At the core of an effective channel management strategy lies a comprehensive channel plan that influences customer and partner behavior and drives desired business outcomes. Simply put, channel planning aims to put the right quantities of the right products in the right places at the right times to satisfy customer demands in an efficient, cost-effective manner. While the concept seems elementary on the surface, it is important to address each element of a channel plan with a fine-tooth comb to ensure your channel strategy aligns with desired business outcomes.
Through years of experience and a rigorous approach, our team of channel experts at The Spur Group have outlined the 5 planning elements that channel leaders should focus.
Channel Health Index
Developing an understanding and maintaining line of sight into the strengths and weaknesses of your channel strategy is integral to driving revenue acceleration through the partner channel. It is important to review, analyze and benchmark your teams’ and programs’ performance on a regular basis. This can be done using a model inspecting 18 points of execution across 6 major areas:
Are you set up to reach your strategic objectives?
- Partner Scoring: Do you know who are the right partners to manage?
- Business Planning: Are you making sure your partners are aligned to the right goals?
- Capacity Planning: Do your existing partners deliver enough sales velocity to hit your targets?
Have you created a model that will continually grow your base?
- Business Proposition: Is everyone aligned around the compelling reason you beat your competition?
- Partner Targeting: Do you understand and act on the profile of your best possible candidates?
- Partner Onboarding: Are you maximizing partner activations throughout your recruitment efforts?
How good are your partners at selling your goods and services?
- Partner Enablement: Are you arming your partners with the tools that help them with customers?
- GTM Playbook: How aligned are your partners and field sellers to deliver unified joint sales?
- Campaign Development: Do you know which partners are effective marketers of your solutions?
Are your costs-to-serve too high for you and your partners?
- Deal Registration: Does your program drive sales behavior or simply transfer margin?
- Incentives Framework: Has your contra-revenue program turned into an entitlement program?
- MDF Planning: Are you getting sufficient return on your investments?
Do your programs keep partners loyal?
- Partner Program: Does your program deliver sufficient value to partners to keep them focused?
- Cloud Program: Have you made the same significant shift to the cloud as you expect from partners?
- IP Program: Do partners view you as supporting their future IP development?
Do you execute in the most effective and efficient manner?
- Performance Scorecards: Do you hold all your stakeholders accountable to the same metrics?
- Pipeline Management: How central is managing a specific partner pipeline for your partner field sales?
- PAM/CDM Training: Are you partner managers doing everything you need them to do?
Using these questions as a guide to review the performance of your channel programs, you should be able to classify the health of your channel as Unstructured (few formal processes in place), Ad Hoc (processes defined as guidelines with limited adherence), Structured (formal process with disciplined adherence), Advanced (multiple scenario-based processes in place), or Robust (automated processes adjust based on defined parameters). Formally benchmarking your programs and processes will then allow you to improve the effectiveness and efficiency of your channel programs.
Another important element of Channel Planning is the ability to diagnose channel performance against a vendor’s strategic product focus and growth model. The Spur Group has developed the Growth Profile TM Strategic Model to help map product priorities to sales and partner performance in a quantifiable manner. The model is composed of 4 quadrants to help classify which products are in each stage of the growth cycle.
Perform – Maximize sales and current revenue flow with existing partners and direct sales resources.
Transform – Strengthen to scale or achieve performance leadership by recruiting new partners or adding additional direct sales resources.
Incubate - Break into new markets and technology by focusing research and development efforts with a new or existing channel or direct resources.
Optimize – Maintain sales with programmatic reductions by redirecting resources from low-performing elements to higher-performing elements to increase efficiency and effectiveness.
Having a clear understanding of your growth profile is essential, as it quickly helps you determine the right strategic balance to recruit, grow, develop, or prune your direct and partner sales base.
Managing your partner ecosystem to ensure the channel contains the right mix of partners is key to sound channel management, which when successful, can be broad and effective. Partner managers need to have a full understanding of the company’s partner ecosystem, and how by using four simple levers they can make a number of efficient and timely adjustments to optimize performance of the ecosystem as a whole.
