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The Partner Channel Podcast Episode #7

When to Consider an Indirect Sales Model 

Show Synopsis

In this episode of the Partner Channel Podcast, David Thomson, Chief Revenue Officer at Allbound sits down with Natalie Nathanson, Chief Executive Officer at Magnetude Consulting to get her take on when to move from a direct sales model to an indirect channel. Natalie emphasizes the need for alignment and strong infrastructure before launching a channel program and some common mistakes some of her clients have made.  Spoiler alert! She also talks about the 3 pillars of a successful channel.

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The Script

Dave:  Hello and welcome to the Partner Channel Podcast, The voice of the partner channel community. My name is David Thomson. And in this episode, I’ll be sitting down with the Natalie Nathanson CEO of Magnetude Consulting. So today we’re going to be discussing how to build and sustain a partner program. Welcome, Natalie. Thanks for being on the show.

Natalie: Yeah. Thank you for having me. Glad to be here.

Dave: Yes, so could you start off by walking us through your background and how you ended up as CEO at Magnetude?

Natalie: Yeah, sure. So I founded the company back in 2012. And prior to that, my background has always been in the tech sector, B2B marketing, both kind of channel and indirect, and had worked at some very small companies, sometimes as a marketing team of one. And then also spent a number of years at Forrester Research and ran the marketing team that sold into the I.T. side of the business. And so there I was, part of a much larger marketing organization seeing what’s possible when you have a full team of experts and a pair that with some of the smaller company environments and use that to found Magnetude really as a full-service B2B firm that helps clients with growth strategy and full-service execution.

Dave: Awesome. Fantastic. Well, you know, since you have experience both on the direct and indirect side, I’m really interested to know, you know, as a consultant and as you start advising your clients, When is kind of the right time do you feel to go from direct sales to indirect? Is there a right time?

Natalie: So I think it really does vary a lot company to company. And maybe I’ll illustrate with a few clients that come to mind. Sure. And then kind of talk about the factors. So we have one client that’s a startup. They’ve only been selling their product in the market for a year. And we’ve been going channel heavy from the start. In their case, it’s a complex solution. It’s really geared towards mature enterprises in an emerging space and with a limited marketing and sales budget with much larger competitors. So that’s kind of a great recipe for channel and really getting those right strategic partnerships in place from the start.

Natalie: You know, on the flip side, I have a client that has been selling direct for many years unsuccessfully they had a couple of channel relationships, but it wasn’t really until the pandemic that we took a few of those reseller relationships and really been making them more strategic and just a bit more consultative in nature. And a lot of that was really looking differently at the assets at their disposal and really what could help kind of get them into their software into the right hands, so to speak.

So I think kind of thinking back to what’s the right time, it’s thinking about where and how the end customer wants to buy the product or service, how much hands-on support or implementation is needed. What is the competitive landscape look like? How hard is it going to be to get the attention of the target market? And then kind of what is, you know, what are the sales and marketing budgets look like? And then kind of what’s realistic about the smartest way to allocate those?

Dave: Sure, sure. And this is a quasi-similar question to that. But have you seen or worked with any companies that you think maybe jumped the gun in terms of moving from direct or indirect?

Natalie: Yeah, yeah, I think companies often, unfortunately, underestimate just what it takes to be successful in the channel. And so that’s sometimes just not understanding the kind of investment they should be making and making sure they have a strong salesperson that that understands kind of how to navigate the channel and build those relationships, because it is very different than on the direct side.

And then on the marketing side is also really kind of having your ducks in a row from a messaging and positioning standpoint, having clarity around your pricing and what that should look like to the channel, investing in kind of all the, you know, the channel enablement materials and turnkey campaigns to offer to the partners. Budgeting for the right technologies to support that, enablement like partner portals and things like that. So unfortunately, it happens too often.

Dave: Yeah, yeah. So since we’re talking about kind of the foundation kind of fundamentals, what do you see or some of the key foundational elements to starting it and also obviously sustaining a partner program?

