Over the last 10 years at Altus, and for many before that, we have seen, or sometimes (unfortunately) been a part of, many misguided efforts to prematurely develop an alternate or indirect sales channel. Entrepreneurs often mistake a channel partner for an armed and ready sales force. Or they are simply in a rush to become a global company before testing and validating the product and sales process in their own backyard. And in these tough economic times in particular, the compulsion to grow a channel and the factors the effect their success are even more prominent. Here are the top 4 reasons why I’ve seen premature efforts at developing channels fail.
1. The Product is not Proven
We worked with one client with a cleaver advertising technology. Early in the initial launch cycle, an opportunity popped up with what could have been a large and strategic partner in taking our product to market. With very little field results and nothing more than blind faith in the development, we jumped on the opportunity and quickly secured a large and joint customer.
Unfortunately, the product failed to deliver as promised which resulted in a black eye with the end customer and more importantly with the goose that was to lay the golden eggs. The simple truth was that the product wasn’t ready; it hadn’t been rigorously tested either in house or with smaller beta clients.
2. Lack of Demand
To this day we still get sucked into the trap of beefing up forecasts too high based on the belief that the new market leading channel partner is going to add our widget to their line-up. More often than not, unless you are the ones feeding the demand (or there are performance guarantees), the partner will likely come up short of your expectations. The relationship gets strained right out of the gate and the certain success is a big question mark.
The safer assumption is that channels are good for fulfillment, not for demand. Don’t expect your partner to market your product and drive demand. If it happens, great…just don’t sign them up, check the box as mission complete and move on to the next market or territory. They may sell it, but they likely aren’t dependent on its success—at least not the way you are. The ideal scenario is you spur the demand and then you channel (pun intended) that demand to your partner, even if you could satisfy it on your own. This way you get your partner started down the right road, give them some experience selling your product, and pave the way for a mutually beneficial relationship. Do not get lured into the trap of selling partnerships instead of customers.
3. Lack of Sales Tools
We had one client in the Telco space where the CEO was a master at the pitch and demo and was a high-odds closer. Following a few big wins, they believed it was time to bring on a channel. However, again the expectations were not met, in this case because the partners did not have the CEO’s talent and experience. Even more than the company’s own sales team, channel partners are hugely dependent on easy and effective sales tools to close deals. Unfortunately, most of the time a misalignment occurs in which the company expects the partner to have the tools and skill required and the partner on the other hand expects them to be supplied. Often more problematic is when the partner does not even ask and the result is an ill-equipped channel team that simply does not deliver. Have you armed your partner with the tools—an ROI calculator, case studies, PowerPoint’s, demos, white papers, brochures, one-sheets, etc? Have you given them a proven process with proven tools? “Just get people on the phone and talk to them” may have worked for you, but that is not a scalable recipe for channel success.
4. Lack of Sales Support
Last but not least—do you have dedicated resources to support the channel? One Altus client, a media entertainment company, successfully recruited a number of data partners that were logical and complementary to their offering. But beyond the initial sales training there were no resources dedicated to supporting them. The results were again a shortfall of expected and planned revenues largely because the follow-up to questions and overall availability of sales and technical support was too slow. To be effective and meet those forecasts you should have the same level (if not greater) of customer-experienced support all fully available and prioritized to be responsive and proactive. Ideally there is a period of mentoring and team selling that both helps see how the process is done effectively and builds a strong rapport between the teams created.
So perhaps the adage, ‘Be careful what you wish for’ is a good one to keep in mind as you think about channel expansion. I’ve seen companies desperately wish for a channel partner and then get it, only to find that they weren’t ready. They didn’t have a ready product, or the necessary demand, or the tools and processes and people needed to support their partner. The result is often worse than a failed customer because of the broader reach. What looked like a boon can sometimes be a bane.
