Channel partnerships are becoming more critical in high tech. Today, up to 90 percent of sales in business technology are generated through a channel partner, dealer or value added reseller (also referred to as VAR). At the same time, business technology is becoming commoditized as more vendors enter the space.
You don’t have to look very far to see the impact of channel partners in tech. In a recent earnings call, Dell revealed that its channel revenue in Q1 of 2015 accounted for 40 percent of its revenue. Recognizing the importance of their channel partners, companies like Salesforce.com and HP have also recently beefed up their reseller programs.
Tech companies are more dependent on channel partners than ever before, making them vulnerable to churn. At the same time, satisfaction among channel partners has steadily declined in the past decade. In fact, one in four partners has “fired” a vendor in the last year, according to a 2013 report. Loyalty is also in decline: on a scale of one to 10, loyalty has hovered between five and six points in the last year, with most partners expressing indifference towards their vendors.
With so much revenue riding on partnerships, business technology vendors need to improve their relationship with resellers—and they need to do so quickly. Here are four ways they can do that.
Provide better support.
End users are asking more from resellers today, who in turn are also demanding more service and attention from vendors. Supporting channel partners with better service needs to be a top priority for vendors.
So far, vendors are not doing a great job helping resellers. According to a 2013 study conducted by networking equipment company Enterasys, 36 percent of channel partners are dissatisfied with vendor service.
"[Resellers] need to thoroughly understand their customers' business and challenges to be able to add value," said Bob Noel, director, global channel and field marketing for Enterasys, about the evolving role of channel partners. "To provide a higher level of support to their customers, resellers need to be able to depend on strong support from their vendors. This could leave many mature and emerging technology manufacturers out in the cold, as the resellers fill their dance cards with only the strongest players."
Keeping partners happy isn’t just about investing more money in reseller support services. Vendors need a better understanding of the evolving challenges facing partners. Only in gaining that understanding can vendors provide support that will help their partners see improved business results.
Plan with your partners.
Enterasys’ study reveals that 27 percent of channel partners have ended a partnership with a vendor because of lack of goal alignment. The concerns go both ways, however: a 2008 study by the marketing services company Maritz reveals that 56 percent of vendors do not believe that their channel partners will align with their future goals and expectations.
Frequent engagement with partners—and with the right stakeholders in the organization—will enable vendors to align business goals. Unfortunately the methods that many vendors use for engagement are remarkably slow and outdated. Many vendors still rely on annual conferences with C-suite executives to learn about the goals of their partners. Most vendors aren’t talking to their partners’ front-line staff—an important stakeholder group that can provide valuable product feedback. Companies need to scale their engagement efforts and talk to more people within their partner’s organizations.
Ask for feedback.
According to a 2014 study conducted by business services firm ZS Associates, only 50 percent of partners are satisfied with how well vendors solicit their feedback. These partners feel that vendors don’t communicate program and product updates effectively. In fact, 86 percent of partners said vendors mostly send communications that are irrelevant and that are too marketing-focused.
To keep their partners happy, vendors need to focus less on marketing and focus more on building relationships. Resellers want to be treated as true partners, and vendors should make it a point to listen to the voice of their partners. And to keep up with the speed of business, engagement also needs to happen more regularly. Instead of relying on one-off surveys, vendors should focus on engaging with their partners for real-time feedback.
Help them grow their business.
Ultimately, when channel partners succeed, so do their vendors. When tech firms set up their channel partners for success, they also benefit. But before vendors can help their partners, they first need to develop a solid understanding of the business challenges that resellers are facing.
Getting that insight requires building trust with partners—something that most vendors aren’t yet doing effectively. The same Enterasys study shows that 30 percent of partners indicate that vendors don’t provide them with enough return on investment for their efforts, and 28 percent said vendors don't understand their business.
In order to help partners see higher returns, vendors need a complete understanding of their resellers’ business landscape. But that insight doesn’t develop overnight. Vendors need to learn from their partners and develop trust over time—something that can only be achieved through an ongoing, collaborative dialogue.
To deliver a best-in-class partnership program, two-way conversation with channel partners is essential. Vendors need to gain actionable intelligence on how to provide more value to partners and how they can drive long-term satisfaction. To prevent lost business from their partner programs, it’s time for vendors to commit to a partner-centric mindset—to foster direct, ongoing and continuous communication with the businesses that are crucial for their success.
To learn more about engaging and retaining your most valuable partners, read about the Vision Critical Partner Intelligence Suite.