The Essential Guide to Partner Planning
Build your partner planning framework
Partner 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 essential to address each element of a channel plan with a fine-tooth comb to ensure your partner 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 five planning elements to guide your planning.
Step #1: Understand the present strengths and weaknesses of your efforts
Step #2: Know your growth levers
Step #3 Define the required ecosystem need
Step #4 Evaluate your partner’s performance
Step #5 Create partner-level action plans
Step #1: Understand the present strengths and weaknesses of your efforts
Developing an understanding and maintaining a line of sight into the strengths and weaknesses of your channel strategy is integral to driving revenue acceleration through the partner channel. It is essential to review, analyze, and benchmark your teams’ and programs’ performance regularly. It can be done using a model that examines 18 points of execution across six primary areas:
Are you set up to reach your strategic objectives?
Capacity planning: Do your existing partners deliver enough sales velocity to hit your targets?
Joint business planning: Are you making sure your partners are aligned to the right goals?
Partner scoring: Do you know who the right partners are?
Have you created a model that will continually grow your base?
Partner business proposition: Is everyone aligned on the compelling reason you win out over your competition?
Partner onboarding: Are you maximizing partner activations throughout your recruitment efforts?
Partner recruitment: Do you understand and act on the profile of your best possible candidates?
How good are your partners at selling your goods and services?
Campaign development: Do you know which partners are effective marketers of your solutions?
Go-to-market playbook: How aligned are your partners and field sellers to deliver unified joint sales?
Partner enablement: Are you arming your partners with the tools that help them with customers?
Are your costs-to-serve too high for you and your partners?
Channel incentives: Is your contra-revenue program still driving value?
Deal registration: Does your program drive sales behavior or simply transfer margin?
Partner investment framework: Are you getting sufficient return on your other investments?
Do your programs keep partners loyal?
Cloud revenues structure: Have you made the same significant shift to the cloud as you expect from partners?
IP development: Do partners view you as supporting their future IP development?
Partner program: Does your program deliver sufficient value to partners to keep them focused?
Do you execute most effectively and efficiently?
Partner co-selling model: Are you partner managers doing everything you need them to do?
Performance dashboard: 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?
Use these questions as a guide to review the performance of your channel programs. You should be able to classify the health of your channel processes as one of the following:
- Unstructured (few formal processes in place)
- Ad Hoc (processes defined as guidelines with limited adherence)
- Advanced (multiple scenario-based processes in place)
- Robust (automated processes adjust based on defined parameters)
- Structured (formal process with disciplined adherence)
Formally benchmarking your programs and processes will then allow you to improve the effectiveness and efficiency of your channel programs.
Step #2: Know your growth levers
Another critical 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:
Incubate - Break into new markets and technology by concentrating on 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.
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.
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.
Step #3 Define the required ecosystem need
Managing your partnership community to ensure the channel contains the right mix of partners is vital to sound channel management, which, when successful, can be broad and compelling. Partner managers need to have both a full understanding of the company’s partner community and how (by using five simple levers) they can make a few adjustments to optimize the community’s performance.
- Contribution: What is the sales velocity of each partner? Sales velocity refers to how quickly the company converts leads to sales and the value of each of those closed deals over a set period. Almost everyone measures sales velocity, and you likely have data to calculate the rate for each partner.
- Consumption: How effective is the partner at driving customer adoption and usage? If contribution represents revenue, then consumption is the increase in the average customer’s lifetime value through affiliation with the product or service.
- Coverage: What markets does the partner cover? Your ecosystem capacity is influenced by the mix of partner types and the number of partners in each segment, as well as partner attributes such as customer served, business models, and solutions offered. You have an opportunity to expand into new markets with the right partner coverage.
- Capability: How aligned with strategic products is the partner? Capability is a combination of the partner’s knowledge and its effectiveness at bringing it to bear with targeted customers. Every revenue dollar is not equal when it comes to building a growth engine, and a partner’s capability is critical.
- Commitment: How predictable and consistent are the partner’s results? Most partners work with multiple vendors, so partner loyalty is a crucial determinant of channel revenue. A partner’s commitment will affect how it contributes to your growth curve.
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 all up-channel management strategies.
Step #4 Evaluate your partner’s performance
Developing a standard, robust partner scoring system is another significant 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 reliable partner scoring method is key to understanding the strengths and weaknesses of each partner, enabling an increased return on the relationship, and visibility into partner potential. (Which partners need to be managed, where you can scale, which actions will have the most significant impact.) Partner scoring is incredibly important because of a a combination of the changing tech industry, a rapidly transforming partner space, and an evolving world of channel leaders. 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 on a belief that it should be more than a simple forecasting tool. This framework 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 essential 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.
