Sales

How to Avoid Sales Channel Conflicts

April 3, 2015

Editor’s note: The following is an excerpt from our new eBook The Complete Guide to Channel Sales & Marketing.

Imagine this scenario: It’s the end of the quarter and your sales team is hustling to hit quota. One of your reps has a potential large deal that would help her cross the finish line, but there’s a problem. It’s also a deal that would be perfect for a partner your company just brought on as part of a new channel program. In fact, it’s very possible the partner may be chasing this prospect, too.

The rep wants to offer a discount to get the deal done, but that could mean undercutting the partner and effectively stealing the deal away from them. What do you do?

“Channel conflict is the most important thing to avoid, and one of the easiest traps to fall into.”

david skok_circle

David Skok, Matrix Partners

One of the most common points of failure for channel programs is unanticipated and unmitigated channel conflict. Channel conflict arises when the SaaS vendor competes directly with their channel partners for the same business.

“Channel conflict is the most important thing to avoid, and one of the easiest traps to fall into,” says Matrix Partners General Partner David Skok. “At worst, it’s the result of greed within the vendor company. Though they say they want to work with the channel, when they run across a juicy deal, they don’t want to give it to the partners.”

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?

5 Tactics to Avoid Sales Channel Conflicts

There are many ways to proactively avoid conflicts between your internal sales team and your channel partners, depending on the kinds of situations you anticipate. Here are a few options to consider:

1) Adjust your pricing structure

If you’re worried about direct sales reps undercutting your channel partners, you might consider a pricing structure that includes channel-specific discounts and a fixed price point for direct sales.

2) Adjust your compensation

You may choose to compensate your internal sales reps so that it doesn’t make any difference to their commissions whether the sale goes through the channel or direct. Or you may even take it a step further and offer them an additional incentive for channel sales.

3) Establish assigned segments and/or territories

Other methods that can help reduce channel conflict include segmenting products by seller type (direct or channel), or making certain geographical or vertical territories exclusive to certain sellers.

4) Utilize a lead registration system

HubSpot, like many other SaaS companies with channel programs, uses a lead registration system to help ensure that there is only one sales process for each lead. “Currently, partners can register up to 500 active leads,” explains HubSpot VP Sales Peter Caputa. “Registration lasts for twelve months, and they can re-register a lead if it’s still active after that period.”

5) Avoid direct sales altogether

It may be a little extreme or only work for particular situations, but the most straight-forward way of avoiding sales team vs. channel partner conflict is to commit to a channel program 100%.

Bottom Line: Think Long-Term

“We routinely pass a lot of deals back and forth… It makes our partners very motivated to work with us and creates a mutually beneficial relationship that helps grow both our businesses.”

— Dan Glazer, Director of Partnerships, Optimizely

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

It’s important to help your sales team realize why it can sometimes be to your advantage to make less money on an initial sale in order to process that sale through the channel, especially when a partner is a better fit.

For example, Optimizely Director of Partnerships Dan Glazer notes that his company’s partners add value for customers by providing support services that his in-house team does not.

“Sometimes we find that a direct sale needs more support than we provide,” he explains. “We’ll pull a channel partner into the deal to ensure that the customer succeeds. We routinely pass a lot of deals back and forth like this. It makes our partners very motivated to work with us and creates a mutually beneficial relationship that helps grow both our businesses.”

Skok is even more to the point.

“Why would you intentionally reduce your initial profit by handing the deal off to a partner? ” Skok says. “Simple. Because it’s an investment in creating a channel relationship that will deliver exponentially more value in the long run.”

Photo by: TimmyGUNZ

Senior Content Manager

<strong>Jonathan Crowe</strong> is Senior Content Manager at <a href="https://www.barkly.com/">Barkly</a>. He was previously the Managing Editor of OpenView Labs.