I have never seen any quantitative research about channel program success in the B2B software sector. However, in my experience 9 out of 10 partnerships fail to deliver results. CEO and sales leaders at software companies are often perplexed by the lack of success. “We did everything right. We trained them. We did co-marketing. We even sent them leads.” Many executives attribute channel failures to misaligned incentive plans and flawed compensation models in the sales organization. However, the true root causes are much simpler.
From the channel partner’s point of view, your offering is a effectively a new product on their price list. And the challenges of selling through channels are very similar to the obstacles you encounter when launching new products through your own direct sales team.
The High Performers – We Already Made Quota
Just like in your own sales organization, there is a group of A-players within your channel partner sales’ team who consistently attain quota. These high performers know how to sell their core products to the target buyers. They can consistently achieve 100%, 125% or 150% of plan. This elite group of top performers is unlikely to invest time and energy in learning and selling a new product — unless the customer is asking for it. High performers will sell new offerings, but typically will not be the early adopters that help get the partnership past the make or break point.
Problem Accounts – We Need to Stabilize
In most companies there are a set of “problem accounts” that are at high risk of attrition over the coming year. There could be lots of reasons for why accounts move into the problem category. Some customers might be experiencing functionality, performance or availability issues with the technology. Others may not be achieving the desired business outcomes that were promised during the sales cycle. Problem accounts typically will have a “cure plan” put in place designed to rescue, retain and renew the account. Number one on the list of things to do is to minimize any changes that might further destabilize the account. Introducing new products – especially from third parties – usually falls high on the list of “things that introduce risk” to the account. As a result, expect that most problem accounts will not be approached by your channel partner sales team.
The Skeptics – No Guinea Pigs
Many experienced sales reps have been burned by new products in the past. These individuals know that despite the hype and propaganda put out by the product management team, their internal teams are not well prepared to support new offerings. It typically takes a few implementation snafus and irate customers for the professional services, technical support, and operations teams to sort out the issues. And these experienced reps know that the challenges with new product launches are even further compounded when the new offering is from a third party. No good sales rep wants their customers to be the guinea pigs that test out a new offering. As a result, a chicken or egg problem emerges. Your channel partners’ sales team does not want to sell your product until there are a few proven successes, but there cannot be any proven successes until someone sells it.
Let’s suppose that the:
- High performers cover 15% of accounts
- Problem customers are 5% of accounts
- Skeptical sales reps cover 30% of the accounts
As a result, almost 50% of accounts are out of play before you even start. But what about the remaining 50%?
The Other 50% – Climbing the Learning Curve
Fortunately, not all of your channel partners’ sales reps are skeptics or high performers. The majority are open to selling a new product, particularly if it can increase deal size or offer a competitive advantage. However, it takes a long time for an enterprise sales representatives to master sales of a new product, especially a complex one. In today’s modern sales organization, not only must the account executive be willing to pitch the product, but the supporting organizations such as solution consulting, bid management, value engineering and the deal desk must have a high level of proficiency. New product enablement is a huge issue in new product launches and the challenges are compounded in a channel model. If it takes nine months for a new product to catch on with your own direct sales team, you should expect that it might take eighteen months to get traction in the channel organization. In the fast-moving, high tech sector most leaders don’t have the patience to wait a year and a half to see results. As a result, the channel might be declared a failure long before the partner’s sales team has the opportunity to climb the learning curve needed to sell the new offering.