Natalie: Yeah, I think there are a number of steps to kicking off a new program. I think first is really thinking about the structure for that program and the logistics. So even like what kind of relationships will it be? Is it more, you know, referral partners, resellers, technology, just kind of defining that and being clear on what kinds of partnerships to look for. Another one is pricing, and especially for companies that are moving from direct and then adding channel instead of kind of an either-or is making sure that you’re not competing against yourself in setting those pricing guidelines. We’ve had clients that we’re dealing with general conflict because they jumped the gun too quickly and just didn’t take those few meetings or so strategic meetings to do that planning. One example of that then that came up recently was a client in a niche space that was doing paid Google ads. And so we came in to do some research to help optimize. And through that, we realized that most of the companies they were competing against were actually their partners. So we talk about where the money can go. So that’s just kind of one example. But just kind of thinking through some of those basics and then really making sure you have the right kind of technology infrastructure in place, the right recruitment strategy. Is it one to one or one to many? Like how many partners do you need to acquire? How are you going to enable them? And then what are those kind of marketing and sales like foundations in terms of materials, training, and so forth to get in place?

Dave: Yes, speaking of that, as you’re consulting and working with some of your companies that you’re advising, how do you go about figuring out some of those metrics as it relates to how many partners or how much they should be bringing in? I’m sure like you mentioned, it’s case by case, but are there any specific things that you look for in a company when discussing the sort of metrics?

Natalie: Yeah, I think it goes back to just setting the right kind of the right goals at the outset and really looking at can it be kind of a few kind of key relationships? And they might give you access to very large sales organizations and you could have one or two key partners, and that could be someone’s full-time job. Right, to manage each of those. And for larger tech companies, often it is one person’s job to do that.

And so you’re really investing in the depth of that relationship, whereas other times and you see a lot of companies, we work a lot in the security space. A lot of companies going to selling their tech through MSPs. And then it becomes more of a volume play oftentimes. And so you need more of those partners knowing that they’re kind of competing with a lot of other solutions and you really need that volume to make it work. But I think the KPIs there’s a lot of things you could measure sales is really what it comes down to. Hard to argue with, with revenue. And that’s when you know it’s working. I think it’s, you know, like longer sales cycles. You want to look at how long can you do want to feed the beast before you expect that return. You guys must see a pretty wide range of this as well on your end.

Dave: Yeah, no, absolutely. I think you’re spot on in terms of, you know, obviously, it’s easy to identify a successful partner program by lagging indicators such as, you know, revenue coming from your partners. But I would love to go out a little bit more in-depth. In a lot of questions I get as well are a lot around those leading indicators and in, you know, a lot of the questions that I sometimes hear are around, you know, how do you identify and when do you identify a partner as a good partner for you? Once you’re on board, then is there a specific timeframe in, you know, in terms of they need X, Y, Z engagement in 90 days and, you know, they’re successful or kind of what does that look like to you?

Natalie: Yeah, and again, I do think it varies from one company to the next, but we do find that those first kind of 30, 60, 90 days is having that strong onboarding program for the partners. And being clear about the expectations on both sides is important. Understanding that the channel sales organization and how are they kind of comped and incented and really making sure that those elements are are aligned so that you can kind of look at joint campaigns or enablement materials and have expectations around how soon they’ll start acting on that. So that’s where I think some of the variations come in from one organization to the next. But ideally, you’re kind of seeing that initial engagement, at least in and of how many reps are going through training. Are they starting to get inserted into deals or brought into sales conversations? And then, as you say, some of those kind of lagging indicators kind of come to fruition down the line.

Dave: Sure. So so what are your thoughts on the kind of the old 80/20 that, you know, 20 percent of your are your partners are going to contribute, the vast majority of you, your kind of revenue in your partner program?

Natalie: And so we still very much see that that holds true for better or worse. But I think we just we see that happening a lot across our client base. And some of the challenges we see are really on both sides of it. So companies that invest that don’t invest enough in those 20 percent, that drive 80 percent of the revenue, and they kind of take it as a given that that’s going to continue. And we had a client last year that one of their partners, one of their top partners started working with their top competitor. And it was a little bit of kind of taking their eye off the ball of that relationship.

Natalie: But then we also see the flip side, where companies are investing so much in trying to get that 80 percent to perform a bit better, that at some point you want to figure out is a partner not performing because there might not be the right partner for you and just aren’t aligned well enough.

Dave: Right, and how do you figure out that that alignment, because, you know, some of the companies that we talked to on a pretty regular basis have a lot of partners. So it wouldn’t make sense if you have 200 partners to spend time interviewing those 80 percent that maybe aren’t making a big contribution. So, you know, how do you kind of talk through that and how do you think through that for larger, I guess, partner organization or I guess those that are a little bit more put together?

