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You Can’t Do It Alone – The Value of Building Channel Partnerships

Why RevOps Should be Interested in Partnerships and Channel Sales

Jay: Thank you so much for having me and for that great introduction. I spent my 28-year career mostly in sales, carrying a bag of some type or another, but working for companies where partnerships were integral in those sales, before the sale happened, at the point of sale, as well as post-sale.

After that, I was a CEO of a software company that built channel software and was an analyst for five years. So I have had the chance to look at this part of the industry in-depth, from multiple different angles, and again, just happy to join.

Barry: It’s interesting how integrated channel sales and partnerships are to regular sales. So could you tell us a bit more why rev ops people or sales ops people listening to this podcast should be interested in the research you’ve done on channel partnerships?

Jay: I always start off and say that in the world economy, in world GDP, 75% of world trade flows indirectly. You bought your last car from a dealer. You bought your last TV from a retailer. You bought your last jar of peanut butter from a grocer.

Everything you do in your personal life, and mostly your business life, happens indirectly, working with independent resellers and agents and retailers and brokers and dealers, et cetera. Why is this important? If you look in the technology industry and go down to the biggest companies, the trillion-dollar size companies are all ecosystem-driven platforms.

They rely on partnerships, not only for customer influence, getting the customers to the dance, getting them on the dance floor for that first 30 days in a subscription model, and then keeping them dancing all night long, every 30 days forever.

But they rely on partners for co-innovation. They rely on partners for value creation, that last mile at the customer. They rely on partnerships for network effects, finding deals they would never find through a normal sales or marketing model. Partnerships are a big part of the industry. One of the biggest companies like Microsoft, 96% of their deals are partner-assisted. They just realized that as a salesperson, as a rev ops person, every deal is going to have perhaps upwards of seven partners be part of it throughout that entire journey.

Barry: Wow. That’s crazy. So many cool stats there. Seven partners, that’s a lot of partners to be part of that journey. Then do you see this trend going like we mentioned Microsoft? Microsoft’s one of the biggest tech companies in the world. Do we see this trend also with some of the smaller companies, these types of working with partners in an ecosystem? When I say smaller, I mean, post-product market fit, 250 employees.

Partnerships are Driving Technology Sales

Jay: One of the big changes after 40 years in this industry is we’ve always looked in, and salespeople tend to look at partners as resellers, where the money changes hands. In the tech industry, about 64% of every dollar changes hands through partners, and so that’s why it’s become so synonymous with the ‘channel’.

What’s happening now is every company, whether you’re at 250 people, 25 people, or two people still in the garage, or as you develop your product, marketing, sales, longer-term customer success strategies, build your subscription or consumption-based company, product-led growth company, usage, value-based company, or whether you intend to sell through a marketplace or direct, it doesn’t matter as much anymore.

All of the other elements of partnerships, which are the tech alliances you need to build, are the strategic and business alliances that you need to sell. To work on those alliances before the point of sale. Your customer goes through 28 moments on average, between the point they have a problem and the point they make vendor selection. You have 28 chances to get in front of them and get endorsed in a reasonable way.

If you think that one of those 28 moments is coming your way, you may have succeeded in marketing, but 27 of them are going in a different direction. The way you understand those moments, the way you partner up with those people who own the moments, something like this podcast, is highly influential to a certain type of buyer. If you’re selling to that buyer, it behooves you, for example, to say something nice about my company.

That’s a completely different view of partnerships than a reseller, signing up a bunch of resellers. At the point of transaction, for example, a big change is happening where again, two-thirds to three-quarters of the world economy is going indirect. That’s changing.

We’re seeing big marketplaces, those big companies we talked about, the big trillion-dollar companies are building really powerful marketplaces and companies are building their own internal marketplaces, API-driven marketplaces in this new embedded white-labeled world. The average customer today in technology is buying seven different things in one deal. Who is putting that together, procurement and provisioning together?

It’s changing pretty radically. We got to move away from the channel being this synonymous with resell, because they may assist in that model as opposed to taking the customer’s money. Then finally, that’s when the fun starts. Now you’ve got them for the first 30 days. You’ve got to renew them and you’ve got to focus on retention for life. Get that customer for life, CLV. What does that mean?

