3 October 2023

Preventing incentives upsetting the channel partner model

The channel partner MDF paradox

Firms caught up in the spring 2020 stampede towards home working have by now moved on to hybrid models. That created a mini-UC boom, and it’s petering out. It also means new IT sales opportunities will inevitably get harder to find, especially among SMEs. There is, however, money to be made in companies running contact centres with homeworking agents.

The effect on the channel partner sales model may be profound. In a Catch 22-like paradox, manufacturers might cut channel marketing development funds (MDF) while still relying on the channel to plug revenue shortfalls. What’s the solution? We suggest returning to basics. We’d bet simple things like measuring MDF return on investment haven’t exactly been front of mind. Nor, we’d guess, have ideas like differential partner rewards for sales success at speed.

Cashflow is king

A fool’s errand, the opposite strategy would be to pump more MDF into the channel in the hope some will fall on fertile ground. While that might have worked in times of plenty, if the fundamental controls aren’t there some of the ground’s likely to be stony or weed strewn (which may never have been noticed before).

Think about it in terms of cashflow, an essential discipline for any well-run business. In a channel partner sales model (in fact in any bilateral commercial relationship) healthy cashflow is naturally a shared objective. MDF money from the vendor’s pot may draw on its bank balance, but measurable results contribute to the partner’s bottom line. Done right, that creates a self-sustaining virtuous circle. Done wrong? Well, read on.

Six steps you must take

To be blunt, the onus is on the vendor. First, don’t flirt with increasing MDF. It could raise questions you might not be properly prepared to answer and get you in trouble with your CFO. Instead, take the following six steps:

  • Check the robustness of your channel marketing people’s methods for monitoring return on investment from MDF. If they don’t survive scrutiny, or even don’t exist, insist on immediate action.
  • Many vendors rank their channel partners as platinum, gold, or silver (or some similar categorisation). Audit the respective benefits they’re entitled to and whether they’re earning them against stipulated criteria.
  • Audit your channel partners’ websites. Do they position you as a first-choice solutions provider? If they don’t, get your people to put things right (or modulate MDF allocation in terms of bang for the buck).
  • Audit your channel partners’ marketing collateral. Does it feature case studies that showcase your solutions? Does it include brochures and data sheets that champion your products? Does it ask the right deal-closing questions?
  • Link your commitment to continuing MDF investment to bilateral benefits like lead generation, real-time conversion rates, deal-closing speeds, and added deal value from linked product and service sales.
  • Finally, have you got up-to-date joint value propositions in place? Competition will probably become even fiercer and reminding customers why they should buy from you and your channel partner is always money well spent.

At first reading, some of the above might seem a bit harsh on the channel partner but remember MDF isn’t charity. The vendor must be sure it’s getting value for money.

Saving money sensibly

On the other side of the coin, there are plenty of added value activities the vendor can conduct that don’t necessarily require cash investment. They include channel partner training and communication as well as refocusing existing marketing activity on lead generation. Also, in terms of conserving cash, although it may be tempting to buy proprietary channel partner management software, much of the above is simple enough for a spreadsheet to suffice.

Finally, returning to cash flow, to sweeten the pill the vendor should look at accelerating its reimbursement processes so channel partners can see a beneficial link between higher performance and speed of reward. In closing, the vendor should also think about weighted channel partner league tables updated in real time to maintain focus.

Reach out to GoRefCo if you’re time-starved or need an expert hand. We’d be delighted to help.

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