Written by Daniel Graff-Radford, CEO of Allbound, the partner preferred PRM (partner relationship management) company.
According to the World Trade Association, over 75% of the world’s goods and services are sold through indirect channels. So, how do you get the attention of these indirect sellers and marketers to drive demand to your offerings?
This is a beginner’s guide to planning and building a new channel partner program. If you are running a program and want to accelerate what you are doing, please look at our content about scaling a channel.
Step 1 – Identify Your Ideal Partner
The first question you should ask yourself is, “which audiences will want to join my channel sales program?” An easy way to locate potential partners is to look at your competition’s channel, starting with their partner page on their websites. Do they have companies that are reselling or referring them business? What types of companies are these, and what value are they receiving from the partnership?
A second place to look at is companies that sell to your ideal customer profile (ICP). See if there is a vibrant ecosystem that wants to integrate with your products, resell, or refer. Marketplaces, such as AWS, Shopify, HubSpot, etc., are another fantastic route to potential partners. They can be great places to list products and find services firms that may want to help connect you with buyers. For additional strategies, read Nine Tips to Find and Recruit Channel Partners.
Finding a pool of prospective partners is indispensable to building a channel sales program, but resist the urge to fling the doors wide and welcome everyone to join. Mismatched partners will waste your time and you theirs. Their subpar program experiences may lead to them sharing their take with qualifying peers. Or, potentially worse of all, ill-fitting partners may inadvertently misrepresent your brand to customers.
Therefore, make sure that you’re well-equipped to serve the particular partners you want to recruit, and that their sales practice, industry reputation, and corporate culture aligns with your own. If not, politely decline, as these are not the partners with which you want to build your channel program.
Step 2 – Determine the Preferred Channel Program Structure
Assuming you have tapped a vein (or ten) of places and companies to find potential partners, your next step is to determine what type of partner program is right for your business. Here are some industry terms for the typical type of programs you can start with:
Referral / Affiliate – This company has excellent relationships with your potential clients and refers them to you. Typically, companies will pay referral fees either one time or for some recurring period of time, like renewals. Look at what others are doing in your space for guidance.
PRO TIP: A higher pay rate does not necessarily mean higher referral rates in most cases. The speed and transparency of payment and proof of how well you treat their relationships will be far more important.
This partner type can be a massive part of your revenue if the referral partners need your product in order to do their jobs. An example would be a web hosting company getting referrals from web marketing agencies that need hosting for the sites they are building and consulting.
Reseller / Distributor – This partner sells your products, many times with other goods and services. Sometimes they use their brand on your product (if you let them), and this is known as “White Label.” At times, these distributors have sub-distributors, also known as sub-agents, and in these instances, the lead distributor is sometimes called a Master Agent.
These types of partners will usually need:
- Training on how to sell your products
- Regular interaction on what is developing with your company
- Updates on current offerings
These partners may have tiers based on the performance of selling your products. Those tiers can be bronze, silver, gold, or any other stratification and naming.
Alliance – Sometimes, companies will work together with joint marketing agreements or joint offerings that suit both parties. An example would be a credit reporting agency having an offering with banks that offer loans. Both need the other and do separate work but can work together. Other alliances work with joint selling of opportunities that can be won together.
Ecosystem / Marketplaces – This is a great and changing place for channel partners. There are amazing marketplaces run by the likes of AWS, HubSpot, Shopify, and many others. You can see that many companies work to enhance the customer experience for other products or in collaboration with each other.
Tech Integrated Partnerships – Many types of products can be embedded into other products to create a great result for customers. For instance, a business intelligence (BI) tool may help show data to customers with their own data, or that BI tool can be embedded into another product to show the data of that product and be sold together.
Step 3 – Define & Build Your Partner Journey
Now that you have picked one or more partner types that you want to recruit for your program, you will want to figure out the optimal partner journey. Defining the partner journey is the first step in engaging your partners and building your channel program. Here is how we see the whole lifecycle of working with partners:
Partner Journey Exploration is where you define what it will be like for partners to engage with your company. You will want to draft some ideas on how you plan to meet partners, engage with them, conduct training, and help them market/sell. Once you have the beginnings of a plan, you should meet a few potential partners and share your thoughts. The goal should be to see whether your plan aligns with their objectives so you can adjust before onboarding partners.
If you can meet 3-5 solid partners who want to work with you, you may want to offer favorable terms to them for helping you build out your partner program. Sometimes just being first is advantageous enough.
