How PRM Systems Optimize Channel Performance and Increase Channel Sales
Adopting a Partner Relationship Management (PRM) Technology is a smart move for your business.
Great companies optimize the performance of their channel partners by integrating these best practices and recommendations included in our whitepaper. As an educational tool, you will be able to understand and inform others of the benefits of a holistic Partner Relationship Management methodology.
Part 1: What is PRM
Part 2: Common Symptoms of Sub-Optimized Sales Channels
Part 3: Understanding where you are starting from and where you are heading
Part 4: Laying the groundwork for a scalable sales channel
Part 5: Putting it Into Practice – A Framework for Implementing PRM
Appendix – Additional White Papers available from LogicBay
In the world of manufacturing, the best product always wins. Whichever vendor has developed the superior design, mechanism or machine will always come out on top, right? Well, as much as we want this to be true, we know this isn’t always the case.
Most of today’s vendors typically rely on outside sales channels and external distribution networks. The success of their business is often dependent upon these relationships. Without proper care and consistent high-quality support, these channel partnerships can turn sour, adversely impacting the sales, profits and the reputation of a vendor in the end-users’ eyes.
This whitepaper explores the world of Partner Relationship Management (PRM). In Part 1, we’ll define PRM, what it is and how it’s used. In Part 2, we’ll examine the symptoms of a sub-optimized channel and prescribe optimization through the use of PRM technology. In Part 3, we’ll identify the starting points of four distinctly different company profiles so you can see where you stand. In Part 4, we will introduce a planning model that applies to all sales channels. Part 5 provides you with a framework for implementing PRM to establish a solid plan; in doing so, you’ll be able to maximize channel engagement, improve channel management and provide efficient sales partner development.
We believe that the potential of most sales partners has yet to be unleashed. LogicBay is driven by a passion to help vendors improve sales through their indirect channels. This white paper is a brief summary of the lessons learned in our decade-plus of implementing PRM with more than 50 marquee clients. These clients range from small franchise systems to global rollouts for some of the most prestigious brands in the heavy equipment and high tech industries
Partner Relationship Management (PRM) is a business term that is used to describe the methodology and strategies for managing relationships between vendors and their channel partners.1
PRM represents the latest evolution in the journey to channel optimization. The chart below shows how approaches have evolved over the years.
A PRM system can be looked at as both a technology solution and a business philosophy. While there is no universally accepted definition for what constitutes a complete PRM solution, there is consensus on the core functional components of PRM.
Generally speaking, partner relationship management includes:
If you’ve been a channel manager or sales manager with some responsibility for supporting sales partners, you know through experience that nothing is ever perfect when it comes to supporting your sales partners. Depending on the complexity of your products, many factors can contribute to stresses in your sales channel. These factors include the current systems and management structure used for partner support. Stresses in the channel often appear as symptoms and, while every sales channel is different, the following symptoms are fairly
Do any of these symptoms apply to your company? If so, which ones? We have found that most companies— even the most successful and mature organizations—deal with these symptoms at any given time. Looking for these types of symptoms is a valuable exercise because it indicates areas that can be improved and ways to enhance performance.
Who’s accountable for sales channel performance?
Most organizations have managers who are responsible for critical functions that support their sales channel partners. These common functions include the sales, marketing, service/parts/aftermarket, training, and information technology (IT) support managers.
In most cases, responsibility for supporting the channel partners rests with the Channel Manager, yet he or she rarely has the authority to prioritize matters in each of the disciplines that contribute to partner support. Rather, the Channel Manager relies on colleagues (usually peers) to help orchestrate all the support activities necessary for the success of the company’s sales partners. The Channel Manager always has the responsibility—but rarely has the authority—to manage the channel directly.
In most companies, Channel Managers usually have to orchestrate and facilitate the well-intentioned initiatives and priorities of the other stakeholders who play a role in managing the sales channel. The graphic shown below illustrates common stakeholders who play a role in managing sales partners, and what their priorities usually are.
