The concept of the 80-20 rule, otherwise known as the Pareto principle, is familiar to most business people. Named after the Italian economist Vilfredo Pareto, the principle states that in many cases, roughly 80 percent of the effects come from 20 percent of the causes. For instance, in many companies, roughly 80 percent of revenue comes from 20 percent of customers. It’s a principle that has withstood the test of time and is still generally applicable in the digital age.
As a recent Vision Critical study shows, the 80-20 rule holds true in the technology vendor-channel partner sales world, where 20 percent of a vendors’ typical partner base generates 80 percent of the overall channel revenue. The 2015 study highlights that the big challenge for tech vendors is improving the performance of their bottom 80 percent—how to get the majority of their partners performing like their top 20 percent.
For the study, we engaged with 51 U.S.-based decision-makers who work at a tech manufacturer or service provider in a partner/channel capacity. We found that a great majority of these tech vendors are not regularly engaging with a majority of their partners. Eighty percent said they regularly get feedback only from the top 20 percent of their partners (based on the revenue they generate). Nearly all (89 percent) think it is vitally important to their company to more regularly engage with or get feedback from the bottom 80 percent performing partners.
This issue is critical because, as a tech vendor, if your channel program’s bottom 80 percent is underperforming, your revenue is at risk if any of your top-performers churn. Having a high-performing 80 percent means your revenue structure is much more diverse and stable.
In general, vendors are not doing a great job engaging their bottom 80 percent. A 2012 report by consultancy group Channel Enablers (now called MHI Global), for instance, suggests that many vendors do a poor job of enabling the “middle group” of partners—those that are at the top 40 to 50 percent of the partner base based on the revenue they bring.
This need to better serve and enable the majority of channel partners is fueling the need for partner engagement programs. More tech companies are realizing that a closer relationship with their partners is key to decreasing partner churn and getting more revenue from their partner programs. The question, however, is how to do it well.
Here are three strategies tech vendors need to adopt in order to enhance the way they engage with the bottom 80 percent of their channel partners.
- Customize your approach.
Most partner engagement efforts don’t succeed because they take on a one-size-fits-all approach. Unfortunately, not all partners are the same. A 2014 study by the consulting firm ZS Associates had this to say about the diversity of partners’ needs:
Channel partners’ visions of an ‘ideal’ feedback program are as varied as their businesses. For instance, cloud VARs usually prefer to discuss financial topics in formal quarterly business reviews; other types of partners prefer surveys to provide this type of input.
Likewise, smaller partners prefer surveys over any other feedback collection vehicle, but larger partners prefer quarterly business reviews.
Instead of a one-size-fits-all approach, ZS Associates recommends segmenting partners according to their needs and tailoring your engagement approach for each.
Partners come in all types and in different sizes. They come from many geographic locations, have different types of partnerships with vendors, subscribe to different tiers and come from a wide range of company sizes. Engagement efforts need to be recognize the wide diversity of partners in the market. It needs to be highly targeted as well to make sure activities remain relevant to partners.
- Evaluate your current tool set.
Vendors don’t see ROI from their partner engagement efforts because the tools that they use aren’t sufficient. Consider the flaws of the following common approaches:
- In advisory councils, a few partners are invited for face-to-face meetings. This is a common approach, but it tends to be infrequent and expensive. Since advisory boards are inherently small, you’re hearing from only a handful of your partners, with few people identifying problems and offering solutions.
- In-person events such as summits can help strengthen partner relationships, but they are also infrequent (usually once a year), which means that you don’t get feedback on a regular and timely basis. Summits are also expensive to put together.
- Talking to partner-facing teams in your company is a great start, although doing so tends to only bring up anecdotal, filtered stories instead of direct feedback from partners.
- One-off online surveys could help you get both quantitative and qualitative data, but many partners feel inundated by surveys. Response rates for ad hoc surveys are plummeting, and one-off surveys don’t help build your relationship with partners.
- Big data, including data that comes from your partner relationship management systems, provides historical, but not forward-looking, data. More importantly, big data can tell you what your partners are successfully selling to end customers, but not why.
- Social media listening offers a skewed view. It’s another Pareto rule: More than 80 percent of what you see on social analytics comes from a minority of your partners.
These common approaches to harvesting partner intelligence don’t provide a complete picture. Acknowledging the drawbacks of the various partner intelligence tools is the first step to maximizing their use in the enterprise.
- Take a more comprehensive approach.
If you’re serious about helping a majority of your partners build their business, you have to foster better relationships with them over time. In other words, don’t just call them partner—actually treat them as one.
One way of doing that is by infusing the voice of your partners in strategic decision-making. Talk to your partners to validate your program and go-to-market decisions. If you want to know if your positioning, pricing and promotion efforts are working out, there’s no better source of insight than your partners. Listening to your partners can help you keep a better pulse on the market, your competitors and the changing customer landscape.
To get a more comprehensive view, vendors should also consider engaging a diverse set of people from their partner companies. Hearing from executives is great, but feedback from sales engineers and other people in the front line can provide specific, tactical information.
Also, it’s critical to engage the right mix and the right size of your partner base. If you’re only talking to a few of your partners, you can’t be confident that the feedback that you’re getting represents the views of the majority of your partners. Having the right people—and the right number of partners—is critical to the success of your program.
As a tech vendor, what you need is an engagement vehicle that enables you to have frequent, two-way engagement with the bottom 80 percent of your partners. You need a tool and a process that give you real-time glimpse into their perspective.
For you to see ROI from your partner engagement efforts, you have to focus on forging a closer relationship not just with your top performers but also with those that aren’t performing well yet. Only by engaging with a large number of your partners can you uncover accurate insight on how to reduce churn and increase average deal sizes and overall channel revenue. When you figure out the right approach to partner intelligence, you improve the business of your partners and you’ll see more benefits from the partner relationships you’ve worked so hard to build.