The 5 Most Dangerous Channel Traps to Avoid

March 4, 2015

Many software companies use channel marketing tactics to expand their reach and reduce customer acquisition costs. Finding the right partner can help you access new audiences, better position current customers for long-term success, and even provide you with crucial feedback and ideas for product improvements.

But for all the potential benefits, one thing the channel will never provide is a quick fix.

Like any significant investment, you tend to get what you put in when it comes to channel partnerships, and the most successful ones are built off a strong foundation of planning and on-going maintenance and support. Along the way there are numerous pitfalls companies can fall into. Here are five of the most common anyone interested in launching a channel program should actively avoid.

1) Assuming Partners Share Your Priorities

Channel sales typically take a long time to get off the ground, and one thing that is extremely important to remember throughout the recruitment, onboarding, and launch periods is that resellers have a different set of priorities than you. As a startup, you may have a great sense of urgency and total focus, but they are usually focused on other products and deals that are paying the bills. It can take time and effort to convince them that they will get a good return on investment in your product.

It is imperative that you look at your partnership as much from your partner’s perspective as from your own. Remember that the relationship has to be mutually beneficial to work.

2) Believing Channel Partners Can Help You Make Your First Sales

If you haven’t figured out how to sell your product with a repeatable sales process, it is overly optimistic to think that a channel partner is going to figure it out for you. After figuring out Product/Market Fit, the next big job founders need to tackle is how to create a repeatable, scalable and profitable sales process (for more on this topic, see “Setting the Startup Accelerator Pedal”). This is a complex task that involves figuring out who is best to sell to, what messages to use, what pricing will work, how best to eliminate risk and objections in the buyers mind, etc. Don’t expect to be able to delegate this task to a channel partner. It really is work that needs to be done by the founders, as often it requires changes to the product and vision to be successful.

3) Believing Partners will Create Initial Demand

Many optimistic entrepreneurs hope that by signing up a bunch of channel partners they will get a lot of orders for their product. In reality, most channel partners are only willing to put energy into selling products for which demand already exists. Only once they have seen that they can make money from a product will they jump on board, and bring you some of their existing customers. This means you should expect to continue creating demand using your own marketing efforts. In fact, in the early days of a new partnership you should ideally be in a position to feed your partners leads, or — better still — deals that are close to done.

By showing them that they can make money with your product, you can then expect them to dedicate some of their resources to bringing you customers. It may also take more than one transaction to get them excited.

Try putting yourself in the seat of the CEO of the channel partner, and ask yourself how you would act if you were in his/her position? This will help you to recognize what it will take to get them to risk bringing their valued customers to you, or taking their scarce sales resources off of other proven products where they know they can make money. One of the key things you can bring to them is the ability to take innovation to their customer base, and to re-invigorate their existing customer relationships with new ideas.

4) Thinking You Can Just “Set it and Forget Get It”

On a related note, software companies often need to be reminded of just how much on-going support and program maintenance is required to ensure a strong and successful channel relationship. You need to continuously educate your partners about how to sell, handle objections, and differentiate your product from the competition. That requires work by your channel sales team, but it also requires backup support from a channel marketing team who will create the appropriate training materials, programs, tests, etc.

Keeping your channel partners engaged and helping to ensure their success (and, by extension, your own success) requires a perpetual process of education, communication, and general support.

5) Competing with Partners Over Deals

Channel conflict is the most important thing to avoid, and one of the easiest traps to fall into. At worst, it’s the result of your own greed as the vendor company. Though you say you want to work with the channel, when you run across a juicy deal, you’ll often find your sales team won’t want to give it to a partner. Unfortunately, when a partner gets burnt by this kind of deal stealing, their motivation to put effort into their own deals is greatly diminished. Why should they work hard for a deal that their so-called partner might steal through price undercutting or some other unfair tactic?

SaaS companies should only adopt a channel sales model if they are willing to commit 100% by either avoiding direct orders all together, or establishing some very clear rules about how potential conflicts are handled.

Whether you use a lead registration system, regulated pricing, split territories, or some other mechanism to reduce and manage channel conflict, the key is to take a long view when it comes to balancing direct and indirect sales.

Remember, you can use one deal to get a partner excited about your product, and then — hopefully — they will go back to their customer database and bring you two or three or additional customers. Think of that first deal as an investment in creating a strong channel relationship that will deliver exponentially more value in the long run.

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Photo by: Janos Csongor Kerekes

General Partner

David Skok joined <a href="">Matrix Partners</a>as a General Partner in May 2001. He has a wealth of experience running companies. David started his first company in 1977 at age 22. Since then David has founded a total of four separate companies and performed one turn-around. Three of these companies went public.