There is nothing inherently problematic about using channel partners in a go-to-market strategy. In some cases it may absolutely be the best strategy for your firm. The key to success is understanding and proactively mitigating the risks and conflicts that exist in such a model.
Channel conflict occurs when companies try to reach end customers through multiple routes forcing components of the sales ecosystem to compete against each other rather than working together. It is inherently wasteful and can be lethal to customer experience, sales results and profit margins if left unchecked.
So how do you identify it, address it, and minimize the risk of it occurring again?
Lets start with a few of the most common causes of channel conflict:
- Mixing Direct and Indirect Sales:
Examples of companies doing this successfully are the minority, not the norm. If your direct sales team and your indirect partners are chasing after the same customers, conflict is inevitable. Some partners may simply refuse to work with you in this case, limiting your options. A variation which can work successfully is if your direct team ultimately turns the end customers over to the channel partners to service. This can be a win-win where you get the end customer buying your product and the channel partner gets to make their cut by ultimately servicing them. This model can also produce leverage in securing high caliber channel partners if your direct sales force is landing large end users that top channel partners want to service.
For two examples of companies in that minority that have blended direct and indirect channels very successfully, listen to this SBI TV Interview with Joe Vitalone, Chief Sales and Marketing Officer at Razberi Technologies or this SBI TV Interview with Burney Barker, SVP of Worldwide Sales for Gigamon.
- Over Saturation of Channel Partners:
When selecting channel partners to cover a market you need to ensure they have a fair “territory”. An excess of partners covering a certain geography or too few customers to satisfy the number of partners competing for them is a virtual guarantee for conflict. One of two things will happen. Either the partners will loose interest in working with you and start selling other companies products. Or, they will get frustrated by having to compete against one another and ultimately look to you to solve the issue.
- Ceding too Much Pricing Control to Channel Partners:
One obvious potential downside is brand equity erosion. If you are positioned as a high end product you don’t want your channel partners selling for prices at the other end of the spectrum. Another risk that can manifest itself if you have multiple partners competing for the same customers is they begin to undercut each other to win business. This can rapidly turn into destructive conflict where partners see decreasing value from carrying your products.
- Channel Partners Who Are Resistant to Change:
New product rollouts, marketing campaigns and other initiatives are going to happen. If some of your channel partners are resistant to embracing these changes while others are not you risk confusing end users and harming your brand. You have a role in communicating to your channel partners why the changes are needed and enabling them to effectively deliver the message to end users. If after that, some remain resistant, it may be time to evaluate the overall relationship.
Recognizing potential channel conflict is only half the battle. The more important question is how to minimize the risk of it happening in the first place.
- Initial Selection of Channel Partners:
If your company has ever completed an account segmentation exercise you know part of that is identifying what an ideal customer profile is. The same concept holds true when vetting and selecting channel partners. If you don’t know what an ideal partner looks like you can’t possibly be sure you are selecting the right ones. For an example of how you might go about answering that question, download our Channel Partner Attractiveness Tool.
- Rules of Engagement:
Establishing a clear set of written guidelines for channel partners is a must. They should indicate anticipated conduct, specific customers or markets the partner may sell to and under what terms. Detailed discussion of the rules of engagement should be part of the selection process. A partner may choose not to work with you based on certain guidelines but better to identify that up front.
- Ongoing Management and Enablement of Channel Partners:
Don’t make the mistake of selecting a partner and then forgetting about them. You should manage and nurtue the relationship continuously with the goal of making them strategic partners in growth. That means ensuring they are following the rule of engagement and representing your company in an appropriate way. It also means helping enable them to sell your product. Training, end user focused marketing materials or even joint sales calls with your direct sales force are all effective tactics. A useful way to keep tabs on all of this is to have partner scorecards that track important metrics. For an example, download our Channel Enablement Scorecard.
The bottom line is that there is nothing inherently problematic about using channel partners in a go-to-market strategy. In some cases it may absolutely be the best strategy for your firm. The key to success is understanding and proactively mitigating the risks and conflicts that exist in such a model.
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