Defer to the “Referrer” for faster SaaS Sales…
If we agree that the ultimate purpose of any partner program is to increase incremental revenue through broader distribution of your products and services; then, all that’s left – in a practical sense – is to define the optimum partner type and deliver the resources they require to be successful.
Of course, it’s not that simple but it’s a good starting point for this discussion.
Let’s begin with “partner type” and briefly explore what that means.
When we create a new reseller program we begin by defining the program benefits and expectations (goals) based on the prospective partner’s type (reseller or referral) and their commitment measured by training requirement compliancy and volume of partner sales or referred sales. The result of this exercise is a “Segmentation & Tiering” matrix that graphically illustrates the partners’ goals, expectations and benefits when they’re compliant with various requirements and on target with sales or referrals.
A complex partner program could include a variety of partner types from OEM to MSP and Online Retailer or Corporate Resellers – each providing something beneficial to the channel based on their unique business model and customer access.
REFERRAL PARTNER OR RESELLER? So, what’s the difference? Plenty. Resellers are in business to sell products and/or services that are manufactured or delivered by others. They purchase a product, directly for the vendor or a vendor approved distributor, at a predefined discount amount usually ranging from 20-40% and then resell it at a higher price – if an established MSRP exists they will attempt to reach that amount. Competitive factors often require some discounting. Their “margin”, or profit, is determined by their end-user selling price less their discounted vendor price.
Resellers will generally have staff and processes for sales, marketing, delivery and services. Services typically include installation, set-up, integration, training and support of hardware and software. Your SaaS solution is one more item in their catalogue for the purpose of generating revenue when the sale occurs.
The VAR resells your product – the referral partner recommends and uses your product in the course of their daily business practice.
Referral partners rarely have processes or personnel dedicated to buying and reselling hardware or software. They may or may not have a sophisticated IT background and can be HR specialists, CPAs, HIPAA advisors, Realtors or Wholesale/Retail consultants. Your complementary SaaS offering is an incremental source of revenue, a competitive differentiator and a tool that they can recommend and use to generate more billable dollars.
The referral partner is accepted as a “trusted advisory” by their customers; and, as such, the sales cycle is greatly compressed when compared to a Resellers’ standard routine of web and email marketing, cold calls, follow-ups, meetings and proposals.
The referral partner will often be a smaller “Mom and Pop” operation with an infrastructure imposed limitation on the number of customers they can influence – so, to maximize growth and exposure you’ll want to include a significant number of these types of partners in your program.
They will be low-maintenance partners who will not require the more advanced technical certification training an integration and implementation partner would demand; but, they should be required to understand the tool well enough to demonstrate, train and deliver some level of user admin functionality.
The task of managing dozens to hundreds of these partners is not as overwhelming as it sounds as long as you deploy a Partner Relationship Management (PRM) system in conjunction with your CRM. The PRM will automate many of the arduous and repetitive administrative tasks and provide a self-service platform to capture registered partner referrals along with a host of other sales and marketing functions. Some would argue a Partner Portal would be sufficient, I’m not one of those – there are too many excellent and cost effective partner management tools to justify a simple portal alternative or flimsy do-it-yourself project.
This type of partner also responds very well to information exchange, updates and promotional notifications via Social Media.
If you’re a SaaS vendor you no doubt picked up on the first reseller challenge – SaaS sales rarely involve transfer of ownership where the VAR takes possession of the item and then transfers ownership to their customer. We’re asking the VARs to behave in new ways while taking their bread and butter big ticket software and server sales off the table.
It’s worth noting that there are some great Digital Commerce applications we happily endorse; Avangate and FastSpring for example, that allow the reseller to purchase SaaS licenses directly from the vendor as virtual inventory then resell: but, that’s one more operational layer with added transaction based fees that can slice a few points off profitability..
The 2nd point is that there can be a 20% – 30% delta between your VAR closed deal and the referred deal.
Longer sales cycle, less profitability, higher demand on the vendor’s internal support services? Are you beginning to rethink your “reseller” options yet?
If your partner program has not anticipated and built in channel conflict free policies it’s possible that your VARs and direct sales team could have some frictional moments – on the other hand, a referral partner can be the direct sales team’s best friend by working hand-in-hand to deliver and close leads.
THE HARE WINS IN A SPRINT – Taking a VAR from signed contract to first closed deal can be a patience trying ordeal. It can take weeks or months to finally bring your new VAR to the ready position and fully engaged in sales and marketing activity. Once engaged they begin the process of calling, mailing and calling some more. Considerable resources and costs are required of the vendor throughout the onboarding and enablement period and all these factors must be weighed against the returns.
Not subject to the same daunting processes of the VAR organization, the referral partner is the go-to-advisor for their clientele and their recommendations are golden – a phone call and the new user is thankful that they have access to a resource who is guaranteeing their competitive edge. Another phone call and your sales team is wrapping up the financial and delivery details with the new user.
We’ve pointed out some of the advantages of incorporating referral agents into your partner ecosystem; but, we also feel strongly in a diversified portfolio of partnerships so their synergies can work together. Be sure to include some VARs too – no toolbox is complete with one tool.