Case Study

How HubSpot created an immensely successful indirect channel

10 min read By 20/04/2020 June 2nd, 2020 No Comments

With $675 million in revenue (2019) and more than 2.000 employees, it is safe to say that HubSpot is a force to be reckoned with. What a lot of people don’t know, is that 40% of HubSpot’s revenue is generated through their indirect channel of resellers. In this blog we’ll zoom in on how HubSpot build their indirect channel, and what you can learn from it for your own channel.

  1. Peter Caputa, the man who started it all
  2. Think marketing (not sales) when recruiting resellers
  3. Solve your resellers’ challenges first, then focus on their clients’ challenges
  4. Keep the barriers to entry low
  5. Prove that the economics work in channel sales
  6. Send qualified referrals, not “leads”
  7. Focus on the end clients’ success
  8. Conclusion

Peter Caputa, the man who started it all

Hubspot was designed to be a direct selling organization. Peter Caputa, who joined HubSpot as a sales rep in 2008, had other thoughts about this. While the executive team didn’t want it at first, Peter Caputa started turning marketing agencies into referral sources. 

It was the beginning of a successful indirect channel, where Peter scaled HubSpot’s partner program to $100+ million annual revenue. 9 years later Peter left HubSpot as the VP of Sales, with the channel sales representing 40% of Hubspots’ total revenue.

If you want to read more about his story, how he challenged the status quo and became very successful, you should definitely read his blog post. I will now focus on what steps he took to grow his channel so rapidly and how you could apply this to your own channel.

Think marketing (not sales) when recruiting resellers

Mostly when a company is selling through resellers, they make a list of the top resellers in their industry and then hound, beg, and bribe them until they agree to add their products to their lineup. HubSpot took a whole different approach.

HubSpot used inbound marketing to get potential resellers on their educational webinars, those webinars were directed to marketing agencies and consultants. Hubspot never had to call anyone who did not contact them first. Hubspot made sure the market came to them instead of leveraging old-school sales tactics.

How could you apply this to your channel? 

Make specific content for your resellers, target it specifically on them to make sure they want to contact you. Give them value through free content such as a whitepaper or a webinar, in this way you can collect their contact details. Now you can contact a reseller who already showed interest in your products, which makes it a lot easier to close them.

Solve your resellers’ challenges first, then focus on their clients’ challenges

HubSpot noticed that messages that resonated most with resellers were the ones about how they could fix issues in their own business, and not per se talking about their own software and their clients needs.

Of course they also talk about those things, but they first focus on the prospective partner’s business. Most small and mid-sized businesses need training on how to run their own business – selling consultatively, packaging and pricing, delivering services, managing client reporting, etc. So they began offering training to prospective partners.

How could you apply this to your channel?

We have the tendency to immediately start telling a prospective partner about the great features of our products and why they should work with us. Instead, you should train your sales reps on how to identify the challenges of the prospective partner and offer training in the form of good content/webinars/workshops/etc.

In this way, the prospective partner feels your brand can really help him and you build a much stronger relationship than when you are just selling your products to them. This will increase retention and makes sure you are top of mind when your resellers are talking to their clients. You can fill in the blanks what that means for your channel revenue 😉

Keep the barriers to entry low

Most brands that sell through an indirect channel require new partners to invest a significant amount of time and money upfront. Hubspot took a different approach. They required no additional investment beyond what a standard customer would pay for their platform.

Sales support at Hubspot is provided for all sales qualified opportunities and no limits to customer support calls, as long as the resellers have at least one subscription. In this way they made it possible for smaller agencies to join their indirect channel, many of them who grew along with Hubspot and now have become large resellers.

How could you apply this to your channel?

Think about the barriers for resellers to entry your channel. Do they have to make a large investment upfront? Do they have to meet specific conditions to enter? Are all those barriers really necessary, or are there some that could be a little less tight? In this way you can recruit partners that are really eager to sell your brand but at the start might not have the budget to enter your channel. Those might be your future A-players.

