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Larry, you wrote an article called “Scale Matters, but the Channel has Size Limits” and you state that if an organization wants to double its channel-generated revenue then its number of partners will need to increase by 115%. Can you explain?
What I was saying in that blog post is there are natural limits to productivity. And if you accept that the 80/20 rule is alive and well in the channel, then you’ve also accepted that there’s a speed limit to the number of partners, or the potential growth that you can get out of any side. Let’s start by looking at the tenants of what the channel is supposed to do. The channel’s supposed to extend market coverage, and particularly get you into niche markets. The other purpose is to create points of presence to create points of sales for customers to come in. Now, that theory works well, but there’s a certain point after you start to exceed capacity, which is the reason why we actually have such an exaggerated 20% rule in the channel.
So, the notion of squeezing more value out of the long tail, particularly, the extreme end of a long tail, becomes less advantageous. If you start pushing down the long tail, and you want to start growing your channels and thinking that you’re going to double your channel revenue just by adding more partners, then you actually have to over-subscribe and get lesser value out of your partners over time, which is the reason why we come to a 115% increase just to double revenue rather than just a pure one over one increase.
Scott, recruitment has an enormous influence on channel program success. What should channel leaders be doing today when it comes to recruitment so they can focus on quality over quantity?
Today’s channel leaders have so much more access to data now that can tell them which partners are having the most success and also predict which partners are best postioned for success. We’ve got to get smarter with new more modern day KPIs that don’t just measure success based on how many partners you’re bringing in, but exactly on what those partners are — things like velocity rate, and how they’re actually growing the business with you.
What advice can you give leaders who would like to transition into a more account-based partnering strategy
Larry: Start at the end. When you make recruitment a metric, then it’s all about bodies, or it’s all about the number of companies. Stop making recruitments, or the number partners important. Make productivity of it important. When I say “start at the end,” one of the other tenants of the channel is that it has to be a net contributor to the vendor or to the enterprise, and enterprise in this case, means business venture.
Scott: Channel has to be aligned with your entire business. If you don’t have the education, enablement, empowerment and training nailed down for your channel partner program, it’s going to be hard to drive more revenue, create more margin, and add more logos to the business. You’ve got to take care of the partners you have, and you’ve got to help them be more successful.
To learn more about driving more revenue with channel partners, tune in to episode 39 of The Allbound Podcast.
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Want to hear more? Subscribe on iTunes. Also available through Google Play. The Allbound Podcast explores the evolving fundamentals of partner-based selling in the SaaS and subscription economy. Featuring some of the industry’s brightest minds in channel sales and marketing, episodes of The Allbound Podcast delve into how and why indirect sales and marketing has long been, and continues to be, a proven medium for accelerating growth and success. And how traditional “channel” models are being transformed into efficient, connected ecosystems to supercharge sales and drive customer success while keeping costs low. Subscribe on iTunes