Unlike the famous, 80:20 rule in directsales, it’s estimated that approximately 95% of a vendor’s channel revenue willcome through 5% of its partnerships. That means that all of those otherresellers are focussed on someone else’s products.
So how does a vendor know when it’s buildingits channel which partners will be the most successful and how does it avoid engagingpartners who will be fail to support the business? Simple really, startapplying traditional recruitment strategies to the channel.
Currently, most vendors use one of twoapproaches: reactive partner acceptance following inbound enquiries generatedthrough PR for example; or proactive campaign-based enrolment against purchasedcontact lists and telemarketing. Both methods will undoubtedly fill up thechannel pipeline but will those recruited partners merely be names on adatabase or will they be valued business partners?
While most vendors embark on channelrecruitment with the very best intentions, some even working to a formal selectioncriteria, they generally fail to undertake the necessary due diligence to findthe businesses able to provide greatest revenue potential.
Channel recruitment is no different topersonnel recruitment. Vendors must first define the goals and job role – whatdo you want the candidate to do for you once recruited? If you ask most vendorswhat they want from a channel partner the answer will be simple – revenue. But thatmerely establishes the goal. In the context of channel recruitment, roledefinition requires an understanding of the geographic, horizontal, verticaland product markets to be targeted.
Next, the profile attributes of asuccessful candidate – what skills, specialist knowledge and other qualities are typically possessedby other successful candidates? Finally, what compensation, benefits andrewards will be offered to entice the best candidates to apply? If these thingsare not clearly understood before embarking on a recruitment campaign it islikely that vendors will attract the wrong kind of partners, attract none atall or worse, repel those who have the potential to deliver the highest growthand profitability.
The greatest challenge and the most timeconsuming step is the definition of the most desirable profile attributes andbenchmarking or ‘scoring’ your partner community against them in order toprovide direction to your recruitment campaign. For this there is no quick fix,it requires deep channel intelligence.
Curiously, most businesses will investmuch resource into understanding competitors but few have a thorough picture ofthe channel. The pain staking task of intelligence gathering must be undertakento identify which partners will be able to meet the brief.
The attributes to look for are the six C’sof channel recruitment: coverage, capability, capacity, commitment, credit and contribution .
Coverage: As well as geographic reachvendors must know which horizontal and vertical markets the reseller isoperating in, which audiences they target, the product portfolio they will beable to successfully manage and what market share they currently have.
Capability: This assessment is a little moresubjective and requires deep investigation. What is the size of their salesforce and how skilled are they? What proactive marketing do they undertake toattract new custom and how strong is their after-sales support?
Capacity: Here we need to understand their capacity for growth.Depending upon the partner type this factor may take into consideration humanresources, infrastructure, locations, size of customer base, size ofaddressable markets or it may even take into consideration the volumes of inventory they are able to manage. Capacity is a keycriterion because whether or not youexpect to displace a competitor within the prospective partner’s productportfolio, their capacity for growth is critical.
Commitment: While a partner’s commitment toa vendor is often dependent on uniqueness of product, installed base, relationshipand the level of support they receive, vendors may also assess currentcommitments by assessing the level of investment made by the partner into therelationship. Indicators are of course sales performance but also share ofspend and number of competitive brands carried. From here vendors can identifyhow much effort will be required to convert loyalties or whether there is evenroom within the business for additional suppliers.
Credit: If your relationship is to be atransactional one then arguably the most important question of all relates tothe solvency of the partner? Are they sufficiently credit-worthy to makepartnering viable. This question is even more critical at present!
Contribution: This is often the onlycriteria used by vendors to measure a partners suitability or current value –the revenue and profit generated by them. This approach however onlyperpetuates the 95:5 rule and a partner’s potential contribution as well astheir actual contribution must be assessed.
Armed with this mixture of quantitative andqualitative information, vendors can create a balanced scorecard analysis.Attributes are scored, then weighted for importance. Then qualitative measuresare mapped against quantitative to generate a balanced assessment of a partnerssuitability. In this way, businesses have a simple formula to identify whichpartners can provide the greatest revenue opportunities.
Partner recruitment is not a one wayrelationship dictated by the vendor, quality partners – like quality personnel– will be in high demand. Vendors must create an attractive proposition withboth compelling financial remuneration and support that matches thecontribution and growth potential of each partner. With deep understanding ofeach partners’ strengths, bespoke (or at least tailored) support packages canbe created to ensure that they are willing and able to become the perfectpartner.
MikeMorgan, is COO of Foundation Network Ltd
This was first published in September 2008