I got to drive the adoption of my product. Doesn’t get adopted, I don’t get renewed. I got to drive integrations and stickiness. I got to make it habit-forming. If you’re in the consumer business, you got to make it habit-forming, if you’re in the B2B world where it starts to get deeper in the stack where they can’t move through processes or workflows or business logic without your product, you need to connect deeper into the organization.

Then finally, you got to focus on upsell, cross-sell, and enrichment. Most deals today are won as pilots. Who’s going to move that $30,000 deal to $300,000? Then who’s going to drive that global cross-department into a million-dollar deal? Guess what? I mentioned seven partners, but there are all kinds of partnerships that drive that pre, during, and post-customer journey.

If you’re thinking that you own that customer journey, or if you think you don’t need help, you’re going to be on the outside looking into competitors who do believe in partnerships at every stage of the journey and making sure that your rev ops process, your sales ops process, all of your sales and marketing, you may be in an ABM approach, account-based marketing approach, whichever approach you’re taking, there’s going to be partners all wrapped around every section of that deal.

Figuring Out Who Your Partners Are

Barry: For me, channel sales strategies sounds like just with working with more people.

Jay: It is, but it takes more work. It’s not just this assumption that there’s going to be a bunch of people at the table and I have to have the right tools necessary to collaborate and communicate and things like that. You’ve got to actually look at your potential buyer and your potential buyer might be a particular type of buyer. Now, for example, if you sell software today, 65% of software is sold outside of IT. Is your buyer the head of marketing in a company?

If that’s true, the head of marketing in many companies now spends more money on technology than the head of technology. If that’s your buyer, there’s a bunch of different influencers around that buyer who are potential partners of yours. There are a couple of hundred thousand digital agencies for example, that might be a potential partner of yours.

There are 8,000 companies on the MarTech stack who might be potential partners of yours, probably very few of them compete with you directly. It’s a different way of viewing the market. Once you define that buyer, or it’s a sub-industry, there are 297 sub-industries, you’re going after a mid-size clinic with 50 doctors. Okay. What kind of partners wrap around that opportunity?

In the U.S., it might be HIPAA and HITECH compliant. As you move from state to state or province to province or country to country in Europe and Asia-Pac, things change pretty radically and the partnerships change based on your go-to-market, based on the TAM you’re trying to get to. That’s two. The buyer, the sub-industry, the geography I just mentioned, the sector size, and the segment.

If you’re going after SMB, there are six kinds of SMB. Selling to a nine, a 49, or a 499 are completely different conversations and they have completely different partnerships that wrap around them. Then product areas, there are 250 different product areas. I mentioned just in marketing, that there are probably about a hundred different product areas.

There are partnerships that wrap around different product specialties who are going to implement and integrate, who’s going to secure it and make it compliant, and who’s going to do the data and automation. There are all kinds of long-term services that wrap around specific product areas. Then finally, there are delivery models. Is this going to be delivered in a managed services type element? Is this project-based? Is it more of an integration project?

If you look around, there are all kinds of ways the products are being sold to your potential buyer and those are six different spheres right there or vectors that you’re going to have to figure out from a partnership perspective to get millions of partners down to the maybe dozens that could really help take your business forward.

Payment Models for Channel Sales Partners

Barry: It sounds overwhelming because there’s so much opportunity to build relationships with channel partners. If you don’t have the expertise or the experience, you might not even know where to start. What percentage of the partnerships that we just discussed, if let’s say 75% are indirect, how much of those is their money being exchanged? 

Like, so sometimes you could make a partnership for free if it’s like a co-marketing initiative, or we could go on and on. How much of that has money being exchanged? I’m sure there are many different ways to exchange the money, but how much of that has $1 going here to a different dollar to a different company?

Jay: Again, the way we used to look at it is the money changed hands at the point of sale. Then what would end up happening is you would sell your product at X number, kind of that distribution wholesale number, and the customer would pay list price or something in between. In between we call it gross to nets, if you’re in rev ops and in those gross to nets, you would pay a front-end margin.

And products are somewhere between 10 and maybe even upwards of 40%, depending on what kind of product it is on the front end. Then on the backend, there is somewhere between 3 to 5% of the deal, which comes in market development funds, comes in spiffs and bonuses, new customer bonuses, all kinds of things that can happen back end. It’s kind of like buying a car.

