Target partner payments to drive behavior and demonstrate value.
As the industry’s economic belt tightens, we’ve been barraged with questions: What is the contribution of our partner ecosystem? Are we overinvesting in partnering? Underinvesting? Half of our clients are doubling down on partnering and investing more in partner experience, incentives and enablement. They are eager to show the growth and contribution of partners to increased sales leverage. The other half of our clients are freaking out, unsure how to prove partner value as their budgets and headcount are scrutinized. Get more out of your partner investments by paying your partners where they provide value in the customer lifecycle. You’ll get more bang for your buck and justify the costs.
Pay partners what they’re worth.
For more than 40 years of channel programs, we have overpaid 50% of our partners and underpaid the other 50%. Partnering executives know every time a partner shows up and takes an order – earning a 20-30% front and back-end margin – our sales teams go nuts. They complain they did all the work and the partner just showed up at the 11th hour, got the deal, and was richly paid. That's overpaying a partner.
Conversely, some deals happen without your sales team lifting a finger. In these deals the partner did the marketing, sales, and engineering. They literally did all the work but only get a fraction of the payment while your sales team gets ‘free money’ from the partner’s hard-won deal. You underpaid that partner because they did everything. When you underpay a partner, you never hear from anyone because the deal happened when you weren’t looking.
Neither overpaying nor underpaying is ideal. Find a way to pay partners appropriately by measuring the work they did outside of the transaction. Better metrics will also help you justify payments in an era when partner investments are the easiest way to trim budgets.
Spread payments across the lifecycle.
Thankfully the industry is shifting from this 40-year-old model of only caring about the transaction. Now we evaluate and reward partner value at each stage in the customer lifecycle. For simplicity, let’s break the customer journey into three stages: influence before the purchase, managing the transaction and ensuring customer success. Those three steps in a customer journey are equally important, so divide the money you're spending on partner incentives roughly into thirds.
Stage One: Influence – What does a person, as an influencer, want or need from you to show up in the first moments of the customer journey and influence vendor selection in your favor? Find a way to incent partners who influence the customer without tying the payment to the transaction. Can you pay partners for recommendations even if the deal doesn’t close? There are also non-monetary rewards that motivate these early influencers. Some people are willing to be an influencer for a baseball cap, a front row seat at your customer event or an MVP badge to put on their website.
Stage Two: Transaction – How the customer buys, whether it’s in a marketplace or from the partner, doesn’t really matter. You’ve won the customer and the partner earns money for that. Collecting the customer's money is one of the three important steps in the customer journey but it's only one-third as important as it was in yesterday’s old-school model. Sales conflict happens when you forget partners provide value or start to believe you're competing with your partners.
Stage Three: Customer Success – As every business goes to subscription consumption, the metrics that matter are the cost to acquire the customer (influence) and then the lifetime value of the customer (satisfaction). Whether it's adoption, integration, stickiness, enrichment, the partner ecosystem is critical in driving customer retention. The partners’ chances of making money in all three stages of the customer journey and your ability to measure and reward them at the point of value produces ecosystem growth and increased sales leverage.
How do companies determine what value to assign to partner actions throughout the customer journey? How do you recognize and reward those efforts? What motivates them as a business model? These are the big questions we can help you answer as we design and build partner programs. Let’s chat.
Diane Krakora is CEO of PartnerPath with over two decades of experience defining the best practices and frameworks around how to develop and manage partnerships.
