A company’s investment in its partner management team is typically its number one channel expense. This investment includes salaries, bonuses, and related costs for channel sales, channel account management, channel marketing management, and channel operations. The primary purpose of these combined roles is to help partners generate more revenue and profit contribution for the company’s channel. Unfortunately, this typical channel team is not nearly as productive in achieving these goals as it could be due to a lack of enabling tools, business processes, and aligned compensation and incentive systems.
To get a better appreciation for the level of investment required to run a successful channel, understanding the total costs for operating a channel is necessary. Channel costs take many different forms depending how a company defines its partner program. Below is an accounting view of a typical channel P&L that highlights investments by different discount and expense categories.
A P&L Illustration of Primary Cost Categories:
(less) Adjustments to gross sales:
- Partner compensation (revenue level discounts)
- Deal registration discounts (account-level discounts for partners)
(less) Direct expenses:
- (# 1 Expense) Channel Management Staff Expenses
(less) Indirect expenses:
- Market development funds (vendor-provided partner marketing funds)
- Cooperative advertising (vendor-funded partner promotions)
- Partner sales promotions & incentives
- Channel operations expenses
- Channel profit contribution
To calculate the total direct staffing costs to run a channel we have provided statistics on average salaries per channel role. Glassdoor.com provides some good estimates of channel staff costs for US-based teams.
A company’s channel management staff is usually assigned to manage the top 20-40 percent of the channel ecosystem. This example of a mid-sized company assumes that approximately 50 percent of its revenue is delivered by its channel.
Example: Mid-Sized Company ($750M in Annual Sales)
- Total number of partners = 1,000
- # of “direct-managed” partners = 400 (600 unmanaged)
- # Channel Account Managers = 20 (20 partners per CAM)
- # of Channel Sales Managers = 13 (30 partners per CSM)
- # of Channel Operations Managers = 4 (100 partners per COM)
- # of Channel Marketing Managers = 8 (50 partners per CMM)
If we assume that approximately 50 percent of the company’s sales is generated from the channel, then this equates to 1.5 percent of total channel sales in staffing costs. This conservative estimate highlights the substantial investment most companies make in its channel development & support staff.
So why is the channel management team not nearly as productive as it could be to deliver accelerated revenue growth and profit contribution?
Four Factors Why Channel Management Teams Fail to Meet its Objectives:
- Highly Complex Role: The old model of a relationship CAM is far too narrow to be successful today. CAMs need to become experts in the product, markets, sales, enablement, marketing, business models and profitability management
- Lack of Channel Management-Focused Systems: Company IT systems make channel managers work far too hard to pull the appropriate data for partner performance tracking and QBRs
- Need to Become an Expert Partner Business Consultant: Partners are looking for professional business advice from their channel management team on all aspects of their business
- Roles and incentives are misaligned with partner needs: Too often, particularly when it gets near the end of the quarter, partner enablement is abandoned for channel team focus on direct selling
The best place to start to get more from your channel management team is setting expectations. Expectations are set with job descriptions and reinforced by managers, enablement tools, and incentives. If you have not looked at your channel job descriptions lately, they may be worth a look. Here is an example of a channel manager job description from a regarded consulting company- BCR.
Although there is nothing wrong with this job description, top performing channel teams do so much more to enable their partner’s success by building their commitments, capabilities, and delivery of accelerated growth for the vendor’s brand. Here is a set of best practices to help get more from your Channel Management team, through enablement, training, automation, and professional development.
How to Get More from Your Channel Managers
- Prepare Channel Managers for This Highly Complex Role: Although there are often other teams channel managers can call on for support, they need to have a working ability to deliver these “services” to their partners on their own
- Product Enablement: Channel managers need to be fluent in the vendor product line and can explain its benefits and how it fits into a partner’s product / service portfolio
- Market Opportunity Expertise: Channel managers need to have a strong understanding of the served market, competitors, and how the vendor’s brand uniquely solves customer problems
- Sales Expertise: Channel managers must have strong selling skills to understand customer needs and match the vendor’s solution with these needs
- Partner Enablement Capabilities: Channel managers need to be capable to provide some enablement support directly with their partners
- Marketing Strategy Training: Channel managers need to be able to provide partners with marketing strategy guidance to help create more sales leads and opportunities for partners
- Partner Business Model Training: Channel managers must have a strong understanding of a partner’s business model to help coach them on potential business model improvements
- Partner Profitability Modelling Expertise: Channel managers need the ability to help partners predict and model their own profitability to guide business planning
- Provide Productivity and Effectiveness Tools for Channel Managers: Provide Channel managers with step-by-step (guided) tools to help them build strong, motivated, committed, and profitable partners
- 5 Minute, Partner Life-Stage Scorecard and Action Planning Tools: Provide Channel managers with the ability to instantly assess a partner’s capabilities and create a customized enablement blueprint in minutes
- 10 Minute, 36 Month Partner Business Planning Tools: Provide Channel Managers with guided tools to create partner commitments and a path to greater profitability
- 5 Minute Partner Quarterly Business Review (QBR) Tools: Provide partners with the ability to deliver QBRs instantly to celebrate successes and plan improvements
- Develop Business Consulting Tools of Channel Managers:
- Show Channel Managers How to Become Professional Consultants: It is not enough to simply enable your channel managers on all the complex roles listed in item #1 above. These Channel Managers need to learn the process of becoming a professional business consultant.
- Listening Skills: channel managers need to develop skills on critical listening and questioning to pull out the motivations and needs of their partners
- Summarizing Partner’s Needs and Goals: Channel managers need to be able to synopsize what they hear from their partners and summarize their needs and goals
- Match Goals to Resources and Actions: Channel managers need to develop the skill of matching partner-defined goals with vendor resources and development of action plans
- Support Implementation: Channel managers need to be able to “champion” the support plan by help organize the resources required for partner success
- Monitor, Measure, and Report: Channel managers need to sharpen their skills for monitoring plan success, highlight key measures, and report on a regular basis
- Align Channel Manager Incentives with Partner Success and Business Outcomes: Compensation and incentive plans can’t be based only on achievement of partner sales targets.
- Partners Sales & Pipeline Metrics: An important but only a component of a channel management comp plan is the achievement of backward looking (Performance-to-Plan) goals and forward looking (Pipeline-to-target) goals
- Partner Capabilities Metrics: Achievement of partner training, certification, market coverage, products offered and marketing and sales capabilities metrics
- Partner Profitability Metrics: Measurement of partner’s ability to build a profitable business with the sale of a vendor’s brand and associated partner-delivered services
- Partner Planning & Performance Management Metrics: Measurement of partner’s completion of scorecards, business plans, marketing plans and QBRs on a regular basis
- Partner Satisfaction & Activation Metrics: Measurement of partner satisfaction levels with the vendor’s brand, their assessment of their channel manager, and to the extent the partner is actively selling and supporting the brand
All channel management roles have changed dramatically over the past 2 years. So much more is expected of these professionals to help partners become competent sellers and support agents for a vendor’s brand. Vendors that take a long view of what it will take to improve the ROI on their largest channel investment (channel managers) will be rewarded with more productive, revenue-producing, motivated, and capable partners.