A brief history of tech partnerships
Can you imagine a world without channel? We certainly can’t. But the complex channel isn’t ancient. Nor are the tech partnerships we know and love today. In the late sixties, and early seventies technology started to really drive the world economy. Tech became the forefront of how to create a good product and take it to market effectively.
Taking a product or service to market is relatively easy In the US. But the complexity of the channel stems from the complexity we see in Europe or Latin America with its different currencies, different languages, and different tax rules.
People buy from people
Enter distributors. First in the form of warehouses to hold and export hardware, getting products from A to B. Later as a way to recruit, educate, and enable partners. And while direct-to-consumer selling became easier and easier as brands created their own webshops and started selling directly, the channel will always be there driving sales. Because no matter how good we get from an automation and AI perspective, people love to buy from people.
Cascading knowledge through tech partnerships
In order to get the right kind of tech to end-users who need it, you need a cascaded group of people who know their market, who know their technology, and know the relationships, the language, the law… It’s all necessary if you want to cascade technology effectively and fast.
The benefits of channel are never-ending.
You can create the world’s best product. But if you don’t have the way to distribute it effectively, if you don’t have the way to introduce it to budget holders, to the people who are going to be evangelists, then you’re going to have a tough time.
The channel is like a shortcut. You can go and find people who are selling competitive technology or alliance technology and really drive that through your distributors, through your partners into the right entry system.
So it’s all about scaling the sales efforts as well with the channel.
Channel is expensive, why should you invest?
The scaling factor
For most businesses, initially channel is the biggest cost center. Only through patience and perseverance does it become the most profitable one. Just consider the scaling factor of having one partner manager who is responsible for ten partners, who each have 100 salespeople. Suddenly you’ve got one partner manager who has effectively a thousand salespeople lined into them.
That’s an incredibly important thing to understand when you’re building a global strategy. Yes, it’s expensive to begin with because you’re not directly in control of the end user. But over time, your reach compounds. So get the message right and make it easy for your partners to sell.
Do you want to go fast or go far?
If you want to go fast, hire an end-user team. But if you want to go far, hire a channel team to take your product to market. Build the complexity by minimizing friction. Build a sales, marketing, technical, and operational strategy.
This is such an effective lever because it gives you an engaged community that will really evangelize your product, and take your strategy to market. If well-executed, it’s the best channel marketing proposition there is.
Four pillars scaled through channel
Channel is so important because it’s keeping stock locally is expensive. Not to mention localizing your products to meet local languages, regulations, structures, etc. So having distributors who hold stock and sometimes even partners who hold stock allows that facilitation and organization and product delivery and project management at a far more granular level.
It’s not just a sales scalability, it’s sales, marketing, technical, and operational. If you’re going to build a channel strategy, you’ve got to hit those four pillars. Luckily, the channel has an effective scaling mechanism for each one of them.
Scaling tech partnerships in channel
Yes tech stock took a nose dive in early 2022. But in reality, tech partnerships are still on the rise. And with good reason: Scalability.
The reason they are so scalable is the fact that they are largely bscription-based. The shift from getting product from A to B, to a subscription-based model has been huge. The other side of the subscription coin is having to provide impact to your end-user every single day, every single month, because otherwise you will lose them.
Retention through integration
As a tech company, you need to produce constant value. Meaning you need to become part of your end-users daily life. Let’s take a hardware example. Take a look at your laptop or smartphone. Bet it doesn’t run on a single brand. You have your hardware, your OS, there’s a special lens inside for your camera, apps, chips – in short, a myriad of other brands working together. The same goes for a lot of software you use, Hubspot chat integrated in Drift, or a Salesforce integration that runs within Channext.
This is how companies work together to provide more value to their end-users. The massive side effect is that this aids retention. In general, the better software companies are integrated together, the higher the end-user retention, and the longer they will stay customer. So the higher the lifetime value.
If you can really get into that cycle of bringing more value, which means higher retention, which means higher customer lifetime value, you’re going to reap the benefits. It’s such an important part of SaaS because it’s half of your growth engine.
Be impossible to delete
Imagine delivering so much value that your product is impossible to delete. It’s really easy to replace one piece of technology. But once you’re integrated, it’s not going to happen organically. Take a CRM program. Never seen one of those be replaced just to try something new. It’s just too complicated. And because they drive so much value, they are inherently built into the business infrastructure.
This is where partnerships once again become so critical. Because if you don’t have a product that integrates in that way, then you can build an alliance strategy to make that happen.
Want to know more about this topic? In this episode, we discuss tech partnerships and channel partnerships, whether the channel is under threat from SaaS, and the importance of segmentation Listen through our player or head over to our podcast page, Partnerships Unraveled.