The dealership might make 10% on the front end but may make 3% on the back end for a bunch of things. The total margin is usually paid out at the point of sale. This is one of the big changes happening now, is if one of those partners helps you in one or more of those 28 moments, getting the customer to the dance, we have better tools now, like attribution tools.

We have better digital sharing tools where we’re sharing data at scale in a protected, secured, double-blind way. There are better tools now that you can pay at the point of value instead of paying at the point of sale. If you’re paying at the point of value, if these partners are helping get that customer to the dance in your favor, we’re paying out co-selling or co-marketing type of bonuses. They used to be called finders fees or referral fees.

That’s if they fill out a form and you end up closing the deal, you go and pay them X dollars, like 10% of the deal, where things are getting much more granular now. If you do a very specific thing that every time you do it, it raises the chances the customer’s going to buy my product by 10%, I might write you a check, what might look like market development funds, but because it’s not a percentage of the sale, it’s actually more of a proactive payment.

Because I want to really juice that part of the market. I want to maybe pay less at the point of sale and start spreading that money both before the point of sale, and as important as all of our business going to subscription and consumption, I want to pay to get a customer for life. I want to start spending that money every 30 days forever on those partners doing those very particular things that keep me that customer for life.

Types of Channel Partners

Barry: Like for example, I was at Wix at one point in my career and so we had an affiliate team and we paid money, or even if you go to their website, you can sign up to be an affiliate and get paid a hundred dollars for every person that goes to your website, clicks on Wix and within 30 days becomes a premium user.

I believe that’s the amount if I remember correctly. Then offline, you could also negotiate if you are a top affiliate person. That is a type of partner that’s not, I guess classic. It is still affected at the point of sale. It’s not B2B SaaS, obviously. It’s B2C, but I guess that’s like a creative type of partnership that didn’t exist maybe 10 years ago in that sense.

Jay: It is B2C, but it’s also B to very small businesses. Wix has one to four and one to nine and one to 24, a very strong market. This affiliate, advocate, ambassador, affinity, these types of roles are coming fast into B2B. Because you’re not trying to win a million-dollar deal. It’s not the old SAP, Oracle, IBM deal. You’re trying to win a $30,000 pilot.

Barry: Absolutely. There’s a company called, I’m name-dropping companies more than ever in this podcast. There’s a company that I’m actually now friendly with the CEO called Bot Leaders, that CEO, and he, or his company, what they do is they’re like the Similar Web for these affiliates if you will.

They help you find the YouTube influencers and they call it influencers because that’s what I guess the people that they’re reaching out to, data about influencers, that’s what the people on YouTube want to be called, influencers, but we can also call them partners or partnerships. I think that’s just an interesting reframe of the market.

I’m curious to hear, you mentioned a lot about the post-sale and the influencers for that. I’m curious to hear some examples from you on that side because I think I’m more familiar with the pre-sale types of partnerships.

Jay: We talked about the 28 moments that get you to that point of vendor selection. For everyone now it’s not just making the sale, you’ve got to go and remake that sale every 30 days. How do you do that? Most companies now are getting pretty smart in terms of predicting success. We’ll call that jeopardy customer that just hasn’t adopted the product. When adoption and usage are low, your chances to get a renewal drop pretty dramatically.

Who are the partnerships out there driving adoption, doing the implementations, doing the integration work? Who is doing the work necessary to make it part of the habit-forming of your customer, to get all their people using it, to get all their partners using it, to get everybody using it? Where just you have to have it open during the day. You have to be engaging with it.

All those metrics are mostly partnership-focused. You have your own customer success team that’s trying to do webinars and they’re trying to take support service calls and stuff. In the end, you’re really trying to drive a habit-forming thing and understanding that that customer might have some partners that you wouldn’t suspect are in that.

The onboarding process of your partner and getting them educated and trained and getting them maybe even incented to use your product, but really winning that battle out at the user level is an important one. All the successful SaaS companies of the past, whether it’s Salesforce in 1999 or the marketing automation companies 10 years later, the Marketos, the Eloquas, the HubSpots, they were really successful at making their product a significant layer in their buyer where the buyer couldn’t get a future job without having deep skills.

