Sometimes it makes sense to fire partners.
Just as it is pointless for channel partners to represent vendors that don’t do right by them, it is equally senseless for vendors to buoy unprofitable partners.
But, of course, it takes discipline and a whole lot of self-examination for a vendor to make the difficult decision of dismissing partners, especially if those partners are contributing to top-line revenue growth.
Wall Street deserves much of the blame for this, as disproportionate attention to quarterly results often compels companies to engage in unnatural, shortsighted behavior that favors current-quarter numbers at the expense of long-term health.
Wall Street notwithstanding, vendors must be strategic in their approach to channel partnerships, selecting partners judiciously and putting metrics in place to measure the value that VARs and integrators deliver back to them. Quarterly sales reports and overall top-line numbers simply are not enough.
Click here to view exclusive channel research from Amazon Consulting.
It’s necessary to drill down, analyze data and try to get at those hard-to-measure intangibles that often go ignored.
Vendors should have a clear picture of how much they are investing with partners in such activities as customer acquisition and joint marketing.
Customer acquisition costs and misguided marketing efforts with hard-to-discern results can outweigh the revenue generated by certain accounts.
When this happens, vendors must reach the inevitable conclusion that certain partners simply aren’t profitable.
But to reach that conclusion, vendors have to discipline themselves to see what they don’t want to see. And that requires putting the effort into periodically re-evaluating partnerships and revising expectations, which is something vendors do poorly or not at all.
Managers in charge of unprofitable accounts that contribute to the bottom line would rather not deal with the uncomfortable reality of profit vs. revenue.
This owes to a “make the numbers” culture that guides many sales organizations. So long as the sales manager is making quota, little attention is paid to the quality of the business that manager brings in.
If a vendor’s overall business is healthy and the vendor’s channel programs deliver positive results overall, vendors often find little incentive to drill down to the nitty-gritty in attempting to precisely identify which granules within the whole aren’t working.
One company aiming to change this lackadaisical attitude is Alliance Analytics, Chicago, whose analytics tool, Partner Value Optimizer, guides vendors through the process of evaluating partner-related data to figure out the whats and the whys of underperforming partner relationships.
In getting the word out about the technology, the company has found that vendors have little interest in the kind of self-analysis that would lead them to make better decisions about partnerships for the reasons already mentioned here.
And that is unfortunate. Vendors that bother to undertake this type of self-analysis would be able to reallocate resources in favor of partners that produce the best results for them. Poor performers would either receive help, where appropriate, or in the case of lost causes, get their pink slips.
While it may seem harsh to suggest that vendors show certain partners the door, business is business. It hardly makes sense to maintain partnerships that though they appear to make a positive contribution by boosting top-line numbers, they may well be detrimental to better-performing partners that really could use the resources a purge of underperforming partners might free up.
The trouble is vendors may be looking at some of these relationships as loss leaders as they seek to boost volume. Too much focus on volume, however, sooner or later will come back to haunt you.
Pedro Pereira is editor of eWEEK Strategic Partner, contributing editor to The Channel Insider and a veteran channel reporter. He can be reached at ppereira@ziffdavis.com.