Today we continue with our series of episodes on partner programs and how marketing automation is handling the scale of channel programs for thousands of software companies globally.
Forrester predicts the through-channel software market to grow to $1.18 billion by 2023. This market includes 10s of thousands of digital agencies realizing $2B in service revenue by that year.
So I invited Mr. Jay McBain from Forrester.com to join me in unpacking the topic of “Through-Channel Marketing Automation.”
If you haven’t run across Jay, I’d wonder how – he is one of the most visible thought leaders in the global technology channel.
Named to the Top 40 Under Forty by the Business Review, he is often sought out for industry guidance and future trends.
He has spent his 24-year career in various executive channel sales, marketing, and strategy roles within IBM, Lenovo, Autotask, and ChannelEyes. Jay is the principal analyst for global channels at Forrester – one of the most influential global research and advisory firms in the world.
In this discussion, Jay and I review:
- The third stage of growth for software companies.
- One vs two-tier channel partner programs.
- The partner relations and marketing automation management software stack.
- How to determine your IPP (ideal partner persona).
- The 6 phases to partner program development,
- Then we wrap up by giving some actionable advice to those about to launch or scale their partnership programs.
This was one of the most enlightening episodes I’ve had with one of the brightest people in channel today.
I hope you enjoy this discussion with Jay McBain.
What is ‘channel’ and what can those developing their software startups today call it?
75% of world trade is indirect. We call in every industry the way they get to the customer indirect sales, partnership sales, etc. But it’s easier to think of it like when you buy a car for example. You are buying from the channel which is the dealership
What should we call it for the purpose of this conversation?
Think of it as the 3rd parties companies that you work with that you don’t control.
What’s the difference between re-selling and co-selling. Also, how do you break up the term Partner
This is one of the biggest changes in channel sales in the last 30 years. Partnerships are expanding to have non-transacting partners take more of the load. Microsoft has over 400,000 resellers and they are getting 7,500 new partners every month. But 80% of them are now non-transactional, they are the influencers, installers, implementers etc.
How many talks are you going to give this year around ‘channel’ or partnerships?
There are about 150 shows per year and I move between a lot of different industries. Because of this, I speak at about 50 of them. I like to talk about where the market is going and how things will look in about 3-5 years.
For the vendors and manufacturers, I like to advise them on how to build better partnerships and relationships.
In other words, I speak about the future. There are so many changes happening, almost every company needs to transform. About 60% of the people making technology decisions now are a line of business executives. We do research on how and why they buy.
When you inspect these things, it becomes clear that everything will be different in the next few years
So let’s discuss what those are going to be about, starting with the key developments around channel over the last 10 years?
I call it the 3rd stage. 20 years ago we used to hear that you have to be “born to be a salesperson.” This is no longer true. Sales is now becoming a science instead of an innate ability.
We are at a maturity point in marketing where the levers and dials most people can understand. This has been causing debates about what parts of the company are going to get marketing investment. The 3rd stage today is the channel, 75% of sales flow indirectly.
The last mile is up to the people and industries who influence the customers to elevate the conversation. Some of the biggest companies in the world have most of their sales go through channels.
Let’s say I’m buying a new marketing automation tool like Active Campaign or Marketo. How does this purchase process look if I’m buying through a reseller partner of the end provider?
Your internal purchasing decision-maker of this tool would look to the reps of the tools in your stack and ask about integration partner marketing automation software…
Or, you may be looking at a CRM and they would also recommend and intro you to the marketing automation software they represent
Tell me more about the behind-the-scenes efforts that are going on to make sure I am getting the right information at the right time from these reseller partners of that software I will inevitably choose (in this case, marketing automation)?
Saas companies are growing every day, and the average saas CEO now has 9 competitors instead of 1. On average, a SAAS CEO is going to bring in about 5 different people to help grow the company, consultants, integrators, traditional partners, etc. The goal is to grab some super-connectors that you trust. They will help you form your marketing strategy, and that’s the story of Partnerships.
On average 73% prefer to buy in an e-commerce kind of way. Typically, they would but it from an integrator, but as millennials take over, they are starting their journey at Adobe Marketplace or Salesforce Marketplace.
Take me through the PRM side of making relationships with resellers.
Basically, you can have them directly sign up with you. They will bill the customer, take their money, and give you a lesser amount. They will make front end and back end profits because of this. This is traditional transaction flow.
Relatively small partners can become billion dollar companies because most of their sales are passthrough.
You can also sell through a distributor and then they sell to a partner. The distributor builds the cake and the partner has the ability to sell all seven layers to customers.
In some cases, the SAAS developer will use some retail marketplaces. Selling your products through Amazon or Adobe for example. In this case, the partner is the marketplace.
On the PRM side, is basically the system of record for the partner. It manages the recruitment of the partner, the certification, and development of the partner. It measures performance and allows you to make partner plans as well. It’s basically the operating system for the partner program.
Now, let’s turn the table and consider I am now an active user of this new marketing automation software. Talk me through how I am converted to a partner?
For partnership professionals, there’s a ton of detail that goes into the process. The first step is creating your partner profile. For example, if your customer is a star, your potential partners are the planets that orbit that star.
The 5 vectors to answer are:
- Who is my buyer?
- What sub-industry should I focus on?
- What is the geography?
- What is the segment size of the sector?
- Where do we fit within the 40 layers of the tech stack?
Now, let’s phase this out – how does the ‘channel’ change/progress over the next 5 years?
Strategy and Design
- First, remember that partnerships have an 80% failure rate. Be prepared to reach out to at least 500 potential partners. Even the hall of famer’s of channel development still have an 80% failure rate.
Find and Recruit
- What do they read? Who do they follow? In the tech world there are 54 magazines and 50 shows so starting there is a good idea.
- Make sure they are smart enough to handle customer conversation. They need to understand the trigger words that relate to your service
- There are monetary and non-monetary things you can do to give partners an incentive to sell.
Co-Selling and Co-Marketing
- There’s a lot to understand before going to market. 66% of tech guys need someone to do the sales for them.
Managing and Reporting
- How to measure and optimize all date
Those software companies with budding partner programs they want to scale – what can they look forward to? What should they look out for?
Look at the ones that are happy, those are probably the ideal customer profile. Basically, replicate the success you are already having with your clients.
What about the startups hoping to start their partner program earlier than most PRM representatives or enterprise-targeting software companies who’ve been around since the early 2000’s – what would you say to the founders of a pre-PMF saas startup wanting to start their partner program today?
Until you lock down your product fit and direct marketing capabilities you do not want to franchise anything. Many companies get out of the gate too quickly. If McDonalds started franchising without those controls, they would have never been the company they are today.
Don’t start too early, it can be expensive and it has a high failure rate. When you start your company go slow. Focus on the necessities one step at a time. Don’t worry about the big flashy portals. Get partners slowly in the beginning and learn from them. Develop strategies based on what works.
And finally, any advice to the brand new partner program manager?
You are probably developing a bronze, silver, gold system. I would develop 70% of my time on the star (customer) and the planets (relevant partners). If I need more digital agencies in my future, I want to bring on a couple of digital agencies and see how it works, then I would build a playbook then expand on that.