Patterns For Channel Led Growth Relationships

How Customer Relationship Models Affect Growth

This is Part 10 in a blog series on Customer Relationship Marketing.?

What’s in a Name: Growth Patterns

This newsletter is now called Growth Patterns. Why? Conversations with many of you - thank you for reading and being such an engaged audience!! - revealed that what I'm talking about here are growth patterns for business, not the operational tactics needed to implement them. Though some of these patterns are owned by marketing, others may be run by sales or product teams. So, I want to focus on how anyone can scale by understanding them.?

Most businesses do not fail from lack of effort, but from failing to employ intentional growth strategies, while drowning in tactics that don’t drive growth.?

Tactics come and go, but patterns of growth I cover here are deeper, and inform crucial strategic choices that make all the difference.

In this post, I apply the customer relationship model I’d developed previously to a company planning to grow through channels. Usually companies build direct pathways to reach users and buyers first, and then add channels later or alongside direct sales. For this reason, this post builds upon my two previous posts on relationships needed for direct pathways to users [product-led] and buyers [account led].?

A New Tech Disrupts a Partner Ecosystem?

Here is the paradox of a novel technology: you want to reach as many users as possible through channels but the technology itself may disrupt the channels.?

Most channels have been built over time to deliver pre-existing products that have established value for the channel buyers. So, a new product can be added to the channel - so long as adding the product and establishing its buyer value are easy. Yet, novel technologies such as a new AI-app or a new chip may not be easy to integrate into current product channels or existing value chains. Adjacent products may become competitors, or the buyer’s value chain may need new services. So, the company needs to understand how its tech offerings affects the channel pathways and what kind of relationship equity [reach, depth, power] is needed to manage its channels.?

Channels Need Dedicated Relationships?

The primary reason for building channels is to reach more customers through indirect but cost effective means. However, there is significant business development effort needed to open each channel. Companies have dedicated teams to research, resource and negotiate with each channel partner and agree on favorable terms to make their product available through that partner. Once signed, each channel partner needs to be activated, nurtured and managed over time by a person or a partner team to access customers and achieve shared goals.

Complexity can grow quickly if a company adds multiple channels that leads to conflict. Channels are hard to start, harder to sustain and require investing in relationships.

So, before going too deep into channels, it is worth auditing the total customer reach the channels can provide. This provides the overall potential of channels to the company.?

A Tech Product Isn’t Enough to Create a Partner Offering?

One of the reasons building channels is hard is because the company’s product is never enough to create an attractive offering for the channel partner. An offering is more than just your product - it is the “whole product”. Typically, from a partner’s perspective, this would include pricing, contractual terms, special capabilities needed to add and sustain the product in the partner’s network, and any additional services that the partner needs to deliver to the buyer.??So, each channel offering needs to be defined carefully with tradeoffs between what is bespoke for each partner and what is common across all partners. Over time these partner offerings may be standardized for a channel or a segment.?

[As an aside, “Offering” is a core concept and a key part of a company's brand story. See earlier posts on the Elements of a Tech Brand Story Key Customer Relationships for Tech Offerings].

Two Channel Patterns: Product Led or Account Led Pathways

When you create a partner offering, built around your tech product, a lot depends on whether the channel’s focus is on the user or buyer. If it's a user focused channel, your offering may sit alongside other products, complementary or competitive, in a network where a user shall discover and choose your product to get a specific job done. To make this work, you need to have product led growth support for the channel. Example of this is Amazon Marketplace.?

Whereas if a channel is focused on buyers, your offering will need to fit in the business value chain or process that the buyer expects from your solution. And the buyer shall select your offering based on the value [TCO, ROI etc.] offered by the product. To make this work, you need to have account led growth support for the channel. Example of this is Accenture supply chain management services.?

This difference is more than superficial: you shall need to bring different types of people, skills and relationship equity to the channel.

For user focused channels, your product managers, marketers and product community teams shall need to define, nurture and support your partner offering. Whereas for account focused channels, your sales and customer success teams shall need to define and support how your product value prop fits into the partner offering.?

It is not uncommon for some channels to provision both user and buyer personas in which case, you shall need to invest in both product expertise and buyer value props and orchestrate across both user and buyer relationships within the channel. Example: Amazon AWS Marketplace that includes both developer and IT buyer focused solutions.??

Product Led Pathways Enable the User’s Job

A tech company may select a product focused channel to reach users. In this case the channels’ purpose is to help users discover, try and even purchase the product. Minimally, the channel should provide access to a large number of users, but ideally, it should enable the user to get the job done with your product in some way better than you can outside the channel.

The degree to which the channel enables your user’s JTBD [Job to be done] varies on the pathway chosen.??

Pathways: Sell Thru, Embed In or Build On Partner Ecosystem

There are three common pathways for a company to partner on products. The spectrum ranges from easy to hard, depending upon the level of product investment needed to enable the user to get the job done.? Let us look at each of them.??

First, a tech company can sell through a partner marketplace. This is the simplest path with minimal product investment. The product team needs to invest in placing the product offering in the marketplace, which allows them to access users at scale. The relationship equity is focused on user reach, instead of relationship depth or power with each user.?

Again the example here is Amazon AWS Marketplace. Thousands of products are listed in the marketplace, each with a clear partner offering that includes a version of the core product [typically as free trial] but also pricing, services and usage terms. For a tech company, a marketplace offers access to users [developers, in this case] since AWS has aggregated the user demand for multiple categories and various jobs within it. The marketplace enhances the user experience since they can discover, compare and try different products until they find one that best matches their needs.?