Once you have a partner or two that is helping you bring in business, you are ready to plan for scale. It is time to revisit your original plan and adjust it based on how much interaction each partner will need at each point of their journey. This will help you plan for revenue and cost of the program.
Example build-out plan:
List your facts (sample from real example):
If there are 30,000 agencies that fit your profile for referral business and at least a third of them match your example programs. If it takes 5-9 interactions of 60 minutes to meet them, onboard and train, and help them market and sell. If you hire a team of 2 and can take on 10-20 partners per month with that team and each partner brings in an average of 6 deals per year at a value of $12,000/year that stays for an average of 4 years, this would be an example model for a reseller partner:
Internal team of 2 X 15 partners per month = 30 partners / month
30 partners bringing in 0.5 deals per month (6/year) = 15 deals per month
At $1,000 Monthly Contract Value ($12k Annual) = $15,000 / month
At month 2 you would have that $15k plus the next and so on
You can take your team and tool costs and gross margin (minus revenue share) to figure out your payback period. This should provide you with a good understanding of your potential growth.
Step 4 – Build Out Prerequisite Channel Materials & Practices
Before rubber can meet the road and your program can take-off, you will need to make key decisions and create baseline materials, including:
Commission structuring and incentives – One of the first questions prospective partners will ask will relate to their earning potential. Have concrete answers in place in regards to the commission structure, as well as other rewards for their participation (placement on your Partners page, product discounts, early-access to industry content, etc.).
Legal paperwork – Anytime the promise of a payout is involved, so should your lawyers. Use our Free Referral Partner Agreement Template when building out your own, making sure it explicitly states the qualifications for lead eligibility, confidentiality rules, how duplicative deals will be handled, and other common points of contention.
Sales enablement materials – Existing sales materials will give your partner program a good start but, ultimately, the needs of Direct Sales vs. Channel Sales won’t necessarily align. After all, your partners may address entirely different audiences and/or promote your products packaged with their own. Therefore, you must audit your available sales enable content and prepare to build out new materials as needed.
Formalized communication practices – Channel managers should not fly by the seats of their pants when interacting with partners. Build out processes, including how frequently they should meet with their contacts and how to structure the conversations. A tool which can templetize the talking points is a partner scorecard which illuminates the various ways partners can successfully interact with the program.
Communication doesn’t only apply to meetings. Make sure it’s clear to both channel managers and partners the preferred way materials should be distributed (such as a shared drive or, more preferably, a PRM). Additionally, consider creating forms for routine requests, such as the granting of MDFs, so partners can provide the necessary details in a single communication.
Step 5 – Set Up Early Tracking and Goals for Your Partner Program
So, how is your partner program going? Good? Well, prove it.
It’s unlikely any professional communication would be so curt, but its underlying message is one which will inevitably come from leadership sooner or later. Therefore, it’s important to define channel program objectives and build out reporting.
After all, a freshly-built channel program may prioritize KPIs like the total number of partners, while those a few years down the line will care more about ROI. It’s also important to measure your program against the company’s greater goals. For example, if the objective is to expand into a new international market, gaining new partners (and customers) from that region should be treated differently than those gained in your own backyard.
Therefore, make sure you document channel program metrics in a way that aids your decision-making and provides value to leadership. The earlier you build the channel program reports, the easier it will be to track progress.
Want to Learn More About Building a Channel Program
If done correctly, one is never done building their channel partner program. There are always opportunities to improve, as well as a mushrooming competitive landscape to confront. To further aid in your program’s development, check out the following resources:
- Channel Sales Business Plan and Proposal – Guidelines and Tips – This article will help you roadmap future partner programs in order to earn buy-in from leadership.
- Examples Partner Programs – A Peek Under the Hood of Six Channels – Dream big with these partner program examples, as well as learn steps they took to reach their levels of success.
- Why Your Partner Sales Program Needs a PRM Tool – Every successful channel partner program is built with a powerful portal. Read this guide to determine whether you’re ready to invest in PRM technology, as well as to learn the many ways it can galvanize operations.
- Questions to Ask in Your Next Partner Manager Interview – Select the right candidates when building out your channel program management team with these targeted questions.
- 16 Partner Program KPIs to Measure Channel Performance - September 18, 2022
- Announcing our $43M majority investment: a letter from the CEO - July 25, 2022
- 9 Steps to Creating a SPIFF Program to Incentivize Channel Partners - January 11, 2022