This is the first post in the Channel Contracting Playbook series
For companies engaged in channel sales and distribution, the contract is the playbook for future success. Without the proper effort put into designing an effective contract strategy, the approach might very well be a losing one. If you’re not happy with the outcomes produced by your channel, it might be time to re-evaluate the playbook.
Regular assessment of channel contracting operations is essential in order to implement more profitable agreements and improve channel performance. Without a proper contracting strategy in place — or worse, with a failing one — companies are more likely to experience unfavorable outcomes that can affect overall organizational performance. Individual functions and departments will feel the impacts on a more granular level as well.
Asking questions such as — Are your partners meeting the expectations that you’ve set forth? Do contracts generate expected outcomes? Are your competitors stealing your partners away? — is a great place to start when assessing the effectiveness of your current channel strategy. If your answers aren’t satisfactory, you will need to dig a little deeper to gauge just how far your channel woes might run.
There are six key areas to watch that are affected by an underperforming channel strategy. It’s important to assess the impact in each of these areas:
- Contract cycles: Without proper workflows in place, it’s easy for documents to get lost in the system, either overlooked in someone’s inbox, incorrectly filed, unable to be accessed remotely, or simply forgotten. These normal occurrences can end up delaying contract cycles to the point of pushing deals to the next reporting period or losing deals to more responsive competitors.
- Legal terms: When documents are hastily assembled using outdated templates and copy and paste for editing, it’s easy to overlook errors. When unintended legal language enters an agreement, a business might expose itself to unexpected outcomes or it might be on the hook for fulfilling less-than-ideal terms. The legal and financial risks can be significant.
- Revenue: High volumes of channel incentive claims and invoices can become overwhelming for even the most resourceful of companies. Managing these on an ad-hoc basis or in spreadsheets can lead to missed documents or errors that cause loss of revenue or penalties.
- Partner performance: It can be impossible to gain insight into the effectiveness of incentives without conducting regular analysis into contracts and partner performance. Lack of the proper tools can make business analytics a secondary priority, leaving many companies to just continuing doing things “the way we’ve always done them.” Channel partners might not perform to their full potential if the incentive isn’t right, causing them to grow lazy or even push a competing product. It’s essential to know what your partners need to drive your business.
- Market share: When one partner isn’t performing to its potential due to lackluster incentive agreements, it’s a problem. When it becomes a chronic issue across all your channel partners, your business could really be suffering. If competitors are offering a better deal, companies will begin losing market share — a scenario that can be difficult to turn around.
- Partner satisfaction: There are a lot of things that can go wrong to make your channel partners unhappy, such as missed, late, or inaccurate incentive payments and less-than-optimal agreement terms. Keeping your operations running smoothly is important not only for your business, but for your partners’ revenue streams as well. And happy partners only generate better outcomes for you. Win-win.
If you find that this sounds more like your situation than not, it’s probably time to revisit the playbook.
In next week’s post, we will take a deeper look at how each function is affected when these areas begin to deteriorate, and what you can do to start to turn the game around.