What is “the channel”?
The channel is a go-to-market strategy that businesses use to scale their ability to serve the market through partner organisations. These partners can work with businesses in different ways, such as:
Referring new opportunities to the business.
Selling to customers on behalf of the business.
Reselling to the partner’s customers.
There are lots of terms that get thrown around when describing the channel, including “distributors”, “two-tier”, “agents”, etc. And there are some differences in the channel approach for physical product-based businesses vs services companies. However, the simple truth is there are only so many ways businesses can contract with an end customer, and this depends on how businesses want to fund the acquisition and the management of the customer base:
Prime-Prime: where two parties contract independently with the customer to deliver a single service.
Prime-Sub: one party is the prime contractor with the customer, the other party sub-contracts with the prime party.
Sub-Prime: your business is the sub-contractor to the prime party.
Overall, the principle behind the channel is that businesses can achieve massive growth, market share and scale through an ecosystem. Everything has a channel angle – if the businesses are willing to meet the market demand. You’ve got the obvious ones like Software-as-a-Service (e.g. salesforce.com), less obvious like transport and food delivery (Uber, Deliveroo), through to more obscure examples like skilled trades and hospitality (Checkatrade, Expedia).
Why doesn’t every business have a channel?
Not all businesses can support channel as a route to market. The reasons for this tend to revolve around these four areas and are driven by the degree to which they have been developed with multi-channel in mind.
Price: if there’s not enough margin in the cost model, it may not be possible to fund any commission or price discounts.
Product: depending on how the products/services have developed can determine their degree of “channel friendliness”, such as ordering, service integration and support.
Process: regulatory restrictions, export control, tax compliance are the “big hitters” that tend to steer what is possible when opening up processes between parties.
People: channel is a complex beast, and sometimes it’s easier to achieve the necessary scale working directly with customers rather than partner organisations. This can be especially the case with professional services businesses.
The top five ingredients for an infectiously successful channel
So, here they are. The top five ingredients - and a sixth bonus ingredient - that will add a little spice to the secret sauce for your partner programme recipe!
#1: Think win-win-win to unlock potential
Partners have feelings. And so do customers. A successful channel is not just about selling more through an attractive channel programme. The channel ecosystem comprises many parts (tiers, incentives, discounting, market development funds (MDF), etc.). Each aspect of the core business processes (create, market, sell, deliver, operate) must interface with the partners and their customers!
#2: Trust and transparency underpinning authentic teams
How much easier are things when we trust each other and share openly? It’s great knowing that we’ve got each other’s backs, so why would the channel be any different? We need to challenge ourselves in behaving with those we invite into the partner ecosystem. This requires robust cultures in the partnering organisations, with psychological safety being the norm – not a rare nugget.
#3: Don’t underestimate the impact of mindset
Being open to new ways of working and looking for those with a growth mindset (vs fixed) will help drive traction and accelerate results. Old habits die hard (with a vengeance) so fostering positive personal accountability is the lifeblood of ensuring all parties deliver on their commitments. The co-creation of these new ways of working will lead to far greater results than one party could imagine on their own.
#4: "Co-opetition" is natural, so embrace it
It’s okay to compete with partners – it’s easy to forget that customers have the ultimate choice of who will best meet their needs. Being open to this doesn’t mean a recipe for diminishing returns. Instead, it means a genuine expression of mutual trust and respect for each other. Having clear boundaries and rules of engagement that can foster that trust and respect means everyone knows where they stand. Not many markets allow for anti-competition, so it’s something to get used to.
#5: Culture eats strategy (and partner ecosystems) for breakfast!
This is about starting on the right foot. Going into a partnership with an open mind, not expecting to have all the answers, and knowing that there are many opportunities for personal, professional, and business growth throughout is the guiding light to openness. Think of it as “we, not me”. This means living the values, putting the customer at the centre, and jointly working to meet their intent.
Having vibrant, positive cultures in the partner community is essential. All explicit and tacit actions and decisions will be driven by culture. Imagine if your business thought of channel as “a threat” and that this culture was thriving. What sort of experience would partners and customers have? You guessed it, a pretty crappy one.
#6: A sixth BONUS ingredient for channel success
You’re welcome! Watch out for these common channel misconceptions as they give businesses severe indigestion. These phrases are not new to anyone but are alive and well in many organisations:
Partners can’t do what we do, it’s far too complicated, and we’re the best at it.
Partners are beholden to us, and they’re our extended sales team.
MDF will fix everything (including relationships). Just throw some money at it.
Bringing it all together
As you can see, there’s a lot going on in the channel, and the business model dictates how flexible it can be. Remember, at the core of this success are people. They’re good people. And it’s these very people - through The Power Of How® - who will generate the infectious energy for your channel and bring these ingredients to life!
Comments