Building a Referral Partner Channel: Step 1 – How to identify potential partners

So you’re sold on the value of referral partners, but who do you recruit? You could go after individuals or large entities that are willing to enable their sales teams to pass you referrals. Both are credible approaches, but first you need to determine who has access to your target buyer and target accounts.

Here are the questions for marketing, sales and channels to work together to answer in order to explore possible referral partners:

1. What companies have a complimentary product that sell into your same targets?

  • This could be integration partners or just companies selling into your same buying group. Another approach to answering this question is to identify the typical technology stack and services used in your target buying group. The other technology and service providers are a great place to start.

2. Who has influence over your target buyers?

  • If you are selling to SMB, there are many trusted providers to consider such as their accountants and bankers.

3. Are there any associations that your target buyers are members of or that they follow/trust?

  • Local associations and chamber groups are often a key way that small businesses network.

4. Are there any purchases that typically happen in coordination with yours?

  • For instance, when someone buys marketing automation, they may also buy a webinar platform. Or when looking to purchase VOIP telephony they may also be looking at video conferencing platforms.

5. Are there any consultant groups or agencies that are typically engaged in to advise on a purchase decision in your area or a process that is complementary to your offering?

  • From niche consultants to goliaths, there may be players that are influencing your target buyers.

6. Are your target buyers part of a franchise model?

  • If so, the franchisors have direct access and significant influence worth pursuing.

Certainly, if you have an existing partner network, you may want to consider transitioning poorly performing resellers into referral partners. And to avoid “failed resellers” in the future, you can make participation in the referral program a qualifying step before reseller. This proves out that the potential reseller truly has access to your target buyers before you put in the effort to train them.

To keep optimizing your referral partner channel read, Step 2 – Engage and recruit partners.

In the mean time learn how companies like Citrix are implementing referral partners in the webinar, Why Channels Need to Embrace RaaS.

The changing partner channel . . . and what you can do about it

The partner channel is changing. And while there is a lot of buzz around the how and why, there isn’t much content on what to do about it.  First, let me break down what is happening . . .

  • The buyer is now a buying unitSiriusDecisions recently revamped its marketing pipeline to be account-based instead of lead-based. Fundamentally, more purchases are happening with cross-departmental buying units versus an IT buyer (who traditional resellers have relationships with).
  • Vendors are embracing subscription models The subscription economy removes the effectiveness of resellers. The direct relationship between the customer and the SaaS provider is extremely important for delivering success services and simply easier contractually on the customer than going through a reseller.
  • The VAR system is broken – Possibly my favorite article of the bunch, due to the fabulously sarcastic (yet painfully true) flow chart of how the reseller deal process works (or better yet doesn’t work) was written by Andrew Plato called Goodbye Yellow Brick VAR.
  • Competitors are taking business away from resellers – Due to many of the above factors, Forrester analyst Jay McBain, refers to The Rise of Shadow Channels which are much better suited to drive business than traditional resellers.

So what can you do about the changing partner channel?

If you are a Channel Chief facing decreasing revenue from your network of resellers, you are likely having trouble sleeping and perhaps are suffering mild panic attacks as you contemplate how to stop your reseller Titanic from sinking. Take a deep breath and let’s consider some life raft tactics that can turn your partner channel program around.

Step 1: Evaluate your partners

Determine which partners can make the transition to the subscription economy and the disparate buying unit. The “younger” resellers may be more able and willing to transition. Once you’ve identified those with potential, meet with them and discuss a program and incentive model that will meet their needs so there is a win-win. Larry Walsh of 2112 Group advises vendors to take an Outside-in approach to channel programs – basically, design programs for what your partners need, not what you as the vendor need.

Step 2: Don’t fire the rest of your partners

Instead of firing the rest of your partners, consider whether or not your remaining resellers have access to target buying personas in your target accounts. If so, it may make sense to transition these resellers into referral partners. They can continue to make money, but not have to deal with the complexity of the sale. Plus, your direct sales team will love these warm introductions to fill up their pipeline.

