In Episode 10 of the Revenue Execution Podcast Series we continued our conversation with Larry Walsh, CEO of the 2112 Group. Larry is an industry luminary and has spent his career advising organizations on how to transform their channels into revenue engines.
In the third part of our conversation with Larry we discuss:
Vendors Will Formalize Mature Professional Services Channels
Professional services have always been the most profitable source of revenue for partners. Even though vendors are going direct or through online channels for product sales, there is still significant opportunity for services revenue from partners because many times the products still require implementation and integration services. With the ongoing need for these sorts of services it is incumbent on the vendors to ensure the efficacy of their partners services so that they can grow long-term customer value. To reduce churn vendors will formalize their professional services channels. Additionally partners will need to actively transition from product pass through revenue models to services revenue models to remain viable.
Shifting Incentives and Rewards to Outcome-Based Measures Rather Than Traditional Performance Metrics
Traditional channel performance metrics mostly focus on revenues. Even channel certification programs are based on product revenues. Vendors can’t survive on this model as customer expectations drive change based on their expected experiences. So rather than purely focusing on revenue, partners need to focus on fulfilling the needs of the end customer. Vendors need to develop performance metrics that focus on the customer value delivered. In this model, partners incentives focus on retaining customers and keeping them happy. To paraphrase what Drucker said, you need to be in the business of creating and keeping customers and the revenue is a derivative of that. That is clearly evident by the fact that 50% of enterprise buyers will pay a higher price for a better experience.
Vendors Will Start Providing Direct Investments to Partners
Vendors will start to directly invest in partners and it will go beyond rebates and MDF investments. The majority of partners are under capitalized. The top 10% of partners however are well-functioning businesses but still have a significant amount of risk exposure. Vendors are looking for ways to improve their partners capital situation so that they can be more aggressive in meeting their goals. MDF is typically tied to demonstrable results so isn’t an ideal option for meeting these goals. To meet these demands leading vendors are investing directly in partners through training and support to significantly improve their channel sales.
Larry discussed the above issues at length and provided a lot of great market data to back it up. Listen to the podcast here to get all of the great details Larry provided on these topics.