Every channel leader faces the same core question: How do I use my limited resources, programs and people to generate the biggest possible influence on my partners and best meet my business objectives?
Why score partners?
A strong partner scoring method is key. It lets you increase your return on your relationship with each partner by understanding each one’s strengths and weaknesses. Scoring helps you manage your portfolio of partners and make the best decisions about who to manage, where to scale, and what actions will have the greatest impact. It should be a central part of your channel planning efforts.
The changing world of the tech industry
The revenue game has changed in the tech industry. For many years, it was all about product innovation. Look at the old guard of stalwart companies — Cisco, Microsoft, Oracle. Their product innovation gave them years of market dominance. Innovation is still a key factor in being a market leader, but the pace of innovation required to maintain that leadership has increased exponentially.
Companies now realize that how they go to market is now a determining factor in sustaining market leadership. This makes sense. A great go-to-market engine works across products and makes it more difficult for competitors to deliver the same value.
Partners are a huge part of many companies’ go-to-market efforts. Used effectively, they are a force multiplier. But they are hard work. They consume resources, their effectiveness varies depending on the customer, and they can be unpredictable.
Unlike direct sales resources, partners can’t be directly controlled. They operate independently — and not always in the interest of the vendor, especially when their objectives don’t align perfectly with yours.
What is a channel leader left to do?
The changing world of partners
Perhaps reflecting other changes in the industry, the world of partners is transforming rapidly.
Partners traditionally fit into one of three categories: They resold products, they provided services, or they developed their own intellectual property as a software or hardware solution. These three core business models still exist, but countless different permutations of those models have developed as well.
Meanwhile, the need to specialize to compete in the market has grown. Many partners don’t focus on verticals; they focus on micro-specialties, such as selling physician practice management software to small hospitals in the Northeast.
Other partners have scaled their businesses into large, powerful entities that try to do almost everything for their (primarily enterprise) customers. They’ve created separate departments for each area, all run slightly differently.
In either case, it can be hard for vendors to establish and manage traction. Because the partner is either hyper-focused on one area or highly compartmentalized across services, the value-to-investment ratio may not balance out.
In this new world, almost every partner fills a unique niche in the market and delivers different value. The trick is understanding what that value is and how to foster growth.
The changing world of channel leaders
At the center of this confluence of change is the company’s channel chief. This job has never been harder.
Channel chiefs are at the heart of the shift to the cloud paradigm. They need to balance maintaining the flow of revenues from their on-site partners with convincing other partners to change their business models to support cloud sales. These leaders oversee significant shifts in the business as old, last-generation products make way for new, next-generation innovations.
Channel leaders need to make sure every segment is covered as they build go-to-market pathways connecting their companies with partners and customers of all types and sizes. Often, each customer segment requires its own set of partners and a unique set of partner initiatives.
The complexity of partner offerings has also multiplied. Channel chiefs must manage, at the very least, a partner program, a set of channel incentives, a variety of practice development efforts, recruitment and on-boarding of new partners, efforts to ensure field resources are managing the partner pipeline, and readiness and satisfaction requirements. Depending on the company’s ecosystem, this list might be just the beginning of the channel leader’s responsibilities.
At the same time, performance pressure continues to mount for channel chiefs. Revenue growth is slowing within the industry, resulting in smaller budgets spread across more partners and products, highlighting the critical need for scale. With greater conflict between direct and partner sales for individual transaction ownership, the need for a clear, right-touch sales model is critical. Contra revenue and incentives have become a larger and more important part of everyone’s channel budget, so demonstrating the direct impact of programs is crucial.
These changing worlds combine to make clear optics into partner performance and value an essential element of today’s modern channel management. In short, you need a way to score your partners.
What is partner scoring?
Companies need the right set of channel partners to form healthy ecosystems, and these channel partners are now playing a more critical role than ever in making sales and providing additional support. Driving growth with channel partners requires an insightful, deliberate, data-driven approach to partner management.
Use as a benchmark
Scoring is a unique method of measuring partner performance. It combines elements of key performance indicators, predictive modeling, and big data algorithms, and it allows channel leaders to measure items individually and in aggregate.
There are two keys to effective scoring.
First, scoring must look at more than generated revenue. Partner sales are clearly a primary measurement for any channel management effort, but sales are only one way partners contribute to a tech company’s success. Often, partners are critical influencers shaping customers’ decisions about what to buy and what not to buy. A partner’s endorsement or, better yet, ability and willingness to build solutions around your platform solidifies your position with customers.
Second, scoring is only valuable when it is measured over time. Partner performance varies at any given moment. Even the best partner sometimes fails to make a critical sale. But the cyclical nature of partner performance normalizes over time. Partner scoring’s true value is in helping you understand the trends and changes taking place with respect to individual partners and within your ecosystem.
Focus on outcomes
The point of partner scoring is not just measuring your partners’ performance. It is understanding whether your efforts are making a difference.
Imagine being able to share data with your CEO, CFO or executive vice president of sales that shows how your incentives have had a direct effect on partners. Think of the impact you might make if you could direct field resources to the activities or partners that have made the strongest contributions to your channel objectives and if you could adjust which partners to prioritize depending on how your objectives evolve. That is the promise of partner scoring.
A scoring framework helps you identify the strong and weak points of your partner ecosystem as you rank each partner’s ability to drive revenue, support your strategic platform, win and retain customers, and counter your competition.
Partner scoring gives you actionable insights, enabling you to:
- Identify the specific strengths and weaknesses of each partner.
- Compare peer-level performance even in partner segments that are more geared to influencing than sales.
- Measure the impact of programs and initiatives on partner performance.
- Increase accountability of partner managers for their partners’ performance.
Understand potential vs. performance
There is a difference between partner potential and partner performance. A partner with $50 million in total revenues and $5 million in sales of your product is very different than a $500 million partner that also sells $5 million of your products. The potential for more sales is probably greater with the larger partner, but the performance of the smaller partner is better overall; the latter partner is more aligned to you and your product.
Remember that you have only four levers of partner performance:
- A partner can sell more of your products.
- A partner can align to more strategic products instead of end-of-life products.
- A partner can drive customer wins in critical rather than oversaturated market segments.
- A partner can favor you or your competition.
If a partner is capped out and performing at full potential, it will have a difficult time generating growth, unless you can steer it into a new opportunity area. That is the dance partner scoring should let you manage — driving underperforming partners to their full potential and steering lower potential partners to better growth opportunities.
Your scoring model needs to take all this into account.