The challenge lies in the fact that these critical stakeholders care about sales channel performance, but they oftentimes view the symptoms that appear through their functional lenses. With all good intentions, functional biases begin to cloud sound judgment when stakeholders are dealing with the symptoms. Kneejerk (but well intended) suggestions to deal with symptoms typically sound like this:
This is a simplistic, intentionally tongue-in-cheek sampling of attitudes—with obvious functional biases—that all have the intention of fixing the sales performance problem. In the real world, these biases impact organizational decision-making as it relates to improving sales channel performance.
These stakeholders all have good intentions. No one is right, and no one is wrong when it comes to recommendations for how to deal with the symptoms that arise in a channel over time.
In today’s technology-rich business world, systems are often put in place by each stakeholder as part of the strategy to close performance gaps. Although these systems usually work in isolation, they proliferate over time. At some point, members of the organization start to get frustrated. “Why aren’t we moving the needle despite all this investment in systems we’ve made to support our sales partners?”
Collectively, these simple systems create complexity over time. Complexity in turn breeds inefficiency. The stakeholders at the vendor level start to get frustrated at the lack of performance from their sales partners. Sales partners, in turn, get frustrated at the vendor. Eventually, they experience increasing difficulty in doing business with the vendor even though stakeholders invest in point solutions intended to make it easier to do business. How can that happen?
Reacting to common symptoms in isolation leads to unanticipated complexity. Understanding this concept is the first step in recognizing the value of a PRM-based approach to sales partner support.
No two companies are alike, not even close competitors in the same industry. Existing systems and management structures vary greatly from company to company. However, we have found that most companies cleanly fall into one of four categories with respect to their level of effectiveness in managing sales partners. LogicBay has developed the Channel Sales Performance Quadrant™to assist companies in bringing structure and logic to PRM implementations.
The horizontal axis plots the number of partners, up to the company’s desired level. The vertical axis rates the partners’ sales performance (low to high). Typically a company’s priorities, and therefore its PRM solution, require changes based upon where the organization sits in the quadrant.
At the bottom left, the emerging growth companies are either small, recently-funded new companies or more established (or even very large) companies that are launching a new division. In most cases, these organizations have successfully implemented their revenue and delivery model with a small direct sales force, or one or two key selling partners. Many will have increased their customer base through informal referrals from strategic relationships. Now they are setting out to establish a channel program, seriously recruiting indirect sales partners to gain traction in the market. The focus here is on getting the business plans right and implementing PRM to support the priority workflows in this quadrant.
Oftentimes, this is where the use of point solutions begins. The Channel Manager usually seeks quick fixes because it’s easy to sign up for point systems at this stage.
For example, common decisions here include:
Typically there are few stakeholders and information systems involved with the sales channel in emerging growth companies. Channel Managers for companies in this quadrant eventually begin to realize that they want to set up a simple, scalable system. They want the ability to administer it themselves—and do it easily. Their priorities usually focus on recruiting partners, completing the business planning and onboarding process with new partners, and supporting them with content and information necessary for successful sales. Eventually, Channel Managers need a way to manage potential channel conflict and the requirements grow as the number of channel partners increases.
In the upper left quadrant, the company has some well-performing partners and is looking to rapidly add new partners. The Channel Manager has done a good job putting a sales partner program in place; the company just needs more sales partners. The following comments are indicative of companies that are hitting the scaling stage of developing a sales channel:
The Channel Manager might be joined by more stakeholders who are looking to add more functionality to support their respective departments. Reporting starts to get complex as the partner organization expands into regions and other organizational structures.
When they begin to scale, it’s critical for companies in this quadrant to have a foundational channel partner program in place and a PRM platform to enable it. At this point, investing in a PRM system is vital for success.
You don’t want to be in this quadrant. This means that your company has taken the time and invested the money to sign up an adequate number of sales partners but they aren’t performing and your company is not hitting its sales goals. Many companies find themselves here at some point. Oftentimes, you will hear the following from channel managers who find themselves in this quadrant:
If you’re in this situation, you probably need to take a step back and re-examine your business plans. Do you have a solid, up-to-date strategy for your sales channel? Or, do you find that you have automated a flawed plan? Taking a few steps back and refreshing the business plans at all levels—making sure that existing partners meet today’s partner criteria—is often the place to start to get out of this undesirable quadrant. Another potential problem occurs when companies race to recruit partners and end up with misaligned partners. Rather than forging relationships with partners who have the vendors’ products as a strategic piece of their business, they fall into adversarial “take it or leave it” relationships which are not aligned with the same business objectives.