Natalie: Yeah, yeah. So I would say that actually when you do have a high volume of partners, like you said, a couple hundred, you really do want to make sure you have the right kind of systems in place and that you’re tracking what does good partner engagement look like with some of those kind of top of final metrics? So to speak. Or are they accessing your materials through your portal or are they attending training? So you’re getting kind of sales kind of questions back to show that to show the true engagement and then kind of the leads. And we often look at leads that come from the channel just the same as we would direct. So thinking about lead scoring and the qualification. And that’s another kind of mid-funnel indicator of the relationship, so to speak, is to see you getting the right kinds of leads. Even if they’re not closing, you’re getting the at-bats, so to speak, from your partners.

Dave: Yeah, absolutely, and I want to go back to you, you mentioned earlier about general conflict and this is something that, you know, pops up and we talk about a lot and could have really large repercussions if you do it incorrectly with your direct team. So, you know, are there some key critical elements that you always talk through your companies that you’re advising about in terms of getting, you know, X, Y, Z together to ensure that channel conflict doesn’t take place?

Natalie: Yeah, I think it’s thinking about just what is your go-to-market look like and at the different kind of key, you know, key planning points around that. What? What needs to be thought through, so we often talk in terms of the market, the message and the mechanism when it comes to kind of three pillars of marketing. So the market who are you going after? Right. And you can sometimes solve potential channel conflict by looking at different territories or tackling different segments of the market. And then kind of you’re setting those parameters up very clearly defined from the outset.

 The second would be the message and just making sure that the positioning that you’re putting out there is a kind of conducive to the channel and that you’re not, again, creating those situations where you might be competing against your own, your own partners. And that sometimes happens with tech firms that have services organizations and things like that. And then third kind of the mechanism, we’re talking about the kind of tactics that you’re using to get out in front of prospects. And that goes back to the example like the Google AdWords example that I gave where a tech company was competing for ad dollars against their own partners and essentially kind of double-dipping on their spend.

Dave: Sure, in one of the examples you gave, I think early on in the podcast, was working with a company that said as more enterprise-focused and you’re going in and helping them with a kind of a reseller model. Do you see that in most companies you work with, do you recommend starting at a referral model and working your way up or does it is a very dependent on, you know, the market and who they’re targeting?

Natalie: Yeah, I think it does really depend. And I think some technologies or services for that matter, are just more transactional or more consultative in nature. So I think to some degree, it depends on where you fall in that we had a client that sold to all their partners were kind of resellers and they wanted them to be more consultative. But you looked at the other products in their portfolio and that’s just not what they were designed to do. So I think it’s it all goes back to looking at how do your customers want to buy, how kind of standardized is your type of solution in the market? And then who are the right kinds of partners to either kind of be a reseller or to be kind of a strategic partner?

Dave: Gotcha. OK, so what would be your single biggest piece of advice to anyone right now that is listening, thinking about starting a partner program?

Natalie: I would say and this goes back to something that I say about a lot of circumstances, is there’s no shortage of places to focus on. So it really becomes an effort in smart prioritization. And I think in today’s environment, there’s a lot of noise out there and a lot specifically in the digital ecosystem. And I would say having fewer deeper partnerships tends to be a smarter place to start than going too broad too quickly, which is not to say that we should look for that business model that has a lot of growth of partners over time, but really making sure that you are smart about where to place your bets, you are paying close attention to those metrics. You’re making sure that the partnership is a win-win and that it is sustainable. And then looking to replicate that versus a spreading effort to thin.

Dave: Absolutely. All right, great. Well, let’s get into the I don’t know if it’s famous. yet but the final four questions, they will be famous after this podcast. But the first question is, if you had a superpower, what would it be and why?

Natalie: All right, so I would love to say that I have something clever, like being invisible or learning how to fly, but I say if I’m being honest, it would be being in multiple places at once.

I would say time is the one resource you can’t get more of. And it’s such a premium, and especially these days. So I always want to be working on more things in the business. Having more time with my husband and kids, more time for my own hobbies. So if I could be doing multiple of those things at the same time, I would be very happy.

Dave: So just clone some Natalie’s is all we need right?

Natalie: That’s a scary thought as well. But I guess so.

Dave:  All right great! Second question one mistake and one success you’ve had in the general.

