Striking The Right Coverage Balance

Early on, vendors will sometimes sign up any channel partner they can find and offer great margins to sell products and make revenue targets. Typically, few partners are interested because they know they will have a significant challenge selling a product or service from an unknown vendor. Partners who do sign on, of course, have unlimited opportunity.

As companies mature and become more successful, the rules change. Much like a successful sales representative, partners often see territories and margins shrink. Selling becomes easier, but competition will increase.

In the next stage, vendors work closely with channel partners to develop a true partnership model based on enablement. Partners are asked to reach a high level of competency and trust, and are brought into strategic opportunities by a vendor's direct sales force. In turn, they introduce the vendor to opportunities.

The last stage occurs when a vendor is a dominant player. If done right, a vendor cultivates a loyal group of channel partners to complement its own business strategy. The implementation of opportunity registration between direct and channel sales teams, smart rules of engagement and a partner margin model create a mature channel ecosystem.

On the surface, one might think a vendor should sign up as many channel partners as possible. But this is not good for partners or the vendor. Opportunity registration programs become unwieldy when dozens of partners attack a deal. The result often is that the low-priced option, not necessarily the best solution, wins. This is bad for the vendor since the end user will likely receive a lower level of service, and odds are strong that the winning partner will receive very low margins.

Will channel executives ever get it perfect? Probably not, but the more we engage in dialogue with solution providers, the better we can be as a team. So, I encourage feedback on the following assumptions.

A vendor might be underdistributed if:
It concedes business because it doesn't have partners in second-tier markets.
It lacks application partners to take it into logical partner-driven verticals.
It never sees more than one partner in a deal.
It can't identify two to three go-to partners within key geographies and key accounts.

A vendor might be overdistributed if:
It sees multiple partners in almost every deal.
Its channel partners' retained margins are slipping steadily into low single digits.
Its partners are picking up competitive lines to create a better margin opportunity.
Its value-add channel partners are being overwhelmed by fulfillment partners.

Finding the right balance is a channel leader's biggest challenge. If a vendor is underdistributed, it is missing revenue opportunities. If it is overdistributed, it is creating an opening for a new vendor with a competitive product to recruit its best partners. Even worse, the executive has eroded a once-positive and mutually beneficial relationship between his or her company and its partners. Balance isn't easy. I welcome your thoughts.