Channel enablement: Turning the Pareto Principle on its head
The Pareto Principle – brainchild of Italian economist Vilfredo Pareto – states that in many cases, roughly 80 per cent of an effect comes from 20 per cent of the causes.
It’s no surprise, then, that around 20 per cent of partners contribute 80 per cent of a vendor’s channel revenue.
We reward good behaviour. So, 20 per cent of the channel stars get all the love and attention, while the rest get a login.
And what’s wrong with that?
Plenty. The Pareto Principle isn’t set in stone – and it’s not necessarily good for your business. Instead of just managing the smaller, already-productive group of partners, you should work on the larger, less-productive group.
Why? Two critical reasons
First, churn. High performers are hungry by nature, and will jump ship if tempted by a better offer. Dependence on a small group skews your business, and is dangerous.
Second, potential.How much better would your numbers be if the rest of your partners did one more deal each?
But here’s the thing; it’s not just about you.
Your partners are also subject to the 80/20 rule – except for them, roughly 80 per cent of their income derives from 20 per cent of their vendors. The key to success for both parties is to get in – and stay in – the other’s top 20 per cent.
How? Communication and engagement
A recent study from Vision Critical found that most vendors don’t regularly engage with their partners. 80 per cent of those surveyed said they regularly get feedback only from the top 20 per cent of their partners.
And 89 per cent think it’s important to more regularly engage with the remainder. Actually, it’s the top 40–50 per cent of the remainder – the ‘middle group’ – that should be your focus.
What can you do to bring about change?
First, learn what makes your high-achiever partners tick. 24/7/365 product support? Customer types/industry sectors? Investment in demand-generation?
Next, what do they have in common? Partner size (by employees or revenue)? Business focus?
You’re looking for a clear profile – the characteristics of partners who are likely to succeed with your product or service.
How do your other partners compare?
For those that don’t match the profile, and are never likely to, the best thing is termination. Sounds harsh, but it will save you a lot of grief over time.
For those who are selling, but need assistance to reach higher targets, fine-tune your channel programs.
MDF, technical support, enablement tools, and promotions can be designed to help individual partners grow revenue, penetrate new markets and close more business.
Serious about partnering for mutual benefit?
- Make sure the voice of your partners is heard in strategic decision-making
- Get them to validate your programme and go-to-market decisions
- Get their insight on your positioning, pricing and promotions – and act on it
- Listen to them, for a better handle on the market, your competition and the changing customer landscape
Look after your top performers (but don’t blindly depend on them). Develop closer relationships with potential performers.
Engage with a larger number of partners to reduce churn, increase average deal sizes and boost overall channel revenue. And strive to make the 80 per cent as productive as the 20 per cent.
Useful? I’d love to hear your views. And don’t miss the next post, when channel KPIs come under the spotlight.