Natalie: Yeah, so one mistake I’ll share, and this was one of my first roles responsible for the channel, was probably 10 or 12 years ago, I was really wanting to start the right way with tackling the channel program and making it more sophisticated. So adding in the tiers on the MDF and all the bells and whistles and the mistake was doing that too quickly and too early in the role. And I think some of that was kind of the young and hungry ambition. But over time I’ve really learned to be respectful of the relationships that are already in place and have take it all in, look for the optimizations or the low hanging fruit and really learning the dynamics before trying to roll out a big change, which is not to say that big changes aren’t needed or aren’t warranted. Oftentimes they are. But really, I think with the channel in particular, there’s a real finesse to kind of being smart about when and how you kind of roll out changes.

Dave: That makes a lot of sense. And how about success?

Natalie: Success, so we have one recently that I’m very proud of is there’s a client that we started working with this past January and they brought us on specifically to help develop their channel strategy. They had to establish partnerships and then that were more strategic partners. And we’re looking to go to kind of a broader channel model and layer in on top of that kind of a pandemic and other kinds of challenges in their business. We ended up with some of the low-hanging fruit on their existing relationships, actually driving a lot of new sales activity and Q2 was their strongest channel pipeline yet. So obviously, things don’t always happen that fast, but I think it’s an example of just being able to kind of look for those small wins and, you know, and lay the groundwork and continue to build from there.

Dave: All right. Number three, what is one business book you recommend to someone who is aspiring to make their way into leadership channel leadership?

Natalie: So. I don’t know that I have a great answer for this. I think, quite frankly, to me, channel is one of those areas where leadership qualification and it comes more from kind of years in the fields and battle wounds and all of those sorts of things paired with that understanding of how the ecosystem works and what are the right levers to push and pull. But there is one book that I’ve been listening to via audio book the last few weeks that I think has relevance. And it’s called Same Side Selling, and it’s about sales in general.

 And I think written more for the direct audience, but talking about not being viewed as a commodity sale and really avoiding those adversarial relationships between buyers and sellers, finding that mutual interest and that selling is helping mentality. And I think that applies to direct selling between a seller and a buyer just as much as it does between a partnership. Having two reps kind of going in on a joint opportunity and really making sure that there’s mutual interest in that.

Dave: And that’s an Ian Altman book, correct?

Natalie: Yes. Yes, it is.

Dave: Yes, I’ve read that several times. It’s a great book. And I’ve actually had him on as a consultant to a couple of previous companies.

Natalie: Oh, that’s great. He’s fantastic. I’m really enjoying it.

Dave: Great. All right. So the last of the four is five years from now what major changes in the channel that people should think about right now? What will be some of those major changes?

Natalie: Yeah, so in some ways, I would say it’s hard to think about what five years out looks like in this climate and what goes back to new normal or old normal. But one of the changes we’ve been seeing is and this is specific to the tech landscape, is around the number and types of partners that companies are working with.

And I think because the channel is so appealing, we’re seeing companies to now start to become more selective about who they’re partnering with so that they are focused on the ones that where there’s kind of a strong fit and a good long term relationship. And so I think that’s on kind of more of the typical Partner Channel model or strategic partnerships. But then I think on the flip side, there’s some other industries where we’re seeing companies just ramping up on the referral partnerships and being less selective in a way, and really just building up that, you know, referral engine to drive deal flow. Real So I think a bit in in both of those directions.

And then I think one that’s more specific to what we’re all facing now during the pandemic is this near-total switch to digital activities. And so just like digital transformation is touching all facets of business and society and all of that, I think it puts the onus on, you know, marketing and salespeople to keep their materials up to date, really make sure that they’re making it easy for four partners to access materials. But then on the flip side, is also getting those data-driven insights about what your partners are doing with your materials online. How are they being shared? Which partners are engaging to some of those things that we’re talking about earlier as there’s kind of prefunnel KPIs?

Dave: Ok, great. Yeah, I know it’s very difficult to think five years from now. It’s very difficult to think, you know, what’s going to happen five months from now with everything that’s been going on. But I certainly appreciate your answers and thank you, Natalie, for coming onboard. Again Natalie, is the CEO of Magnetude Consulting. And obviously thank you listeners for joining us at the Partner Channel podcast. If you like what you heard, please, please subscribe to our podcast episodes wherever you listen to our podcast. And if you want to learn more about Allbound, please visit our website www dot A-L-L-B-O-U-N-D dotcom. Thank you very much.