When I think of partnership, many examples come to mind, across many disciplines – tennis, criminal investigation, entrepreneurship and movie production, to name a few. And it’s easy to see a common theme, that partners must have the same goals. Once we have this alignment, the partners must carve out a strategy to reach the goals.
That brings us to some fundamental questions – How do we outline a strategy? Do product companies conduct due diligence to understand their channel partners before seeking alignment?
Let me clarify that by channel partner I mean a large ecosystem of value added resellers (VARs), solution providers, service providers/managed service providers and systems integrators (SIs). Now, I’m going to walk through the key parameters that I think will help you understand a channel partner’s business model and motive. The ultimate objective is to determine if a partnership might be gainful or strategic, or simply not worth pursuing.
Understanding a Channel Partner’s Business
1. Products/Services and Pricing
First, a clear view of the primary and secondary products and services in a channel partner’s portfolio is needed. Once the products/services with the segments being targeted (SMB, mid-size/large enterprises, industry types) are mapped out, you can start to rationalise the product/market fit as it relates to your own product.
You also need to understand:
- How these products and services are delivered
- The pricing structure for customers vs resellers
2. Current Strategy vs Future Direction
It is imperative to understand a channel partner’s current strategy, as well as future direction it could take, based on market trends.
A shift in strategy from a channel partner opens new doors for vendors. Just think of how managed service providers (MSPs) have evolved in the last few years, from hosting their own infrastructure-based services to managing infrastructure services hosted by hyperscale public cloud providers (AWS/S3, Microsoft Azure, Google Cloud Platform). For example, an MSP that had its own cloud hosted storage services would now no longer require storage from a particular vendor as all that physical infrastructure is now managed and maintained by AWS, Azure or GCP. However, cloud-native services, backup and recovery solutions, and business-specific data analytics may still be relevant for the MSP to host and offer in partnership with a product vendor. The key question here is what product, solution or toolset is missing from the new service delivery method?
3. Core Competencies and Innovation
A review of a channel partner’s core competencies should give you an idea about their capabilities in the areas of technology, operations and business model.
- Is the technology evolving over time and embracing cutting-edge computation models, techniques and tools?
- Are the operations costly and process heavy, or are they streamlined and automated?
- To what extent do the business initiatives rely on innovation?
- Does the channel partner have the right resources to meet its technology, operations and business goals in the long term?
Innovation in these three areas – technology, operations and business model – can lead to new market opportunities. Vendors should look for ways to contribute to their channel partner’s innovation cycle by trying to add value to these areas.
4. Competition and Perceived Value
To survive a business must understand the competitive landscape and differentiate its offerings. But, as Benjamin Gilad notes in the Harvard Business Review, businesses rarely make good use of their market intelligence data. As a product vendor you should gather and analyze competitive information relating to a channel partner in order to be equipped with the right positioning messages and tactics to influence the relationship.
Similarly, as vendors, we need to understand the value of the product to the end user. In a multi-tiered sales channel, a vendor can be separated from the customer by several tiers. The customer’s perception of value includes the services packaged by the channel partner around the core product, so there is a value difference between the core product and repackaged product. This value difference should be acknowledged and justified by the vendor.
5. Customer Acquisition
As a vendor in these relationships you don’t own the customer, the channel partner does. If you establish the right relationship with a partner, you can get invited into customer calls related to product and service reviews. At the same time, as a vendor you should have a good handle on personas – the users of products/services, the decision-makers and the buyers. Sometimes the personas can double up as both buyer and decision maker or user and decision maker.
In essence, a clear understanding of personas and their behaviors, relating to product and services, benefits a vendor in a number of ways – specifically in identifying problem areas (pain points), improving a product roadmap and enriching the customer journey. A vendor should be able to create a list of likes and dislikes on the basis of personas, feeding into the product requirements funnel for further rationalization while tuning up positioning collateral to generate more demand, improve sales leads and draw customers. This approach to customer acquisition makes the partnership stronger.
In summary, here are the questions I think are worth asking:
- What are the essential business drivers for the channel partner and how can your product enable those drivers?
- As a vendor, can you foresee a change in direction from the channel partner? Is there a gap in service delivery method, solution or toolset?
- Are the partner’s existing capabilities and resources in technology and operations sufficient to support growth?
- As a vendor, do you acknowledge and justify the difference in value between the core product and expanded product which includes services from the channel partner?
- Do you have the right level of relationship with the channel partner to be able to assess the wants and needs of a customer (not owned by you)?
By approaching a partnership with a set of common goals and understanding the dynamics through the parameters discussed above, product adoption should become more predictable. However, it requires considerable clarity of purpose and a shared responsibility framework to make it work. Ideally, the channel manager, product manager and product marketing manager should collaborate to get this right.