Second, the company can embed their product in a network of partner products who already own or are building the end user experience.? This requires product level integration into the partner network with ongoing investment of relationships and resources from product managers, community and tech support. The focus is on building relationship depth with users.?

In some software categories, such as collaboration or design tools, product integration is sine qua non to completing the use case - or getting the job done. In such cases a partner network needs to provide capabilities that further the use case, such as completing the user flow, triggering events, or reporting the results.?

In some categories like business API services, the end user may not even experience the product directly. An example is Plaid, a tech company offering bank account authentication service. They have built an ecosystem of 50 banking and tech partners who embed this service into the digital financial experience for their users.? In this case, Plaid enables product integration to their partners [developers] through APIs, documentation and support.

Third, a tech company can build its product on a platform that has a large user base and offers full monetization, fulfillment and support services across the product lifecycle. The company has direct relationships with end users, and builds relationship power with users through this platform.?

A prime example of this is Shopify where millions of merchants build online stores and count on the platform to offer full commerce, marketing and support features including access to assets, extensions and education.??

Another example is Google Play’s in-app platform. Thousands of game and app developers build directly on the platform which takes care of user engagement, pricing, analytics and terms of use.?

This pathway requires major resource and relationship commitments to the platform partner from the entire product development and commercial teams: product managers, engineering, tech support, community, marketing, sales and so on. In many cases, this may even be a choice to “bet the company” to the underlying platform.?

Account Led Pathways Enable the Buyer’s Value Prop

A tech company may select a buyer focused channel that helps buyers find solutions to their business problems across their value chain. Minimally, the channel should provide access to buyers, but ideally, also build value for the buyer through its activities like bundling, service and support.?

Pathways: Sell Thru, Sell To or Sell With Partner Ecosystem

There are three common pathways for a company to partner on accounts to enable business value.

These range from account partners who deliver basic add-on services to those who help customers realize more complex value through business transformation.?

Let us look at each.?

First, the company can sell through resellers who list the product in their catalog with agreed upon markups, alongside other products in the category. Often called VARs (value-added resellers), they offer add-on services like product bundling and support. While this pathway offers buyer reach, it is best suited for products in a well defined category with an established buyer value proposition. The company has to invest in reseller relationships to build reach, through programs that educate the channel on the buyer value proposition. Example: Value Added Resellers [VARs] like CDW sell business applications, among others.?

?Second, the company can sell to distributors who build up their own offerings, provide branding and sales and generally sell directly or through intermediaries to the end buyer. This is common in hardware, manufacturing, and embedded software categories, where the end buyer may not even be aware of the embedded technology. The value of the tech product is embedded in the value chain. Here, the focus is on relationship depth because the distributor needs deep knowledge transfer from the OEM and may take ownership of inventory. Example: VMWare OEM partnerships.?

Third, a company can sell with a partner who orchestrates selling their offering into joint accounts. Usually, system integration [SI] partners implement and maintain the technology.?

In more complex software offerings like app development, conversational AI, these partners create new value propositions, customize buyer’s value chain, and transform entire businesses.? The technology company often works jointly with the buyer and SI partner, and focuses on building relationship power. Example: Accenture Google Business Group.?

Mix, Match & Grow Channels with Care

An early stage tech company can easily get lost in channel planning due to all these possible pathways.

It is important to select a few pathways carefully and build them with care and make sure you are not reaching the same buyer or user through multiple pathways, causing channel confusion or conflict.

To grow each pathway, a company needs people with different skills that create the right mix of relationships with reach, depth and power. Finally, as it grows, the tech company also needs to orchestrate within and across channels.?

The Question of Two CEOs - Answered

In a recent post, I laid out a tale of two SaaS company CEOs, one pursuing product-led growth and the other account led growth. Each one wants to switch to or add the other pathway. The question was: how hard could it be? In the past three posts [account-led, product-led and channel-led growth], I have identified the different and unique patterns of customer relationship equity for each pathway.

Taken together, these relationship patterns pose the biggest barrier to switching GTMs, even if the product and technology doesn’t change.

Most CEOs and business leaders underestimate the challenge of switching across these patterns.??

Key Takeaways

• A new tech may affect the partner ecosystem through which the company wishes to grow?
• A company needs to invest in relationship equity [reach, depth, power] to build its channels to manages the changes generated by tech
• Before building channels, it is work auditing the total user reach available to you through these channels
• Tech product alone is not enough; company needs to build partner specific offerings to grow channel business
• There are two channel patterns: product-led pathways that reach users, and account-led pathways that reach buyers. Some channels may reach both users and buyers, but it helps to be clear about each pattern.?
• Product led pathways enable the tech product to help users get their job done; while account led pathways unlock the tech product’s value proposition for the buyers
• There are three product-led channel pathways: Sell Through a marketplace, Embed In a network and Build On a platform
• There are three account-led channel pathways: Sell Through a reseller, Sell To a distributor and Sell With a service integrator
• An early stage company should mix and match channel pathways with care as people and skills are different for each
• CEOs looking to switch or add direct or channel pathways have to invest in right kind of people and relationships, posing a big challenge to growth??

References?

• Ultimate Guide to Channel Sales - Hubspot

This is Part 10 in a blog series on Customer Relationship Marketing.

Part 1: Who is the Customer in Business Marketing?

Part 2: Key Customer Relationships for Tech Offerings

Part 3: Orchestrating Three Pathways into Business Customers

Part 4: The Hidden Purpose of Customer Relationships

Part 5: Pursuing Business Growth with APIs

Part 6: What is Customer Relationship Equity?

Part 7: Towards A Customer Relationship Model

Part 8: A Pattern for Account Led Growth Relationships

Part 9: A Pattern for Product Led Growth Relationships