article | February 12, 2017
10 Reasons Why Channel Partnerships Fail (and What to Do About It)
Channel partnerships can make or break your sales revenue goals. This is true whether you have 5, 50, or 5,000 channel partners. Quality, not quantity, is what matters most. It’s difficult to grow revenue faster than your industry’s growth rate and faster than your competitors. Leverage the How to Make Your Number in 2018 to access a revenue growth methodology to hit your number quarter after quarter, and year after year.
Strong channel partnerships mean greater mindshare and more sales. Weak partnerships mean your products barely factor, if at all, in the sales process.
How strong are your channel partnerships?
Maybe you go through distributors. Or value-add resellers bundle your products with others and service end users. These partnerships supply 25%+ of your revenue. Revenue is down, and you’re looking for answers.
First, take a look at our “Top 10” list of reasons channel partnerships fail. Do any of these apply? If so, read on to learn what you should do next. Strong channel partnerships mean greater mindshare and more sales.
1. Ignoring Why End Users Buy From Resellers
You must understand (and appreciate) why end users value the relationship.
2. Channel Reps vs. Supplier Reps
Is your direct sales force competing with your channel partner’s? If so, your channel partner is likely getting discouraged. Its reps don’t stand a chance.
3. Expecting Channel Partners to Change
Your channel partners are independent businesses with their own agendas. They own the customer relationship, so they hold the power. You have to cater to them.
4. Sticking with a Failing Partnership for Too Long
The first six months of a channel partnership are critical. You must go from zero to 10% of your channel partner’s total revenue. If you don’t, you’ll become a distraction. You’ll lose mindshare. Your partner’s reps will present your product to buyers less often.
5. Not Understanding Your Product’s Significance to the Reseller
Does your channel partner consider your product a strategic asset? Or is it just a cost of doing business? If it’s the latter, you’ve got the wrong channel partner.
6. Being Too Casual About Selecting Channel Partners
More channels equal more revenue, right? Wrong. You must enable and support your channel partners, and your resources are limited. If you spread your channel managers across 5,000 resellers, you won’t be very effective.
7. Not Understanding a Channel’s Proper Requirements
Channel partners are small businesses that live and die by cash flow. Does your product offering generate lots of gross margin dollars? Then the business owner will lead with your product. It’s an ideal match.
8. Betting on One Channel
Routing a new product to one market through one channel is a common mistake. You need multiple routes to market—and they should be complementary.
9. Avoiding Conflict
If you and your channel partner are competing, it’s not healthy. In fact, it’s a death sentence. You need to deal with it head on.
10. Having No Strategic Plan
You sign up channel partners, give them training and sales materials, and then vanish. This, too, is a death sentence. We recommend quarterly meetings. And a joint business plan that holds both parties accountable to each other. Both parties must invest continuously to help grow each other’s businesses.
Questions to Ask Next:
Having any of these 10 red flags presents a quandary. Do you fix your failing partnerships? Or do you cut them loose? Here’s what you need to ask yourself.
Q: “If I end the partnership, what are my alternatives?”
Should you build out a direct sales force to replace it? Find a new channel partner? Or opt for a different indirect channel entirely?
Q: “What’s the competition doing?”
How are your competitors routing their products to market? Are they using the same channel partners? If so, do they have a stronghold on those relationships? (Meaning, is your product being used as “column fodder”?)
Q: “What do I have to offer a new partner?”
What makes investing in a partnership with you worthwhile? Can you provide adequate support? Your prospective channel partner will want to know details. You need to be ready with answers.
This is helpful:
We’ve prepared a case study showing how our team tackled a difficult channel management problem. The Case Study shows how our client resolved channel conflict and increased revenue per channel.
© 2017 Sales Benchmark Index (SBI)
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© 2018 Sales Benchmark Index (SBI), B.V.
A Business Strategy Consulting Company
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Amsterdam, The Netherlands