What best defines your partner program? There are significant differences between Channel Partners, Referral Partners, Alliance Partners, and Technology Partners. Who are you…or maybe better yet, who do you want to be? This can be a significant part of your go-to-market strategy, so you should spend some time on it. Most companies that have a partner strategy will diversify their partner program across multiple profiles.
Let’s take a look at Channel. I find that the term “Channel” is very often misused. In my experience, a channel is made up of VARs (Value-Added Resellers) that build a business or practice area around a vendor’s core offering. We sometimes refer to a VAR as a “Channel Partner”. The terms are really interchangeable. Not to forget ISVs (Independent Software Vendors) as they are closely related, but very much focused on software/technology integrations. Take ECM or ERP for example, there are very large Channel and ISV ecosystems that pivot around these core offerings. It’s very common for companies to build a consulting and/or implementation practice around the vast number of ECM and ERP solutions available on the market. For example, Oracle, a global leader in ERP, has a very large channel of VARs/Channel Partners and ISVs that specialize in specific industries (e.g. Healthcare, Financial Services, Manufacturing, Retail, etc.) or solution areas (e.g. inventory, accounting, human resources, supply chain, etc.). Professional Services is a key revenue driver for an Oracle VAR/Channel Partner or ISV. They may gain some pull-through revenue on software licensing and annual maintenance, but their primary revenue model is built on professional services and customization pivoting around a core solution offering.
This is very different from having a “Referral Program”. We often refer to participants in a Referral Program as “Referral Partners”. I’ve known some organizations to use the term “Indirect Channel Partner” in place of “Referral Partner”. I’ve often wondered why? I believe in calling it what it is, but some organizations want to hang on to the term “Channel”. It means something different to them and the identity of their partner program. Different than a VAR/Channel Partner or ISV, Referral Partners typically do not build a business or practice area around referral fees. Their participation is based on their relationships, industry knowledge, and ability to get a “seat at the table” for a vendor to sell their solution. They normally are not involved in the “selling”. The value they bring to a vendor are their contacts and industry experience. A good referral programs will compensate Referral Partners well for access to their contacts and industry experience. In the world of lead generation, warm doorknobs always trump cold calling. That is the purpose of a Referral Program. Cold calling often results in low single-digit conversion rates; whereas, a referred lead through a partner will often result in double-digit conversion rates — in some cases as high as 40% or more. There is power in relationships, but not to confuse this with a channel. Businesses focused on Referral Partners tend to be mostly transactional and less interested or focused on strategic partnerships.
This leads us to “Strategic Partnerships” and “Alliances”. These can be in the form of private/white label, OEM, Consulting/Systems Integrators, or technology partnerships. Different than a traditional VAR/Channel Partner, these profiles have a core offering and seek partnerships with solution and technology providers as a value-add to their core offering or practice area. They may take some ownership in the cost of sale so as to integrate a vendor solution into a packaged offering. These partnerships can be monetized like a Referral Partner, but are often relationships of awareness and monetized through lead sharing and strategic engagement. I see this in the transportation space where 3PL (Third-Party Logistics) companies that primarily focus on freight will partner with small parcel vendors as a value-add to their customers to round out their value story. For example, Packsize is a packaging vendor that focuses on right-sized on-demand packaging. Packaging may not be a focus area for a 3PL, but it addresses a need their customers may have when it comes to warehousing and reducing overall shipping costs. This is a little closer to a VAR/Channel Partner, but distinctly different in that a business or practice area is not built around a value-add vendor solution — it’s complimentary to an existing core offering. These sometimes form into strategic teaming agreements where you have a Prime/Sub relationships between solution providers to bring greater value to a common customer. VeriShip is another small parcel solution provider that has an expansive partner ecosystem. Many of their partners look to round out their core offerings with VeriShip’s parcel intelligence platform.
In closing, I find many channel programs more closely resemble a referral program with a mix of strategic partnerships and/or alliances. Why is this important? It’s important because it’s confusing to partners and can often times create unnecessary overhead and false expectations within your partner ecosystem. Your partners need to have a clear understanding of where they fit in your partner program and engagement strategy. Understanding the differences will allow your business to create a successful partner strategy that targets quality and fruitful relationships to help grow your business.