Vendor Challenge: Helping Partners Minimize Risk

Larry Walsh, The 2112 Group

We're excited to share a guest post from Larry Walsh, CEO and Chief Analyst of The 2112 Group.

####

Your partners are optimistic about 2017, with the majority expecting to grow their businesses by 6 percent before the New Year’s Baby makes another appearance.

How are they expecting to produce these positive returns? Mostly through the expanded sales of products and services already in their portfolio.

According to The 2112 Group’s annual 2017 Channel Forecast study, partners’ growth investments are pointed in three places: expanding sales of existing products and services, adding more professional services (mostly around existing products and services), and creating new services based on vendor products.Partner investments in what they know best is hardly unexpected. Partners are creatures of habit and following the paths of least resistance. If they find success with a product or service, they typically stick with it rather than risking expansion that usually comes with new expenses.

The development of professional services isn’t surprising either. Product margins – including those around cloud computing – continue to compress. Professional services, according to the Channel Forecast – have the healthiest expanding margins for partners. So even if a customer doesn’t need a product in the partner’s portfolio, the partner can make money by supplying professional services.

A large part of the reason behind partners investing in the tried-and-true is risk management. Expanding sales and professional services capacity around existing vendors and products is capitalizing on past investments. Expanding beyond into the unknown means putting money, profits, and viability at risk. Moreover, partners are extraordinarily risk-averse.

The problem with partners is they don’t often see a dollar invested as an opportunity with the potential for multiples in return. Rather, they worry too much about not getting the dollar back or what to do if they need that dollar before the returns pour in. This conservative posture reflects a lack of operational and business maturity. Partners don’t necessarily plan for growth, as other 2112 research finds only 45 percent of partners set annual sales goals.

Helping partners find their way to growth is the vendor’s responsibility. And showing partners new-and-improved products (complete with lemon-fresh scent) isn’t the way. Vendors need to paint the economic picture for partners to show why expansion into new goods and services is worth the risk. Vendors need to quell partner fears by minimizing risk exposure.

Just how does a vendor do that? Mostly with math.

Math is a channel-centric vendor’s best friend, as it will show the level of investment and effort required by partners to make money with a particular product or service. Margins aren’t important as the total cost of partnership and sales volume required to cover costs and produce a positive return. Too often vendors speak to partners about rich margins with no consideration of costs. As such, partners find they must make significant up-front and ongoing investments that reduce their ultimate returns.

Moreover, vendors need to plan with their partners. Partners aren’t planners. Much of a partner’s success is opportunistic. As many as 60 percent of partners, according to 2112 research, don’t have business plans or growth strategies. By planning with partners, vendors can help instill some managerial and operational best practices that result in more positive returns for everyone in the value chain.

Vendors like to think great products are the catalyst of well-performing channels. Truth be told, partners need more than a product to motivate their performance. Data and planning are two ways of showing partners growth opportunities.

The 2112 Group is a specialist in channel research and strategy. Our analysts are experts at helping vendors develop channel growth strategies, optimized working relationships with partners, and development of channel enablement resources. For more information about 2112 services or to obtain a full copy of 2112’s 2017 Channel Forecast Report, send e-mail to info@the2112group.com.

Research, Channel Enablement

Larry Walsh, The 2112 Group

Posted By: Larry Walsh, The 2112 Group

Larry Walsh is one of the most recognizable figures in the IT channel and security communities and is considered one of the more forward-thinking leaders in the industry. A seasoned journalist, analyst, author, and industry commentator, Walsh is also the founder of Channelnomics, which is a leading provider of IT channel news and analysis. A specialist in the development and execution of channel programs, disruptive sales models, and growth strategies for companies of all sizes, from start-ups to Fortune 500 organizations, Walsh has worked with a roster of diverse technology players, including Ingram Micro, Intel Security, SAP, and Verizon. Walsh is the CEO and Chief Analyst of The 2112 Group.

State of Channel Marketing

State of Inbound Channel Marketing 2017

Ever wonder what thousands of channel partners around the world actually do when they have access to state-of-the-art channel marketing automation software? We did, too. This report examines what partners really do and what they really care about. No speculation here, this report shows you what actually happens so you can plan and benchmark your partners accordingly.

Download the Report

Channel Engagement Framework

Channel Engagement Framework

Is your channel execution as organized as you'd like it to be? In our experience, having a simple channel framework that you can use, internally and externally, helps drive alignment and expectations with all of the involved parties.

Download the Framework

Channel Marketing Bill of Materials

Channel Marketing Bill of Materials

While the Pragmatic Marketing Framework defines roles and responsibilities across the typical functions within a marketing organization, there’s still the question of what specific content and materials are needed to successfully execute campaigns in the modern world.

Download the eBook

Launch Communication Plan

Launch Communication Plan

You’re launching a new program or platform to increase partner engagement and you can’t wait to get your partners using it. Consider that how you communicate what you’re offering your partners is just as important as what you’re offering them. Learn how to make your new initiative successful with a communication plan that educates your partners on the value for them, stokes excitement, and gets partners engaging with the platform after launch.

Download the eBook