Can this Channel Vendor-Partner Relationship be Saved?

By Joseph Pannone Our blogs May 18, 2020

The sales channel that we know today has been around since the early to mid-1980s. After over 30 years, it would be expected that vendors would know how to treat and interact with their partners. That is not always the case. Simply stated, if a channel partner is not treated as a legitimate business partner, the partnership will not work.

Why would a solution provider [1] want to sell a vendor’s products and services if there is not a mutually beneficial business partnership? And if a vendor expends time, effort, and resources to create a channel program and recruit partners, shouldn’t the outcome be a profitable and sustainable business relationship?

Before sales incentives, marketing development funds, spiffs, and most certainly metrics, there is the vendor-partner relationship. If there is no relationship, there is no partnership. Consequently, there is no reason to have a channel organization if you are not committed to developing a strong partnership that is set up for success. But, if you are committed to creating a well-performing channel, how do you create an environment that fosters fruitful channel partnerships? This true story tells you how.

[1] Value Added Reseller (VAR), Managed Service Provider (MSP), Systems Integrator (SI).

A VAR’s Story

The New York City-based VAR was won over by the Vendor who promised quick sales and healthy margins. They signed up immediately to be a partner. Was that a good idea?

The Vendor had come in with a convincing dog and pony show about their ‘wiz-bang’ products and services, persuading the VAR to jump right in and commit to a partnership. The VAR saw dollar signs everywhere during the presentation, but nothing about the Vendor’s channel program, products, and services training, or sales expectations. There was no mention of how the relationship was going to be managed. Also, it was apparent the Vendor did not know the VAR, their history, and their business. Did they want to know? None of these matters were discussed before the agreements were executed. The new Partner knew there was a potential to make money selling the Vendor’s products but not how.

During the on-boarding process, the Partner realized the two parties really did not know each other very well. Should the Partner have been reluctant to move forward without knowing more about the Vendor? This is a very familiar and painful scenario for many channel partners.

Forming a partnership with solution providers starts with the relationship. A vendor can have the world’s best products and a partner can have the world’s best sales team but neither will be successful if there is no rapport.

What can you do to ensure your partnership with your channel will have a positive and profitable outcome?

Before contracts are signed, sit down, get to know one another, be transparent, and provide information that helps your potential partner make the right decision in forming a business relationship with you.

Why your company uses the channel to sell products and services.
How your company views channel partners. How they are welcomed by the sales, marketing, and management teams.
What steps you take to get to know the partner and their business model.
What the best partner profile is for your products and services.
How you support the partner. The resources are available to help the partner sell.

Tip – If a vendor and a partner are not a good fit, they should re-think the partnership.

Getting to Know One Another

Is it truly a partnership or does the relationship seem like it is all about the channel vendor?

The New York City VAR partnered with a Vendor without qualifying them first. Eventually, the VAR had some concerns because the relationship seemed more surface and less substance. They had not taken the time to get to know the Vendor and their reason to recruit them as a channel partner.

As the year passed, there were bi-weekly update calls with the Vendor’s channel manager and a few dinners with various Vendor sales and product managers. But no plan on how these two companies were going to successfully sell together. The Vendor’s channel manager wanted a list of all the partner’s customers but never offered access to their own customer base or help in generating leads. It was the VAR who was expected to mine their customers for sales. It seemed overly one-sided. So much of the VAR’s invested time had been wasted because not one sale had been made. They felt they were just another logo for the Vendor’s website.

Would the partnership have happened if the Partner and the Vendor had taken the time to get to know each other?

Maybe not. Are both parties doomed to a failed business relationship? Not necessarily. It may not be too late to sit down and truly get to know one another. Steer the affiliation to a more equitable and profitable arrangement through questions such as:

What is each party’s motivation for this partnership?
Are there benefits that can come from this relationship? How have both organizations benefited so far?
What are their respective business models, products, services, and company cultures, and are they a good fit? Why and why not?
Are the expectations of both companies compatible? Are they competitive or unworkable?
After getting to know one another, is there a belief that they can work and make money together?

Tip – Revisiting the reasons for a partnership and deciding if it is worth continuing is not only smart but also good business.

channel vendor: Can’t We Just Get Along?

Channel Conflict: The Good, The Bad, and The Ugly

The New York City VAR was certainly having serious doubts as to the value of their relationship with the Vendor. Not only did they join the Vendor’s partner program before establishing a foundation for the relationship but they also failed to get insight into the Vendor’s sales organization. Imagine their surprise when they discovered the Vendor also sold their products and services directly to the customer (Bad). This subject was never discussed. Now the VAR had to deal with probable channel conflict (Ugly). [2]

Channel conflict. Two words that can make a channel partner see red. There are various forms of channel conflict. In this case, the Vendor has a direct sales team creating a scenario where the Vendor and the VAR are possibly competing for the same customer. The VAR realized they should have gotten more information on the Vendor’s sales organization before they joined the partner program.

Can this situation be mitigated to get something good out of it?

Absolutely. As the Vendor, you need to map out your sales organization to your partner and describe how they sell:

Do they sell to a set of named accounts or can they sell to any customer?
What are the practices and policies when your direct sales team is in the same account as your channel partner?
Do you have customer registration and does it apply to your direct sales team as well?
Is the partner compensated if your sales team sells directly to one of their customers?

To prevent the possibility of channel conflict, should the channel partner avoid vendors with direct sales teams? They can and they will, which reduces the number of partners available and willing to work with you. Or you can minimize the impact of channel conflict by having an open and direct conversation with the partner and be prepared to put policies in place that restrict your direct sales team from selling into their accounts. If you are willing to develop solutions, such as compensating the partner when a direct sale is made into their account, then the Bad and Ugly channel conflict can turn into something Good.

[2] Channel conflict occurs when a vendor not only sells directly to the customer but through the channel as well.

If the Partnership does not Click

Can this relationship be saved?

After everything the NYC VAR had been through with the Vendor, it was no surprise they were rethinking the partnership. The Vendor was continually reaping, but not sharing, the rewards from the labors of the VAR. Was it time to end this relationship?

Before making the final decision to terminate the partnership, the VAR voiced their concerns. The Vendor should have listened to the partner’s issues and taken them seriously. Unfortunately, this story did not end so well for them. Because all efforts to rectify the partnership problems had been exhausted with no positive outcome, the VAR decided it was time to develop an exit strategy to end the relationship. You don’t ever want to lose a partner this way.

What could the Vendor have done to save the partnership?

Take the time to learn about their partner’s business and help them to build that business.
Satisfactorily address the concerns they had about the lack of a sales plan, qualified leads, and total attention from the channel manager.
Propose a proper solution and implement it to mitigate the channel conflict.
Really listen to them.
Together, determine if the partnership has been worth the investment you both made in time, personnel, and money.

The VAR was not completely blameless but they did learn their lesson and took action once they realized they were in a partnership that did not take them into consideration. If a vendor truly wants a successful and profitable channel program, then they should respect their partners, treat them as equals, and help them build their business.