In 1999, a few years later, you couldn’t get a job in sales without deep CRM skills. That just became a way of the world. Right on your resume and right in the interview, people would ask about your CRM skills. The same thing went for marketing automation. Going into about 10 years ago, going into that decade, you didn’t need the technology chops to become a CMO.

A few years later, you had to sit in an interview and talk about your deep automation skills to get the job. The same thing is happening now.

The Pros and Cons of Partnerships While Scaling

Barry: Absolutely. Then let’s talk about the pros and cons of the channels sales model. I specifically want to focus on the post-sale conversation right now.

Jay: I mean, part of scaling is interesting, and for every company like you mentioned, once they get to a couple of hundred employees, they get to the point where they have to keep that hockey stick growth happening. What happens to a lot of companies at that point is they start to hit a plateau in terms of the capabilities of their marketing, their sales, and now their customer success teams to keep winning and onboarding new clients hits a maximum.

To get after new industries to get after new geographies, new buyers, new product adjacencies, and stuff, you need to scale. That’s the point of opportunity, that the negative on partnerships like you said is you don’t own them. They’re independently owned. Those entrepreneurs who own these businesses can go in any direction on a given whim.

There are some partnership skills that we’ve learned over the last 40 years of how to hire the right people that can manage these partnerships, have the right processes in place, and have the right programs built. The average channel program that’s very mature has a hundred different elements to it. You have to recruit these partners, you have to onboard, educate and skill them up, incent them, co-sell, co-market, engage, and enable.

There are so many elements to the average channel program that has to be run well. Then, in the end, you have to have the technology, which I write the landscape for that has 200 companies now that allow you to do this in a self-service flexible adaptable way. This is something that needs to be actively managed, not just something that’s plugged into your current process.

That’s what catches a lot of companies is getting to that level of maturity while you enact all these partnerships. That’s kind of the background to it. On the point of success, it’s this point of a multiplier. For every dollar you sell, how many services can be attached? As some of the movement coming away from resell, the move now is Microsoft will talk about unlocking trillions of dollars for partners and making the Microsoft story better than AWS or Google. Salesforce talks about kicking out $6.19 of opportunity for every dollar, which makes them better than other CRMs.

Same with every level now, companies are talking in terms of multipliers, and this is what enables, and this is what influences these entrepreneurs to say, “I’m going to hook my caboose to this train that’s leaving the station because I feel that I have the biggest opportunity to go get $2 or $3 for every dollar they sell. They’re a channel partnership friendly company.”

How Does RevOps Manage Partner Sales

Barry: Oh, absolutely. It’s super interesting. I want to go back to ops. Where does this ops person stand? Rev ops in theory, to our listeners, is in charge of the sales ops, the customer success op. I say in theory because sometimes we see that a lot of rev ops were ending up doing sales ops and I’m sure that’s something that hurts a little sometimes.

That’s part of what our podcast does is to help educate not just the rev ops, but also the people managing rev ops teams. Let’s assume rev ops is managing CS, sales, and marketing ops. Then, is there a specific channel sales ops person or a partnership ops person or are the partnerships, let’s say again, company 250, is their partnerships person doing the ops themselves? Is there an ops person for these partnerships?

Is the rev ops person doing this in their 20% or 10% of their free time or the free time that they don’t have, they’re doing the ops for the channel sales? Who is doing the ops piece of this part? You mentioned we have to make an effort for this. Who is making that effort?

Jay: Yeah. This is not new. I call this the decade of the ecosystem where 20 years ago, the decade of sales, the decade of marketing, they’ve had 10 and 20 years to build out this rev ops function. I truly believe that the channel partnership ecosystem person comes into that rev ops team. You’ve got today the CRO kind of handling from marketing to sales, to customer success, you got rev ops doing that.

But in that journey, you’ve got seven partners on average and you’ve got a bunch of external data. You’ve got a bunch of external processes that you don’t actually control but need to be brought into all that and managed. Over time, I think the ecosystem function will embed people in each of those stages.

Barry: That makes sense. Where have you seen channel sales managers succeed or miss their mark with regards to ops and partnerships, at least the new way of looking at channel partnerships?