Prove that the economics work in channel sales

It took HubSpot some time and persistence to establish their channel. The most important thing to prove internally was that the economics work in their channel. After hiring 20 channel account managers and validating that HubSpot’s customer economics worked at scale, they established support processes for the channel across the whole company. Now that 100-plus HubSpot employees exclusively support their partners it’s woven into the fabric of HubSpot. The channel team has proven the importance of the channel, so CEO Brian Halligan – and the rest of HubSpot’s executive team – only question is: “What can we do to make our partners more successful?”

How could you apply this to your channel?

Thinking of starting your own channel or expanding your current channel? Make sure that the economics work for both your company as your resellers. If the economics work it is easier to persuade resellers to join you on your journey. Internally it’s important that the channel accomplishes exposure, revenue and profit. Show your management growing figures and I can assure you no one will ever doubt the channel.

Send qualified referrals, not “leads”

Traditionally, companies decide to sell their services or products through distributors, partners and resellers because they have better access to the market. At HubSpot, this wasn’t true. 

Their reach (which are millions of people through several online channels) made the collective reach of their resellers look small (note: at 90%+ of the channels this is definitely not true, the collective reach of resellers is almost always way larger than you can accomplish on your own as a brand).

HubSpot’s main focus is selling software as a service. Their in-house marketing services and support are focused on customer success and not primarily increasing their revenue from services.

To connect HubSpot certified partners and HubSpot end customers, they launched the HubSpot Marketing Services Marketplace. Here HubSpot’s direct customers can search, inquire and hire a certified HubSpot partner. With their Marketplace, HubSpot sent millions of dollars of services revenue to their partners.

This was a mutually beneficial deferment for HubSpot. The revenue helped their agency partners to fund their growth, while it’s also helping HubSpot’s direct customers to become more successful. This lead to strong customer and partner retention.

How could you apply this to your channel?

Is your company merely product/software oriented or service-oriented? If it’s most important for you to sell your products or software, think about how you could transform traffic/leads from your own website to a warm lead/referral for your partners. What can you do to make sure a lead is more eager to buy when you hand over the lead to one of your resellers?

A Marketplace to connect your end customers and partners to get the most out of your product? Give leads a better overview through your dealer locator of which partner sells the specific range of products they’re interested in? Create more engaging content? There are a lot of opportunities, you just have to find out which one fits your company and channel best.

Focus on the End Client’s Success

While it may seem obvious, people often forget the core purpose of starting a channel partnership – to help mutual clients be more successful. HubSpot decided to build a system that rewards their partners based on the success of the end customer. 

HubSpot measures their partners’ performance based on their client’s success using HubSpot. They’ve set up multiple rewards. Those rewards can include invitations to exclusive events or more marketing and sales support through HubSpot’s tier program. HubSpot’s team works harder for high-performing partners because everyone is rewarded when mutual customers are successful.

How could you apply this to your channel?

In my opinion, this is one of the most brilliant things HubSpot has done that lead to their channel success. Focusing the rewards of your channel program on the success of the end customer will ultimately lead to the maximum results for all stakeholders in the channel.

Think about what kind of customer success metrics you could assign to your reward programs. If you and your partners are both obsessively focused on the end customer, there is no doubt that your channel will be a success in the end.

Conclusion

Above I described the six pillars on which HubSpot built their entire indirect channel, now representing 40% of their $513 million (and growing!) revenue. Start by focusing on your resellers, how can our company help resellers with their own challenges? Show the resellers your added value, not only because of your great product, but also as a business partner.

Use marketing to target your potential resellers and don’t make the barriers to entry too high. Convince your (potential) resellers and your management to believe in your channel by proving that the economics work.

Most important, make sure that you and your resellers are obsessively focused on the end customer. The success of your end customers defines the success of your company and your resellers. Send qualified referrals to your resellers and let the end customer thrive, this is ultimately the most important factor to make your channel successful.

Let’s connect,

Rick van den Bosch

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