If plans are current and solid, then a PRM system can remove many of the constraints causing the growing frustration in this quadrant. The goal of a PRM implementation in this quadrant is simple: make it easier for your sales partners to do business with you. How? Start by looking at the support you are providing—from your partners’ perspective, not yours. Survey your partners. Interview them. Listen to them. At the same time, take an inventory of all the systems that have been put in place to support them. Assess the strength of the channel plans, goals, and policies that exist. In short, take an X-ray of your systems and processes. Ultimately, ask yourself, “If I were a sales partner, how easy would it be to do business with my company?”
Implementation of a PRM system can frequently remove many of the frustrating barriers that evolve over time with point systems. In addition, implementation of a PRM in this quadrant almost always results in the retiring of some legacy systems. As an added bonus, the retiring of these legacy systems often leads to cost savings that exceed the cost of modern PRM systems.
The companies in the top right quadrant have most or all the partners they need—and most of them are high-performing partners. You want to be in this quadrant eventually.
In this quadrant, companies need enhanced business processes, more sophisticated performance data, and more complex systems integration. Typical priorities here also involve a concentration on new product rollouts and more focus on the service, parts/aftermarket, and finance functions of sales partners’ operations now that the sales function is running smoothly. The goal of most companies is to get to this quadrant, where they have a sufficient number of partners and these partners are all performing well enough to achieve the company’s sales goals. In this quadrant, the sales partners also have the ability to react to market changes and trends, and show continuous improvement.
If you find yourself in the Emerging Company quadrant, you’re probably focused on developing your partner package, recruiting partners, and onboarding them. If you’re a global vendor with a worldwide network of sophisticated partners, with tens of thousands of people to support, your priorities are considerably different.
The key point here is not to be shortsighted. Most companies need to master these workflows as they evolve from an emerging company (lower left quadrant) to a mature company demonstrating continuous improvement (upper right). It’s easier when you’re an emerging company; you can rely on a few simple solutions to get the job done. As you begin your journey on this path, however, scalability of your systems and the required workflows become paramount to success. It’s a journey—not a single event—when it comes to implementing a PRM system.
Given the lessons learned over time in working with companies in every quadrant, we have compiled several key points:
A solid framework helps companies examine all of the issues that contribute to providing effective support to sales channel partners. This framework guides all the decisions that should be made when enabling and supporting a sales channel. A solid analysis spans all levels, from the business plan to the tactics and best practices required at the customer point of sale.
Figure 7 illustrates all the components, stakeholders, and technologies comprised in a comprehensive strategy.
This comprehensive model shows that any implementation of a PRM system must be grounded in a solid plan. If not, you’re simply automating a poor plan. On the left, you will find the “must have” tools, plans and best practices. They are targeted at various levels and include:
Once the executive leadership decides that expansion through an indirect sales channel is a key element to growth, Channel Managers are usually tasked with developing a solid channel development plan that includes the right subset of these components. They encompass Levels 1-3 in the model depicted above. Stakeholders at the “vendor” level in the model focus on the overall business plan and sales/support plan.
All plans have a shelf life, however. Plans are important, but the act of planning is even more important. Good planning processes focus on the questions that need to be asked. The answers form the plan.
Partner Relationship Management technology is the enabler of these plans. It supports the execution of plans at all levels. However, there is no one-size-fits-all approach when it comes to implementing PRM technology. It is important to prioritize your workflows. Which need support immediately and which are future projects? Those priorities depend on where your company is in terms of the sales channel maturity model.
Cornerstone level: Organizational Management
It’s critically important that you know who your partners are, who works for them, and who no longer works for them (and may have taken a job with a competitor). This becomes more important over time as the number of sales partners grows, as regions and other more complex management structures get implemented, etc. Consider this step: mapping the DNA of your sales channel. The PRM system should become the primary system of record for your sales channel organizational members, reporting structure and real-time tracking of who works for them.