Jay: I mean, there are all kinds of points of failure, but when something’s brand new, we’re almost learning as we go. This would be like talking about sales ops in 1999. It would’ve been like talking about marketing ops in 2009. We’re kind of in this new early innings of rev ops, but we have 40 years of channel history. We know the mountains of data. We know the data is dirty because you might have the same customer data coming back from five different sources.

The distributor is reporting something, and the channel sales partner or different partners are reporting something back. You’re getting clusters of data that is not clean. There’s a cleansing process to normalize the data, make it predictable, decision grade. Once you’ve actually got that done, and that’s a big task. Once you’ve got data now that can be plugged into the data lake that you already have, now the question becomes, when does this data come?

It’s not as predictive as your sales data is that may come on a daily, hourly basis that you can start to build. Your distributor may not send this back for a month, your end partners may not send this back for a quarter because they’re not incented to do so. You’ve got this time delay, you’ve got this inaccuracy. You’re dealing with other problems before you can introduce them into your central data lake and start to take action.

In the end, it’s everything. Because of those 28 moments because of these different points of sale and then because of these every 30 days forever, the companies that figure out the channel data, the channel automation, the best, the best rev ops teams that are plugged into this indirect side of things are going to be the winners.

Barry: That’s really interesting. I’m going to throw in a shameless plug. I wasn’t planning on it, but I’m a product marketer and recently we released an API for a partner relationship management system for our CPQ. What you mentioned is exactly the way I was thinking. CPQ again for our listeners is Configure, Price, Quote, and what the CPQ with our API would do is it would help you actually get visibility into the channel sales to know how far is that deal is closed.

Then you could forecast the channel sales and that way you want to help your channel sales team be more efficient, but also you can have greater visibility. I think that’s a big piece of a company not being under you or in the same building or in the same org structure, is that visibility that you just mentioned. 

I wanted to ask you, I sometimes as a product marketer, am always looking to where our customers are. I guess in the end, I sometimes am doing some type of partners relationships because I’m also reaching out to other companies that are in our industry, just for co-marketing initiatives. I’m going to the events where people are finding influencers online.

Sometimes I become even a product marketer by accident, doing that type of partnership. Sometimes I would do the work and it wouldn’t go anywhere because I wasn’t a dedicated user or it took a lot of time. I would put in all this work, I’d have my list, and then there wouldn’t be any responses and it wasn’t as predictable as for example, my marketing initiatives. I knew I could roll out a new feature in two weeks.

I wasn’t sure anything about this because I just don’t have as much experience. What are your thoughts on the time to succeed with some of these partnerships? How do you define that? How do you know which of the 28 points to go to, right? If there are 28 points, am I going to X or am I going to Y or am I going to Z? Where do you start? What’s the process methodology to figure that out?

CPQ is an Integral Part of the Buyer’s Journey

Jay: It’s not as simple or linear as anybody would love to have. By the way, CPQ is a very important part of those 28 moments. As you’re buying a car as a consumer, for example, you’re going around, you’re looking at videos, you’re going to social media, you’re talking to your neighbors, you’re talking to your friends.

I could predict most of the moments you make when you buy a car and you’re getting smarter than that salesperson at the dealer ever will be. By the way, that dealer is independently-owned. 99% of cars are bought through independently-owned dealers. Talk about an industry that’s all indirect, but your 28 moments later on in the journey, you’re in configuring the car, putting the rims on it, putting your colors, putting the engine in it that you want.

You’re doing the CPQ work. You’re getting what the quote is off usually the manufacturer’s website. Then you go and try to find the invoice price somewhere else on the internet. Then you go try to find the backend rebates. You’re so smart when you walk into that dealership. You know probably within a hundred dollars, how much you’re going to pay, even though they spend eight hours trying to get you a deal, CPQ in every scenario.

I just used a car example, but in every scenario becomes important. Now the question is, does a customer try to do CPQ through like a G2 crowd? Do they try to do it through a marketplace? They’re going to buy seven things and they got to make sure those seven things work together. They got to make sure that they’re getting the advantages and the know-how of other people who have tried putting those seven things together. CPQ becomes everything later in those 28 moments.

Then as you’re upselling, cross-selling every 30 days forever, enriching the contracts, CPQ again becomes a thing every 30 days forever. It’s one of those really important technology layers that every company has to think about. To your question, this is complicated. It’s celestial. It’s not linear. It goes back to the buyer always.

