Building a Highly Profitable Vendor-Reseller Partnership

Vendors are mostly interested in revenue (some may have a revenue/margin mix) while pretty much all resellers are interested in margin/profit. For a vendor to be successful in the channel they need to understand this dynamic and build a margin rich channel strategy. It is also worth noting that some resellers only allow their sales people to be paid on front end margin (profit added during the quote) and not back end (rebates). This is why asking questions about the partners business model is very important, covered in previous posts.

Let's explore some ways to help build a profitable business for your channel partners beyond just offering front end margin.

Wrap around services

The commodisation of technology hardware has made it no longer profitable. Services such as design, deployment, migration, monitoring, alerting etc is where the profit is for resellers. There also is not much differentiation in selling hardware but services is where a reseller can really set themselves apart from the competition. Therefore, to be successful as a vendor with a partner, you need to help them build a margin rich portfolio of service capabilities. Think about what services a partner can offer on your product, then train their teams to be able to deliver those. Think about low level design, deployment/installation, configuration and migration services all the way to the nevada of a full remotely managed offering. The more profit the partner seller makes from the services wrapped around your product, the more they will want to sell.

Complimentary vendor solutions

Unless you are a large multi-product vendor, you will likely only have one or two product lines to sell. To a seller this is just a small portion of the customers/prospects environment and the value is in the 'whole solution' not just a part of it. Consider other complimentary vendors that the partner is already working with and selling. Join forces with these vendors and create that complete solution with wrap around services. For example, if you sell storage then partner with server, software, networking and backup vendors so the seller can create a more rounded solution offering to their customers. This will add a lot of value for the customer as well in having a well thought out solution. This is a big part of the resellers value to their customers.

Authorised Support Partner (ASP)

ASP is when the partner takes over the support of a vendors product, usually 1st and 2nd line with breakfix offloaded to the vendor themselves. There are two main reasons why partners like ASP: profit and stickiness. Profit is easy to understand, ASP is a service and the partner will add their costs and margin. Stickiness is because the partner now manages the support of that customer so there is a higher chance any future expansion will come to them as well. The customer benefits as well from ASP, if the partner is an ASP providor for many vendors then they will be able to wrap the support of multiple infrastructure components into a single support contract. This is great because the customer will have only one number to dial and one set of teams to deal with rather than multiple vendors all blaming each other's products for the problem (happens a lot). Offering ASP also leads very nicely into managed service to get a complete offering. Of course the partner needs to be large enough and capable of offering such as a service.

Rebates

This is a very common way of improving the profitability for a partner without impacting the customer pricing. Rebates are paid at the backend after deals are done, usually routed through as marketing funds or straight payment. Many times, rebates are linked to a set of conditions such as new business deals, going beyond a certain revenue goal etc. Partners then use that money in many ways including running marketing campaigns. Many partners rely on rebates to do this so some consider them very important.

SPIFFS

SPIFFS are sales incentives, basically conditions where if met, the seller will get some sort of reward. For example, you might run a net new business SPIFF where if the seller brings you a new customer they get ￡1000 or if they hit a certain revenue goal they get a reward as well. Not all resellers allow SPIFFS but if they do then they are good ways to influence behaviour.

Hopefully the above helps vendors get some ideas of how to help their partners become more successful which in turn helps both ways.