Step 3: Onboard potential resellers differently

Assuming some resellers can transition to be successful in this new model, you will likely see a different breed of resellers emerge. But instead of trying to push them into your traditional certification program, first start out light. Onboard them as referral partners to start (like TBI is doing) – this proves they have access to your target buyers and influence to see a deal close. Once they have a feel for how easy you are to work with and have proven productivity, then you can spend the time to upgrade them to a reseller. Note, some may never graduate, but will stay happily productive as referral partners.

Step 4: Start getting revenue from non-reseller partners

That’s right, technology partners, integration partners, services providers, ISVs, system integrators, etc. could all be providing you leads. Enroll them as referral partners and you can make up for lost reseller revenue by sourcing business from your existing ecosystem.

Step 5: Expand your partner ecosystem

Most Channel Chiefs are familiar in the realm of managed partnerships, but much less aware of the potential of individual unmanaged partners. Consider all of the individuals that have influence over your target buyers or have intelligence as to when a buyer is in-market for your product or service. Here’s a few to ignite your thinking: lawyers, real estate agents, accountants, association members, lenders, agencies, consultants, even your own customers. You can use a referral program to leverage all of these individual referral sources at scale to drive high quality leads to your direct sales team.

Are referral partners replacing resellers?

I’m sure you’ve recognized a theme here of referral partners. Truly this development is a response to how the partner channel is changing. Vendors want the direct relationship with customers. They want to do the selling, but who would say no to hand delivered high quality leads? Some businesses are seeing so much success with referral partners that it has overtaken traditional marketing as the #1 source of customer acquisition. If this is completely new to you, there is a great Referral Guidebook that has 20 interactive worksheets to walk you through determining who would make a great referral partner, how to design a referral program (including incentives calculations) and through to sales enablement and metrics.

Yes, the reseller boat is sinking, but there is still phenomenal opportunity for the channel to be a big revenue generator for your company. It just requires some different thinking about who a partner is and how they work with you. It’s time to take action – go find a life boat before it’s too late!

referral software, referral program, referral strategy, referral marketing, referral partner program, referral sources

Quick Tip: How to better qualify resellers

If you have a reseller program, you know how much work it takes to get resellers qualified, trained and enabled. It’s worth it if they add to your revenue stream. But what happens when they don’t? They promised you that they had access to your target buyers and that their team was on board. Unfortunately, there isn’t much you can do beyond call it a sunk cost and move on to the next potential reseller. If this is a far too frequent scenario for you, it may make sense to consider a new approach to qualifying potential resellers – a referral program.

Ryan Morris, principal consultant at Morris Management Partners found in his research that “Everybody is churning, and yet [resellers] tend to churn and ramp and onboard very slowly, because there’s a lot of false starting.” 

By establishing  referral partner programs, you can both enable lower tier partners to be productive for you while also using it as a proving ground for potential resellers. Before you spend the time training and certifying, make sure they actually have connections with and influence over your target buyers by having them supply your sales team (or another reseller) with leads. Track these leads to a purchase and compensate these referral partners with a bounty or a percentage of revenue of the deal. Once the potential reseller reaches a threshold of successful referrals within a set time period, they will earn their right to become a trusted reseller.

With this extra step in the process, you’ve trained the reseller through the referral program on who your target buyer is and through reporting back to the reseller, they can see exactly which referrals lead to a purchase. Around 45% of channel companies pointed to their top pain point being the difficulty of doing business with vendors, (Channel Insider). But by qualifying resellers with a referral partner program they’ve got a head start going into training. Additionally, your team is more motivated to get them up and running quickly, because you know with certainty that they will be productive.

So what about the partners that never qualify with enough productivity? Well, they can still be a lower tier referral partner who occasionally brings in referral leads. This still adds to your revenue stream and compensates the partner for bringing forward that relationship. The more “failed” resellers that you have, the stronger the pipeline of your direct sales team. This makes sales happy and makes the channel team happy that they didn’t waste their time on training these partners to become resellers.

Citrix GoToMeeting referral partner program

Why referral partners will overtake resellers

There are lot of opportunities in the partner realm. With resellers and referral partners (agents) opening up new channels to reach target industries, companies are able to expand their selling power. But not every partner channel is an easy approach to take.  There are many factors that play a role in a business wanting to become a reseller or a referral partner and the company/vendor benefit that will result from this relationship.

