Recently I had a call with a channel director for a company based in India. His company sold software for banks and he managed their channel for them across the Asia-Pacific. region. It struck me that the challenges they faced is common to many companies in the tech industry – and beyond, and that they were rooted in decisions made years ago by his company, when they set their route-to-market strategy.

His company had sold “direct” until about 5 years ago when they started adding “some channel”. Now they had a loose network of 1-2 companies per country who acted as “Agents” for them in Australia, Singapore, Taiwan, Malaysia, Vietnam, Thailand, etc.… He had previously managed their business in Europe and they had the same setup – and the same challenges….

Of the 20 or so countries he managed, with nearly 50 partners, he only considered 3-5 partners to be focused and enabled on his business. His plan was to get another 3-5 enabled in 2016. He’d done this before and knew he would need to 1) focus on a country or set of partners, ) he would need to spend a lot of time with the partners’ technical team to help them get “enabled” and 3) he would need to get them engaged with his field sales team with account targeting. But since he had gone through this process before, he also knew just how hard this was going to be – and in the end, that it was a gamble that might not work…

What Could the Channel Rep/the Company do to Become Relevant to Partners and Gain Their Focus and Commitment?

The company had a sales rep or two in each of these countries, and as we discussed the situation, what jumped out at me was the shallow relationship that the vendor seemed to have with these Partners. Sometimes they would be engaged (when the vendor brought them into a deal), but then they would not talk for a few months. In the channel manager’s heart, he knew that every week that went by without engaging, meant the Partners’ business was moving farther away from selling his product…

So what was the “Route-to-Market” decision that led to these issues?

The decision to have a “Partial-Channel” Sales Model!

What I mean by “partial channel” sales model is that some business is sold by partners, and they get compensated for what they sell, but a lot of the business is sold directly by vendor sales reps without involvement or compensation for any partner. They have “some partners”, but neither party is very committed to the relationship.

My experience is that

• Vendors can have some success selling “Direct” (particularly in specific segments/markets)

OR

• They can be successful with an “Indirect” (or channel) sales model.

But it is hard to be successful with “partial-channel” sales model.

The results are like the old saying, “You cannot be ½ pregnant”. Either you work with partners, or you do not. Working with partners only when it is “convenient” does not result in a true partnership (or much revenue).

So why is this the case? A “partial-channel”sales model makes building a channel difficult because it runs completely against 3 Powerful Human Emotions that dictate both vendor and partner behavior. These 3 emotions are incredibly powerful and stack the deck against a “middle-path” on channel –

• Trust
• Envy
• Greed

Let’s discuss each of these emotions and the dynamics of selling in a bit more detail.

Trust

We intuitively understand that “Trust” is a good thing in a partnership – but clearly lack of trust can have a very bad impact. Unfortunately, a “partial-channel” model tends to create a lack of trust between a vendor and their partners.

Think of it this way – on Monday, you make a sales call together, with your partner.   But what is the vendor sales rep doing the rest of the week? In a “partial-channel” model, the answer often is, “calling on customers direct”. That’s OK and was probably the situation when the partner signed on, but it makes the partner ask themselves questions like:

• “Why didn’t the vendor ask me to work with them on ABC opportunity (that I heard about in an RFP)?”
• They sold XYZ opportunity direct – and I’ve known that account for years…
• I just invested in training on their new product, how could I recover my costs if they don’t work with me?
• I wonder how they decide when to work with me? It is probably just their sales rep trying to make more money on the deal by keeping me out…

All of these questions indicate a lack of trust in the partnership – and make it less likely a partner will commit, invest and initiate new sales opportunity for your products…

Envy

Google dictionary defines envy as “a feeling of discontentment or resentful longing aroused by someone else’s possessions, qualities or luck.”   When a vendor has a “partial-channel” sales model, they often create guidelines for when they will sell “direct”. For example, they might say they will sell direct only to a) some named accounts, b) their current customers, c) some particular geographic area or d) specific vertical markets (such as financial services).

The problem with these carve-outs is that they create “envy” in the channel. Even if the reasons for the approach make sense on the surface, they create a dynamic of “envy” where a Partner tends to ask themselves questions like:

• “What if I did invest more in selling Vendor A,’s products? I can only sell it to some of my customers. I’m limited, and they are keeping the best accounts for themselves.
• “I wonder if there is even any opportunity in the accounts/markets where I can sell? It might be a waste of my time – and then they may take other customers/segments direct later (lack of trust) ?”
• Why bother – I have better opportunities to pursue…”

Greed

The last emotion that keeps a “partial-partner” sales model from thriving is “Greed”. Once again, some business is “Direct” and some business is “Partner”. The question becomes “How” does the vendor decide what is “Direct” and more importantly “Who” decides. The reality is that in many organizations, the field rep is loosely managed and can make the call whether to leverage partners or not. At some level that makes 100% sense – since they are in the best position to judge the customer situation and the partner capabilities to support the deal.

Unfortunately that is where “Greed” comes in. I cannot count the number of stories I have heard over the years from partners, from channel sales managers and even from sales reps, recounting that the deciding factor in whether to use partners was “How much will I get paid on this deal?”.

 Many vendor compensation plans pay less to a rep on deals that go through the channel – because they get paid on the net selling price (which is the price paid by the customer minus discounts taken distribution/ resellers). In the short term, the Rep gets paid more if they sell direct. In the long term, he may/may not realize/or believe that he would get paid more if they had a strong channel in their patch. But the lure of higher compensation today makes the long-term question disappear for many reps and for many vendors…

So What are the options if you are stuck in the middle with a “Partial-Channel? Sales model?

In my experience, if a vendor has decided they need a channel, then they need to go “all in” and be willing to have a business that is 100% “channel touch”. They can still set up programs to differentiate channel margins or commissions based on role the partner played, but the assumption needs to be the partner is involved at some level in every deal. With this mandate, the vendor field reps are encouraged to use “team selling” and know they cannot sell around the partners, just to maximize the value of a first deal. That policy provides some incentive to support and enable partners. At the very least, partners are involved in fulfillment – which helps some with “Envy” and “Greed”.

It takes a lot more than that to create a strong partnership – and to begin to build “Trust”. The goal is to get partners to go beyond reactive to proactively creating sales opportunities. A lot of things need to change in the vendor’s GTM to make this happen (strong channel program with incentives, field engagement model, partner enablement, etc.…). But the first step is knocking down (or at least minimizing) Envy and Greed that having a direct team “in competition” with the channel creates. It is not the end of your journey to driving more channel revenue, but at least it is a start…

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