3 Steps to Reduce CAC & Turn Channel Partners into a Force Multiplier
In a recent post, I put forth a long laundry list of channel metrics to monitor partner performance. Now, let’s dive a bit deeper into one of the most important metrics every expansion-stage B2B SaaS company should be measuring: customer acquisition.
An annual Private SaaS Company Survey benchmarked customer acquisition cost (CAC) by analyzing how much companies spend for $1 of new ACV from every new customer. The survey found that Channel Sales had the lowest CAC at $0.53 – nearly half that of its Field Sales counterpart ($1.02).
So research proves what logic would lead us to believe: it’s a lot more cost effective to sell via channel partners than to hire more sales reps. But, why is CAC such an important metric to track and measure?
A company that understands its CAC essentially know what’s required to scale their business cost effectively. Think of it as the tachometer that monitors the efficiency of your growth engine.
By working with Channel Partners you are essentially activating a strategy that can help keep your CAC low. Channel Partners are a great way to deflect the cost of selling your product, but establishing a channel program can be a bit of a risky strategy for those that don’t have a long history selling through an indirect channel. Remember, you’re putting a lot of faith in a group of salespeople that don’t work for you. In other words, you don’t have complete control over them or their productivity.
But, there are many ways to lessen that risk and turn your partners into a force multiplier. Just as if you were trying to reduce your CAC in a direct sales model, many of the same principles can apply in an indirect approach. Here are three:
1. Smart Segmentation
Partner segmentation shouldn’t be a discrete exercise done only when planning for the next business year. If you have a unified partner system-of-record, you have the foundation to analyze partners based on different profile and usage based criteria. If you don’t, consider how you consolidate your partner data into a single repository so you can answer questions like:
- Who are my B-partners that with a little extra help can become A-partners?
- Who are my C-partners that I have carried for far too long and should be jettisoned from the program?
- Who are my A-partners that are most enabled, engaged and ready to roll out my new product?
Armed with this knowledge you can be more agile in your decision-making and generate more revenue in a cost effective manner.
2. Partner Planning
In a direct selling model, each of your reps carry a quota. They know what they need to bring to the business each month, quarter or year. And if they don’t? Well, I think we all know the answer to that. The reality is that not all sales reps make it beyond their first year.
It’s staggering how many businesses don’t apply similar sales planning principles to their partners. Proper partner planning enables both the supplier and the partner to agree to revenue goals and the required investment each must bring forward to be successful. It is also the plan-of-record to evaluate a partner’s progress on a regular basis to see where additional support can be applied to achieve (and exceed) goals. Here is a good template to use to develop a sound partner plan.
3. Proper On-boarding
Companies spend a lot of time and money recruiting the right partners, but sometimes fall woefully short of enabling them. When a new partnership is signed, that’s when its time to optimize partner on-boarding using an automated system to offload the myriad tasks associated with enabling new partners. Your partners need to be properly trained to position and price your products, and also handle any objections or competitive threats. As they are spending more time in the field in front of customers, they expect to get answers quickly and easily. Don’t stop at just allowing partners to register deals on their mobile devices. Think about how you can mobilize your training, product literature, demos, and support too. All this can be the difference to getting them up and going quickly and acquiring new customers cost-effectively.