Consider that each vendor has to factor in the costs of building a reseller channel. There is a high cost associated with training, certification and just to get the attention of the reseller and their sales team. In regards to training, sales and the rest of the team need to understand how to operate the product, the terminology needed to sell it and receive the in-depth knowledge to understand how to provide support and service. With all the training that has to happen there is inevitably a long period of time where nothing is being sold. And then, when an update occurs or new features are added, another round of training must occur. And once a reseller is fully trained, they likely have multiple products in their sales bag, so then it transitions to a struggle to get focus on selling the vendor’s product.

So what does this mean for the vendors? The amount of onboarding effort necessary for both vendors and reseller partners often jeopardizes the partnerships and the success of partner programs. According to the Ryan Morris, principal consultant at Morris Management Partners, prolonged onboarding cycles, program false starts, and ultimately a high rate of partner churn are often a consequence of the necessary burden involved in preparing reseller partners to bring your product to market.

An alternative approach to resellers is to establish a channel of referral partners. As opposed to resellers, training referral partners is a breath of fresh air. While they need to understand the value proposition, ideal user, and features to know if their referral is a fit, they don’t need much more. They aren’t trying to sell the product directly, just make a trusted and highly valued introduction to a company that offers their peer or customer greater value. This way the brand messaging, selling, and post customer engagement is owned by the brand which allows the company to give customers an authentic experience. In addition, partners can get a commission without any of the headache (or financial ache).

Here are some tips and tricks to enable referral partners and make them (and you) successful.

5 ways to enable successful channel partner referrals

1. Make sure your program supports the specific type of referral partners

One big part of referral partner success is how you go about enabling that partnership. The major determination for this is the kind of partners you are enabling with a referral program. For instance:

  • Do you have a bunch of small partners or bronze level partners (individual partners, agents or small business) that have access to your target buyers in their constituency and can influence them? This only requires an automated referral program that can easily scale the referral partner channel and is available for those partners to register, refer, track their progress, and get rewarded.

 

  • Do you have managed partners or silver level partners that need to enable their sales team to refer customers they interact with and that match your target customer? These require more complex referral partner programs as they need to have two tiers of management (company manages the partner and partner manages individual sales advocates and their activities) in order to provide unique rewarding and reporting by partner.

 

  • Do you have a high performing large partner or gold level partner program? This is usually a single large partner. This partner’s productivity is so high, a dedicated, co-branded referral partner program is created for them that is highly efficient at generating leads.

Ensure that your referral partner programs aligns with the type of partnership you want to create. The different features in these types of programs can enable substantial growth of referral partners and success of their referrals.

2. Training is a powerful tool

As demonstrated above, training is still an important part of the referral partnership. Since the partner doesn’t need to demo the product or sell it directly, they don’t need to go through the highly intensive training and onboarding typically reserved for resellers which tends to slow down the training process and increase expenditures.

To train partners, think about what knowledge they will need in order to communicate the value proposition of your product succinctly. To help facilitate this, offer resources like:

  • Monthly email updates on product innovation or service improvements
  • Video or documents that gives partners a talk track on how to present the product
  • Details on what makes a lead qualified
  • Introduction and walk through on the referral partner software
  • The types of pains the product solves for

Of course, for a tiered referral program, either the company or the partner will also have to take this training and communicate it to their sales team. The partner may add on certain materials to present their sales team which could include specific incentive levels that align with the unique values of each successful referrals.

And in regards to a dedicated partner, they will most likely have themselves aligned with your value proposition, but providing the generalized information above could always help.

3. Make referring easy and trackable by partners

The complicated onboarding that is associated with the reseller model is part of what makes reseller churn an issue. Learning your lesson from that, make partner referrals as easy as possible.

Try giving partners a variety of trackable referral methods which will allow them to adapt their referral method to the type of interactions they are having. This includes:

  • Suggest a lead form
  • A way to collect verbal referrals
  • Email sharing
  • Social media sharing
  • Shareable urls
  • Printed cards

While suggesting a lead will most likely be the most popular since it doesn’t require the referral to do any work, it is always a good idea to provide options. For instance, if a partners contact is more comfortable with another form of referral they can have the option of using it.