1. Calculate a final PERC score and assess whether a partner is performing above, at, or below average for similarly sized companies.
2. Rank each component of the 5Cs discussed earlier in the Channel Planning section (Contribution, Consumption, Capability, Coverage, Commitment). For all of these, set weights based on your channel strategy and intricacies of your partner ecosystem.
3. Rate each partner into peer-levels. It is done using a simple five-star rating. Partners that score will in the 5Cs are 5-star partners and the scale adjust down from there.
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 several options.
Step #5 Create partner-level action plans
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 Insite 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:
Business Model – Discover the services the partner provides and how they monetize their business
Industry Importance – Which industries are a partner’s focus areas?
Product Focus – Identify which products the partner highlights and emphasizes
Program Membership – Understand what vendor programs a partner is enrolled in and the status of their membership in that program
Vendor Alignment – Know the vendor’s partners are working with to go-to-market
By developing a firm understanding of these five aspects and leveraging data-driven insights to adjust strategies accordingly, companies can optimize their channel management strategy and accelerate revenue.
While each element of an effective channel plan is individually important, it 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. It enables businesses to consistently meet revenue targets and align with current and future business objectives.
Set the right goals
When thinking about a successful partner channel, it certainly seems logical that more partners are better. The more partners you have re-selling, the more revenue you and your company will enjoy.
Why more doesn’t always equal better
When it comes to your partner strategy, bigger is not necessarily better. At a certain point, the right kind of partner becomes more critical to the success of your channel than the quantity of partners.
The Spur Group recently worked on a project at a large software independent software vendor (ISV) developing ERP and CRM solutions because they wanted to adjust and refine their channel. Their partner channel was and still is significant, and by looking at data and modeling, it was clear that some trimming was necessary for two reasons that we see often: an unbalanced partner community and too many partners overall.
Creating balance in your partnership community
Having the right mix of large and small partners is an essential component of your channel, and both have an essential role in the market. We’ve found that sometimes small partners take on deals that would have been better managed with a more specialized partner. Wrongfully assigned deals happens for many reasons, including smaller partners having the luxury of being able to discount to a higher degree than others. These partners, however, may not have the best level of implementation or services required to meet a customer’s needs. Too many times, a customer would be best served by the right partner, but with a channel that is oversaturated with partners, the perfect match cannot be made.
Capacity planning and economic modeling are critical,too many partners cripple your economics,too few and you limit revenue. Don’t just chase a number. Sometimes you must prune a tree to keep it healthy.
Efficiently supporting your partners
Every partner, regardless of size, quality, or drive, must be supported. Whether it’s incident response, training, or marketing, partners management requires budget. Marketing, training, and implementations require support, and partners who are not driving revenue and adding customers eat up more than their fair share of your support expenditures. With an overly saturated channel, you end up in a situation where too many partners require support, all of whom are chasing a limited number of customers.
A successful partner channel is a difficult thing to get right. While you want as many partners as possible to act as re-sellers, it’s important to remember that too many partners can lower your return.
Benchmark your channel efforts against your direct sales
Both direct and indirect sales are essential elements of your go-to-market effort. Channel leaders must never forget that the most important reason for an indirect sales motion is scale. You have partners because they help you win customers, drive sales, and enter markets where you wouldn’t otherwise have the presence or meet the cost structure.
In an age where new products are hitting the marketplace at an unprecedented rate, companies are tasked with the challenge of developing strategies on how to get the best right partners selling the right products at the right time. Having a robust understanding of where each of your products is in the growth cycle takes the guesswork out of investment decisions and enables you to optimize channel revenues and profitability.
Before you can develop a channel strategy based on your product growth profile, it is vital to understand the elements of the growth cycle and how each one influences the decision making of channel chiefs.
What is Product Growth Mapping?
The Spur Group has developed a proven system for product growth mapping called the Growth Profile Strategic Model. The model is built on the idea that products fall into one of four quadrants: Incubate, Perform, and Transform. The model helps you map your product priorities to your sales and partner performance in a quantifiable manner and optimize profitability for each product.
The axes of the graph you’ll create are labeled “Percentage of Total Revenue” (Y-Axis) and “Percentage Growth” (X-Axis). The elements of the graph and their descriptions are displayed on the grid in the following order:
Incubate – Break into new markets and technology by focusing on research and development efforts with a new or existing channel or direct resources (bottom left quadrant).