Figure 8 is a simple model that can be used as a framework to plan your PRM implementation.
Any PRM must be able to use this information to tailor what information is available to whom. When your sales channel includes many independently-owned businesses, it’s important that you are able to present information, systems—anything—based on the role of the person using the PRM system and his or her role in the partner company. Depending on the channel, many of these sales partners may actually compete with each other. Some partners may sell some portion of your product portfolio, others may sell another portion.
So, it’s vitally important that anything you do within a PRM system environment is anchored in knowing the visibility of important information (in other words, who can see what). It is therefore critical that the cornerstone of any PRM implementation start at this level, ensuring that the PRM can control:
A good PRM system becomes the system of record for mapping the organizational structure of your indirect sales channel.
Few companies support their channel partners with just a single PRM system. Partner Relationship Management systems integrate seamlessly with other IT systems that are accessed by sales partners. By using Secure Single Sign-on technologies, accessing these systems is made easy for the user.
The PRM should be the “nerve center” for systems that support your partners. This is the building block that enables access to data, allowing you to build a complete view of the channel’s health.
The objective is to make it easy for your partners to do business with you through the development of a systems integration strategy. The first step is to survey the systems that support your partners, including internal and external business applications, legacy systems, data transfer requirements and transactional integrations. Then set up a PRM system that integrates existing systems and is easy to use.
Having a robust content management system is the next critical component of a PRM system. This component allows a company to manage content in a single database. It facilitates the “ownership” of content and the process of reviews. All types of content should be supported, including training, sales and marketing collateral, sales tools, and general marketing communications (MARCOM) as well as other materials and documents.
Robust content management, connected to the cornerstone organizational management component, ensures that the right people get the right content every time within a PRM system. This capability, commonly referred to as “audience-smart” technology, is critical for any PRM system to be effective. Otherwise, what you have is a one-size-fits-all web portal that runs the risk of putting the wrong information in the wrong hands.
Contextualizing content and other IT systems within workflows is critical to enabling partners to operate efficiently. The PRM should act as the “identity provider” and “integration hub” for partners and users to access external business applications. This is the place where workflows support key business processes. Native PRM functionality is integrated with other partner-facing business applications in order to provide your partners with seamless movement between business application environments. What business processes need to be supported and in what priority? Workflows support business processes that help answer these important questions:
Best-in-class companies use PRM as the system of record for everything they need to know about their partners, including locations, partner agreements, business plans, organization hierarchy, employee roles and status. Partner Relationship Management solutions act as the ”nerve center” for systems that support partners while also enabling vendors to have a complete view of channel health. This allows vendors the scalable ability to monitor how well partners are performing. It also enables the vendor to see, in real time, what the partner channel looks like, who works in the channel, and who is ready to sell and service the vendor’s products.
Best-in-class companies take a strategic approach to PRM solutions deployment. Their objective is to make it easy for partners to do business with the vendor. This is accomplished by establishing a framework for the systems that support the partners, including internal and external business applications, legacy systems, data transfer requirements and transactional integrations with other critical systems that the partners must be able to access.
A recent PRM study by Aberdeen Group set out to discover what best-in-class companies do differently, compared to average performers. Aberdeen then delved under the covers to discover what technologies and services were enabling these companies to succeed. For this study, a best-in-class company was defined as one ranking in the top 20th performance percentile, based on three measures:
Aberdeen found that best-in-class companies experienced more than three times the year-over-year revenue growth when compared to average-performing companies. The best-in-class companies also converted nearly three times as many leads and 50 percent more of their partners were achieving sales quotas.
Aberdeen came up with the five “best practices” by looking at the PRM technologies and services being used by the top-performing companies. They are:
PRM systems allow you to seamlessly enhance all five components for best-in-class channel performance.
Here is a link to the study:
For a closer look at LogicBay’s Partner Relationship Management technology, click the button below to view our PRM solution tour.