Another important aspect of referral partner engagement is allowing referral partners to check the status of their referrals and know how they are progressing. You don’t want partners calling you up all the time to try and figure out if their referral became a customer.

Make sure your referral partners can easily access information about their referrals in the program. Try automating notifications when a referral status changes to alert the partner if there referral is moving forward or successful or was unsuccessful.

4. Offer incentives that partners find valuable

Determining the incentive that your partners are most motivated by can be difficult. You have to take into account the effort they put in and how deep the relationship is with a certain partner. If you have multiple managed partners, the reward should be able to be automated and managed per partner so partners that are considered more valuable contributors can be treated as such.

When Citrix was deciding on how to incentivize managed partners, they did a number of studies on what competitors in their space where doing and that is how they landed on offering 20% of the annual value of the deal. However, Citrix uses an escalating reward structure as partners mature in order to reward low performers, mid-performers, and high performers in a way that will motivate higher numbers of referrals from a single partner. Automating an escalating reward structure for partners is a good way to incentives and scale a referral partner program.

5. Keep it top of mind

Promotions aren’t only for customer. You always want to make sure that your referral partner program is kept at the forefront of partners minds. For a dedicated referral partner this could be easy. But it is still good to reach out every quarter or so and offer helpful tips or remind partners of the chance to escalate their incentive with more referrals.

For individual partners, you might want to reach out by email or by phone more often in order to keep engagement up. These partners most likely have other companies they are working with and further nurturing is required to keep them sending leads.

Do you want to learn more about how to optimize referral partner engagement? Listen to what Randy Fahrbach, Senior Manager of GoTo Channel Development at Citrix/GoToMeeting suggests as he walks through his experience of automating his managed partners with a referral program.

Referral partner program ideas from Citrix. Headshots of Randy Fahrback and Larry Angeli.

Why customer advocacy means the end of reseller partners

Customer advocacy is the practice of leveraging your customers to endorse you and with the right tools it has become a very powerful source of lead generation for businesses. These endorsements can come in many different forms ranging from product reviews on third party sites, to sales references, to referring your product to someone in their network. Sales and marketing have been begging customers for these things for years but they haven’t been able to turn it into a significant lead generation resource.

Now there is software available that allows you to get customers advocating at scale, software for getting content and software that drives referrals and they are working. SiriusDecisions recently highlighted some customer advocacy programs that are impacting revenue in this presentation. It isn’t just influenced revenue. ADP stated that customer advocacy via referrals is their top source of leads that turn into revenue.

But with the onset of customer advocacy adoption and companies realizing the value of it, it’s  highlighting a big problem with reseller partnerships. Specifically, with reseller partnerships you get revenue, but don’t have any relationship with the end users of your product. They aren’t your customers, they are the Customers of your reseller.

These customers may be some of the best and happiest users of your product, but they have no relationship with you so they can’t be leveraged for customer advocacy. If you don’t own the relationship, you can’t control it.

This is one of the reasons why companies are moving away from reseller partners and transitioning toward Referral Partners.

How to leverage referral partnerships with customer advocacy

Referral partnerships benefit both the partner and brand/customer marketer. With referral partnerships you can still leverage the value of your partner network, while keeping the customer relationship direct. The way this works is that your partners act as a trusted adviser to your target buyer. They can recommend your product to them and can get compensated for that recommendation if they end up buying your product. This generates a high quality lead in your sales pipeline that gets sold by your sales team.

And now there is software that can manage the complexity of that relationship from delivering the referral experience and tracking that referral, rewarding and fulfillment process with variations as needed by partner. Relative to resellers, this drives incredible value for Partner Marketers, Sales, your Partners and your Buyers.

Partner marketers can drive incredible value from your partner network while making your brand and customer marketers BFFs. By transitioning to referral partnerships, you are extending their pool of potential advocates that can take actions to make referrals and endorsements. And this of course, drives more revenue.

As customer advocacy becomes a more common and expected part of the lead generation and buying experience, I predict that companies will find it difficult to justify their investment in reseller partnerships.

Justify your investment in customer advocacy by trying out the ROI calculator to discover the ROI you can achieve with a referral program.

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