Optimize – Maintain sales with programmatic reductions by redirecting resources from low-performing elements to higher-performing elements to increase efficiency and effectiveness (bottom left quadrant).
Perform – Maximize sales and current revenue flow with existing partners and direct sales resources (top left quadrant).
Transform – Strengthen to scale or achieve performance leadership by recruiting new partners or adding additional direct sales resources (top right quadrant).
Thresholds to determine when products move from one quadrant to another are set based on company size, product offerings in the market, and the amount of revenue each product drives. A company with one great product bringing in most of the revenue may set their percentage of revenue threshold at 5 percent so that it will include more than one product. On the contrary, a company with several extensive offerings may set their threshold for this axis at 10 or 15 percent.
For this example, let’s say the percentage of revenue threshold is 10 percent, and the percentage growth threshold is 5 percent. A product in the incubate phase is growing at a steady rate, but does not yet make up more than 10 percent of the company’s total revenue. Products in the transform quadrant are those that drive more than 10 percent of the company’s revenue and are experiencing growth higher than the threshold of 5 percent. Performing products are typically great products already at scale, accounting for greater than 10 percent of total revenue, but the growth has plateaued and is below the threshold. Products in the optimize quadrant are being phased out because they are not growing and make up less than 10 percent of revenue.
Now that you have a good grasp of the model, we can look at how this influences the channel strategy for each product.
Why is Product Growth Mapping Important?
Having a clear understanding of your growth profile is essential. It quickly helps you determine the right strategic balance to recruit, grow, develop, or prune your direct and partner sales base and invest in each product in the most efficient manner. One factor to keep in mind before we dive into this further is how a company can grow its channel capacity, as these factors relate to the types of partners a company will look for in each product. The three main strategies you can use to increase sales using a partner strategy are:
Convince current partners selling a different product begin selling a new product
Leverage current partners sell more of that same product
Recruit entirely new partners who have never worked with you begin selling a new product
Mathematically, every partner growth strategy falls back on these three significant engines, and you should keep this in mind as you determine to which partners you should sell products. Next, we will quickly go through each quadrant and discuss the typical types of partners that sell products in each phase of the growth cycle.
Starting in the incubate stage, the chances of recruiting new partners to sell relatively new products is slim to none. You don’t know them, they don’t know you, and chances are they aren’t overly familiar with the product. Instead, you will likely leverage partners you have worked with before and who you have an existing relationship. These partners often have a low-risk profile and have experience selling innovative products in an unproven marketplace. In the transform quadrant, we see a completely different story. Now we rely on all three partner growth engines to sell a product.
Current partners start to sell more of what they traditionally sold. Other partners are willing and excited sell a new product, and new companies from an entirely different space or an adjacent space view this as an attractive opportunity and jump in to sell the new product.
In the performing stage, partners are no longer adding a practice, as the product has reached maturation. The only exception is if the partner is a laggard in the marketplace, and this is the strategy they have adopted for this product. Additionally, very few new partners are coming on because the market is already developed.
The main focus here is to keep current partners selling, if possible, to stave off a deceleration of sales. Once a product reaches the optimize quadrant, the strategy is to figure out how to pull back investment and roll partners off that product.
In addition, it is also essential to establish an investment model for each phase of the growth cycle. Most funds dedicated to product marketing should be focused on products in the incubate stage, even though they are bringing in little or no revenue as they ramp up. This money can be spent incenting partners or developing a joint venture to decrease the risk of selling a new, unproven product.
As you move through the model to transform and perform, you spend less money in each stage to fuel product growth because the products mature and gain traction in the market. As the product reaches the optimize quadrant, you want to invest as little as possible to keep the product afloat and devote resources toward the end of life milestones and rolling partners off that product and onto a new one. Having a consistent mathematical model that drives the investment strategy for the growth cycle is equally as important as having a sound partner engagement strategy in place.
Common Mistakes to Avoid
When developing investment and partner engagement strategies for different stages of the growth model, there are two significant mistakes we consistently encounter: selling a product before it’s ready to move from perform to optimize stage and developing an investment model based on the traditional cost-of-sale model.
The first mistake is incenting partners to sell a new product before a product is ready to move from the perform stage to the optimize stage. We often see that the new product cannibalizes an old product, and sales of the old product are cut short because partners begin to focus all of their attention selling a new product that everyone wants to get their hands on. A vendor must be careful with their launch and incentive strategies to avoid this partner behavior.
