Per-Partner Pricing: A Penalty for Success

Mike Moore, Averetek

Life is much simpler (at least in some ways) when you’re on the making money side of the business (sales) rather than the spending money side of the business (marketing). The word that sends a shiver down the spine of every marketer is “forecast”, as in “Did you enter your marketing expense forecast? Did you hit your forecast? Why did you miss your forecast?”

Like others, I’ve lost sleep over whether I was going to make my forecast or not.

Forecasting for marketers is like paying taxes. You must do it, but you don’t have to like it. Forecasting your marketing expenses and doing so accurately helps the rest of the business produce predictable results. Whether your company is public or privately-held, the CEO staff is always trying to generate a certain amount of income each quarter. Revenue minus expenses equals income. The marketing forecast is part of the expenses portion of the equation. And in many organizations, marketing expenses represent a fair amount of the operating expenses.

Spend the amount that you forecasted, and all will be well. Spend too much or too little, and someone will be unhappy with you. There are exceptions, of course. Sometimes you’ll be asked, usually at the last minute to overspend or underspend because someone else in the organization isn’t expected to hit their forecast. Either way, just as sales is expected to deliver a certain amount of revenue, marketing is expected to hit their expense forecast.

How does this relate to per-partner pricing?

In the world of hosted software or programs for channel partners, there’s always a discrepancy between how many partners CAN participate and how many ACTUALLY participate. You can’t control human behavior, especially the behavior of channel partners. You can try to influence it, but you can’t control it.

  • If the software or program you’re offering your channel partners has fixed pricing for unlimited users, you’re on easy street. You can turn in your marketing expense forecast and always hit your target. You'll have no unexpected expenses, and you can focus on driving utilization of the program with your partners.
  • If the software or program you’re offering your channel partners has user-based pricing (based on actual users logging in), the variable nature of that arrangement almost guarantees that you’re going to blow your forecast, at some point. When you least expect it, and if your luck is like mine, you’ll get an invoice from your vendor saying something to the effect of “Congratulations! You’ve reached X number of users! You've moved into the next pricing tier. Attached is your invoice. Please pay on time.”

This is when per-partner pricing becomes a penalty for being successful. You’re successful because you’ve engaged more partners than ever before, which is typically the main objective of every tool or program for channel partners. The penalty comes in when you’re pushed into the next pricing tier or per-user license and it’s time to ante up.

Why do vendors do this? It's simple. It's how they choose to make their money, even though it frustrates their customers.

Whenever possible, I recommend avoiding vendors and contracts like this. Making unlimited user pricing part of your selection criteria for vendors is the key. And if the company you’re considering doesn’t offer unlimited user pricing, you should ask for it. If they refuse to accommodate your needs, you can factor that into your decision-making.

Being able to budget and forecast in a predictable way is one reason to make this a requirement of your program. Not being held back and having to decide who’s in and who’s out when you’re inviting partners to the program is the other. Let everyone in. Let them benefit from what you have to offer. Unlock the multiplier effect of the channel.

When we first built our channel marketing automation platform and decided on our pricing and licensing model, we started with unlimited user pricing because we knew that our customers and their partners would benefit most from this arrangement. The price is the price, no more and no less, and no surprise invoices will arrive in your inbox. We've continued to offer this model, even as we've released additional product editions. It meets the needs of our clients, and we can all focus on driving user adoption.

Let other people worry about their forecasts. Turn in your numbers with confidence and focus on helping your partners succeed. The rest will take care of itself.

 

Channel Marketing, Budgeting

Mike Moore, Averetek

Posted By: Mike Moore, Averetek

Mike Moore serves as Averetek's VP of Channel Strategy. Mike has spent twenty-two years in the IT channel as a channel partner and as a channel and field marketer for software companies like Microsoft, GE Healthcare, and Progress Software.

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