- Coverage: This refers to the number of partners by segment. Ecosystem capacity is influenced by a number of factors, including the mix of channel types, number of partners in each segment, and core attributes such as customers served, business models, and solutions offered.
- Capability: What knowledge is required to sell and support the company’s offerings? Having this knowledge is imperative for the channel to be effective in the market.
- Capacity: A function of the size, frequency, and number of transactions per year, capacity is the velocity of sales per partner in a given year.
- Commitment: Partner loyalty is a major factor in optimizing revenue. If partners are selling products from multiple vendors, it cuts into a company’s bottom line.
Channel planning should take into account and inform channel management activities such as creating data-driven models for recruitment and development, balancing engagements based on business models and different performance requirements, and validating partner business propositions across different segments.
Overall, capacity planning creates a road map for the all up channel management strategy.
Developing a standard, robust partner scoring system is another major way to optimize your channel management strategy. Channel leaders have limited resources, programs and people to generate influence on partners and meet business objectives. A strong partner scoring method is key to understanding the strengths and weaknesses of each partner, enabling an increased return on the relationship and visibility into which partners need to be managed, where you can scale, which actions on which partners will have the greatest impact. The importance of partner scoring is being driven by a combinations of a changing tech industry, a rapidly transforming partner space, and an evolving world of channel leaders at the confluence. These changing worlds have created a need for a system to score partners, as leaders need clear visibility into partner performance and value.
The Spur Group’s framework for partner scoring is centered around a belief that it should be more than a simple forecasting tool, but rather it should help companies increase sales, improve ROI, and influence partner behaviors to act on the products and markets that currently matter the most. To effectively rank partners, it is important to consider both their current performance and potential for growth. The Spur Group uses a three-step approach for calculating a Partner Evaluated Revenue Capacity (PERC) score.
Step 1: Rank each component of the 4C’s discussed earlier in the Channel Planning section (Contribution, Capability, Coverage, Commitment). For all of these, set weights based on your channel strategy and intricacies of your partner ecosystem.
Step 2: Rate each partner into peer-levels. This is done using a simple five-star rating. Partners that score will in the 4Cs are 5-star partners and the scale adjusts down from there.
Step 3: Calculate a final PERC score and assess whether a partner is performing above, at, or below average for similarly sized companies.
The PERC score allows you to create an action plan for partners and even extend the model to get more value for you and your partners. You can evolve from the core model and customize your PERC score, create better dashboards, compare like partners, simplify research, and strengthen capacity planning amongst a number of options.
Partner Business Planning
The final element of effective channel planning is partner business planning, which improves your ability to set goals, manage commitments and drive partner performance. Having insight into the performance of your partners against planning benchmarks and the effectiveness of programs is essential to adjusting strategies that optimize revenue acceleration. The Spur Group has developed a Partner InsiteTM database that combines comprehensive data and advanced algorithms to help you recruit competitive partners, expand your ecosystem, and track partner execution.
Our solution helps you track partners and increase the effectiveness of your channel management strategy in five key areas:
- Vendor Alignment: Know the vendors partners are working with to go-to-market
- Program Membership: Understand what vendor programs a partner is enrolled in and the status of their membership in that program
- Product Focus: identify which products the partner highlights and emphasizes
- Industry Importance: What industries is the partner focusing on?
- Business Model: Discover the services the partner provides and how they monetize their business
By developing a firm understanding of these five aspects and leveraging data-driven insight to adjust strategies accordingly, companies can optimize their channel management strategy and accelerate revenue.
While each of the five elements of an effective channel plan are individually important, is must be noted that they cannot be addressed in silos. The elements of a high functioning channel plan are all inter-related and inform and influence one another to deliver an optimized strategy. This enable businesses to consistently meet revenue targets and align with current and future business objectives.