiliate link?
Affiliate links are unique live URL links that a vendor will provide to a partner. That partner will display that link in an email, on a website, on social media and on any promotional materials as a “Signpost” to the vendor they are recommending. Once the prospect clicks on that link, the vendor will be able to track back to that specific partner and be able to credit them as the “Partner of Record” for that opportunity.

Q: What is a Partner Portal?
A partner portal is a web page specifically designed (and ring-fenced) for partners who will usually have their own unique log in and credentials that will enable them to access content and systems. A good portal will know who is logging in and then expose the right content and functionality to that individual according to predefined rules about who sees what. Portals can also be the “windows” into other systems such as quoting, pricing, ordering, opportunity management, performance tracking and support.

Q: What is meant by “Partner OnBoarding?”
This is the process whereby a prospective partner who is interested in working with a vendor, is taken on a learning journey to become skilled in the solution. Increasingly partners expect these onboarding processes to be automated so they can progress “on demand” at their own pace and be guided as to the next stage. When done well, onboarding takes a partner through to “activation” and their first sale, so they are truly an active partner.

Q: What is a Channel or Partner Ecosystem?
A partner ecosystem is a system of record that displays all the partnerships a company has created. Each vendor who sells through a channel will have a different ecosystem of partners as they reflect the needs of a different set of customers.

Q: What is TCMA?
Through Channel Marketing Automation (TCMA) are software solutions that enable vendors to provide a marketing platform for their Channel Partners to use and send jointly branded marketing campaigns. The campaigns may contain email, social, brochures, webinars and videos and a wide range of assets and templates that partners can use to build their own outbound lead generation and marketing activities.

Financial

Q: What are Rewards?
Typically refers to an incentive, rebate, promotion, or discount that is awarded to partners as a result of certain activity.

Q: What is a Deal Registration?
A process of registering an opportunity by the partner to the vendor. A deal registration discount is usually available to partners who register a deal with the vendor. Usually, the deal needs to be uploaded or entered onto the vendor system via their Partner Portal or some other form of automation or online form, (although emailed spreadsheets do still exist!). Sometimes to qualify for deal registration, the “deal” will need to meet certain criteria (such as being part of a product group or campaign). The deal registration discount is usually paid as a discount or credit memo on purchase of the product to fulfil the “deal” (directly or through distribution).

Q: What are Co-op funds?
Co-op funds are accrued funds based upon sales revenue through a particular partner who “accrues” funds to be spent on approved marketing activities. For instance, if a partner sells ABC revenue of a product, then they become eligible for 2% of ABC to be used on agreed marketing activities. The Partner Program will dictate the % accrued, the activities that qualify for refunds, and the % a vendor will refund towards the cost of the marketing activity. The “matching” (or amount the partner will still have to contribute) depends on the vendor program. 

Q: What is MDF?
Marketing Development Funds (MDF) are a lump sum discretionary fund that is made available to partners for eligible activities. As these funds are “discretionary” there are usually hoops that need to be jumped through to have access to those funds. This will usually involve presenting a marketing plan with ROI (return on investment) figures and estimates as to the effectiveness of running the marketing activity. For instance, the number of attendees expected to attend a joint event, or the number of leads or opportunities they expect to be generated by the activity compared to the spend.  In most instances, there will be a post-event reporting process that will need to be completed before funds are paid out.

Q: What is a SPIF?
A Sales Performance Incentive Fund (SPIF) rewards specific behaviour within partners such as the successful sale of a product. SPIFs are usually awarded to the individual responsible for performing the activity. These can take the form of sales SPIFs (an award for each product sold) or for completing training or driving marketing – the list of activities will depend on the activity the vendor wishes to drive. The rewards often (although not always), take the form of vouchers for consumer goods.  Best practice is to ensure that your SPIF aligns to the goals of that partner, so the sales team are driving the right activities that meet the goals of the vendor and that of the partner.

Q: What is BEC?
Back-End Credit (BEC) are sums paid to the partner as a credit once the deal has been processed. These may be used as part of an incentive program to enable the partner to make more margin dependent upon performance.

Q: What is a Partner Rewards Program?
A Partner Reward Program usually refers to the system of incentives, rebates, marketing funds and other rewards put in place by a vendor to reward Partners for sales, marketing, and promotion activities in relation to selling their Products and Services.

Q: What are Reward Payments?
This refers to payments made or credits granted pursuant to Rewards Programs.

Q: What is an Annual Contract Value?
Annual Contract Value (ACV) represents the annual value of a transaction with a duration of 12 months.

Measuring Success

Q: What is a POP?
Proof of Performance (POP) is the required documentation that demonstrates performance. This may be an invoice to show what was purchased and the explanation may be how this cost justifies a request for marketing funds, based on a mutually agreed business plan. 

Q: What is MBO?
Management by Objective (MBO) are performance-based targets that are not usually aligned to revenue. The objectives are usually referred to as “soft” targets and take the form of things like reaching technical standards by taking and passing approved training courses. The nature of MBOs will vary with vendors from a focus on training, or marketing.

Q: What is LOB?
Lines of Business (LOB) are the functions within a business such as sales or marketing or operations. Increasingly the purchase of technology solutions has involved more LOB teams than just the IT department as it was historically. So, this phrase is used to describe this process; marketing automation solutions are purchased by the marketing department for the marketing department. This will then influence who the vendor should target, (in the above instance the Marketing Director), as trying to talk to the IT departments will likely fall on deaf ears, although they may have some influence. 

Q: What is Campaign Activity?
A Campaign Activity is usually time limited offers or marketing outreach that present a specific product set to the audience (partner or customer). Many channel marketing tactics are based around a series of “campaign activities” that roll in a quarterly frequency. 

Q: Campaign Activity Rules?
Campaign Activity Rules determine which products are included in the campaign. If there is an associated offer or discount, there will be rules that dictate how that campaign is applied and how rewards or discounts are benefited to partners. 

Q: What constitutes ROI Metrics and what are the requirements?
Return on Investment (ROI) metrics state what return you intend to bring for the investment made, such as what the benefit is in terms of leads, opportunities, new projects, or other benefits defined in the mutually agreed-upon business plan.

 

 

 

Rules of Engagement (ROE) defines the ways in which a company operates in a competitive market. A vendor may dictate that a partner only operates in one country, or in one vertical sector. Or they may have a direct relationship with larger enterprise customers (such as the FTSE 500) but leave the Mid-market and SMB (Small to Medium Businesses) to their partners. Rules of engagement give partners the visibility and guidance as to who should engage with which customers. 

Privacy

Q: What is Personal Data?
Personal Data means any personal information that enables the identity of an individual or person to be identified.  

Q: What is Data Protection Law?
Data Protection Law means the laws under which data needs to follow local government rules and any amendments, revisions, re-enactments, or consolidations thereof located in a country. GDPR is the General Data Protection regulation under which the EU is guided. 

Q: What types of “Marketing” activities are usually excluded as eligible for vendors to reimburse as part of an MDF or marketing campaign?
Alcohol, company hospitality suites, travel, temporary help, internal employees, telephone charges, any sort of cancellation fee, capital expenses, or the normal cost of business.

Tags: Defining a Channel Strategy