The second major mistake we see is companies developing an investment model based after a traditional cost-of-sale model. Companies will spend their product marketing budget in the wrong quadrant, most often the perform quadrant, because it drives the most revenue. Instead, devote this budget towards a product in the incubate quadrant even though it is driving little revenue.
With technology changing so rapidly today, having a great product simply isn’t enough. You also need go-to-market efficiency and data-driven tools for managing partners and channel sales. Whether you are doing annual business planning or trying to determine your best partner strategy, knowing your growth profile is essential. You can quickly and efficiently assess which products are in the growth cycle and determine the right strategic balance to recruit, grow, develop, or prune your direct and partner sales base.
Roll it out to partners
Every business wants to accelerate its revenue. It is one of the most common business goals, and one of the hardest to reliably accomplish. Combining product advantage with go-to-market efficacy is the key to consistently achieving revenue acceleration.
You have a great product or solution but, in a market saturated with competition, it will not get you to your revenue goals without effective go-to-market plans. Setting up the right business plans for you and your partners is fundamental.
How do you make business planning valuable for both you and your partners?
The best partner business plans are mutually beneficial, helping both you and your partners to grow faster than your organic growth paths. To make sure the plans you’re creating will deliver accelerated results, you’ll need to take a critical look at six areas of your business and find answers to the following questions:
- Partner Selection – Which partners will help me grow faster?
- Capacity Planning – Can I grow better through existing or new partners?
- Performance Measures – How can I confidently measure partner performance?
- Incentive Impact – Are my incentives rewarding or reflecting partner behavior?
- PAM/CDM Productivity – How can I drive more revenue, and higher partner satisfaction, with my field resources?
- Program Effectiveness – Do my programs make a difference with the right level of return?
Now that you have identified the necessary elements, it’s time to structure those them into a practical, adjustable plan. At The Spur Group, planning is a four-step process: assess, learn, plan, document.
Assess > Learn > Plan > Document
First, you need to set your goals and select your growth partners. It will require you to assess and analyze your partners’ growth profile. Specifically, you need to look at the difference between their organic growth and the growth you need from them to reach your goals. How can you get your partner’s managed growth up to a level that will reach or surpass your revenue goals?
Once you have your goals and growth partners set, you need to know the partners’ performance drivers and growth areas. Leverage the work you have already done for capacity planning and partner scoring to understand what you need from partners.
After you determine your most valuable partners, you can finally set up your plan. In this step, you will define business outcomes and firm partner commitment. A good business plan sets the right expectations by covering off on what the partner and vendor commit to across several components:
1. Outcomes – What are the business results you both seek?
2. Actions – What are the specific steps the partner will take to accomplish the desired outcomes?
3. Pro Tip – We recommend not micromanaging the partner. Agree to business outcomes, allow partners to deviate as needed, and hold them accountable to their results and agreement.
4. Resources – What staff, programs, and other tools will you provide to the partner?
5. Investments – What incentives are you willing to offer partners with the right performance?
6. Pro Tip – We recommend paying MDF slightly before partner actions to help drive capability and efficiency.
Now that you have your plan, you’ll need to document it and both of your commitments correctly. It will involve sharing the plan and driving performance accountability. It is crucial to have the business plans collected in a manner that allows the partner, the partner’s account manager, and whoever has corporate responsibility for the aggregate outcome number to review the plans and documents.
As you go through the planning and documentation process, leverage the opportunity to make sure you know your partners and your gives and gets.
First, use your partner business plan to develop profiles for your partners by collecting information that allows you to benchmark future performance. Then, make sure you have set up a timeframe with performance milestones, outcomes that focus on specific, measurable performance, and investments based on incenting and rewarding performance against commitments and completion criteria.
With your partner planning process set up and documented, make sure to track your performance against the 5Cs in your QBRs. Whether under, at, or exceeding goals, determine if the plan needs to be adjusted, if goals need to be reset, or if investments need to be reallocated.
No matter how developed your channel partner ecosystem, creating robust partner business plans will guarantee the go-to-market efficacy of your product, and thereby revenue acceleration.
Assess and analyze your partners’ growth profiles. Set your goals and select the right growth partners.
Document the plan with proper visibility, track performance.
Learn your partners’ performance drivers and growth areas by leveraging the 5Cs channel capacity plan framework.
Plan the business outcomes, actions, resources, and investments needed to succeed.