If you’ve got a particular buyer, as a product marketer, you got to ask three very simple questions. What do they read? Where do they go? Who do they follow? I’ve got a midsize clinic with 50 doctors in Upstate New York that I’m trying to win as a potential part of my TAM, from Buffalo to Rochester, to Syracuse, to Albany, who’s wrapped around that buyer? There are 30 different ways to read. Who’s writing the eBooks? Who’s getting on page one of Google? Et cetera.

Where do they go? Do they go to a chamber of commerce? Do they go to a local roadshow? Do they fly to Las Vegas? Where are they actually attending? Then finally, every market in the law of a few, this is kind of your Malcolm Gladwell tipping point, in the law of a few if I want to win midsize clinics in Upstate New York, there are literally a hundred people that drive that market.

Every other market that I mentioned before by industry, by buyer, by geography, any market you want to win boils down to a hundred people. There are the ones writing the e-books, and recording the podcasts. They’re the ones speaking at that event in Vegas. They sit on the boards of those associations. They’re in the chamber of commerce. Like these are the super connectors, and so if I want to win that as a product marketer, I need a repeating process.

Of those hundred people, all of them are potential partners of yours, not resellers, but partnerships to make you successful. If those hundred people, even if 20 of them say something nice about you on their platform, your upstate midsize clinic business is going to double and triple quickly because you’re in the conversation. You’re going to get invited into these watering holes and that’s the way.

Now rinse and repeat those three questions for every potential market you want to win. Do you want to go win Germany now? Perfect. Repeat those three questions. Get to the watering holes, get to the people at those watering holes and get 20 of them to say something nice about you and invite you in, your business in Germany just tripled. Your job as a rev ops person in the partnerships world is to get this process to be repeatable and scalable.

The Value of Partnerships in Sales and Revenue Growth

Barry: Thank you, Jay. We covered a lot about sales channel strategy. For me, the biggest thing is the redefinition of partnerships and how partnerships are really business almost, because if you took out the word partner, I’m like, “Oh, it just sounds like you’re doing a business or you’re running a company.”

That partnerships are so integral. I didn’t realize the extent to which partnerships are involved in some of the bigger companies like Microsoft. 96% is a crazy number. Obviously, if you’re selling to that Microsoft ecosystem, you want to be there. You want to be at that table when people are talking about it, they’re also mentioning DealHub. You want to find also the incentives for those partners, right? His job is different, different than mine. He has to talk more about easy-to-use, stickiness, and different values to make your customers happy, versus I’m showing the customer that implementation time is short. It’s really fascinating, I think, from that perspective, working with partners, understanding what’s important for them and that value.

I think the last thing that’s super interesting is that this is a new age. The fact that management could decide to do some of these types of partnerships without even hiring a partnerships person and that partnerships could be focused on certain types of partnerships, like bigger ones, but there could be a team internally focusing on just affiliates or influencers. I think that’s also really interesting and we’ll see that transition expand.

I really appreciate you joining us. I am looking forward to continuing to follow you on LinkedIn. I think all of our listeners should follow you on LinkedIn after this podcast.

Are there any other insights or any thoughts that you wanted to leave us with? You’re a wealth of information, so I don’t want to stop, but any last comments or thoughts?

Jay: Absolutely. Again, thank you for having me. This isn’t just technology companies. Every pharma company, every bank, and insurance company, every manufacturer, and every company in all 27 industries are thinking about ecosystems. Accenture did a survey a while back that said 76% of CEOs think that their current business model will be unrecognizable in five years and ecosystems were the number one reason why. No one can do it alone.

You can watch every industry as they become technology companies themselves and as they’re building partnerships, not only with the big players but with the medium and small-size players to build out their own future business model. We’re all a part of that. Subscription and consumption models will be everywhere. These companies will look more and more and more like technology companies.

Just go look at the latest car business news when the CEO of Ford last week is calling out dealerships and questioning what their value’s going to be in the future. When they go electric, then they go self-driving and then they go transportation as a service, what does TaaS mean to everybody? It becomes really interesting. You could walk through all examples.

We’re at the intersection now, I call it the decade of the ecosystem, but this is an intersection of which books will be written in decades to come about this point in history where no company can do it alone.