Channel partner sales messaging and customer value diverging - again

One of the most exciting insights available from Techaisle channel partner survey research and corresponding SMB and midmarket survey research is the extent of divergence between what customers value in their relationships with channel partners and how the channel presents its value to its customers. The extent to which the two sides do – and don’t – connect is again diverging, first noticed by Techaisle in 2012. Data shows that the channel is emphasizing benefits that have relatively minor effects on customer/channel relationships.

As seen in the data, quality of services provided by the partner and technical expertise are the most important reasons why customers embrace their channel suppliers, followed by industry knowledge and long-term relationships, understanding of business needs, deliver business outcomes, and pricing. On the other hand, “features and functionality,” “affordable price,” and “availability as a subscription service” are messages used by more than 50% of the channel, “ease of use,” “robust security,” and “industry/vertical-specific relevance” by about 40%, and “affordable maintenance and support,” “customizable to meet business needs” and “deliver business outcomes” by 30%-36% of channel members. Thus, the messaging by partners differs from what customers value.

Another interesting pair of findings from the channel survey compares customers’ most critical technology requirements with the positioning channel firms strive to attain within their customer bases.

Data shows that the most crucial customer requirements: implementing new technology solutions, accessing skills that they lack internally, help in acquiring, deploying, and supporting technology, and help in building a digital business strategy are all cited by 44%-59% of firms, and “need help in creating a roadmap for adoption of technology” by 22% - an area that Techaisle believes will become more important over time and maybe more important already than this data would suggest. However, the channel partners’ target positioning is very different. Their primary focus is on supplying “products and services to sustain IT infrastructure” – not explicitly on the list of most crucial customer technology requirements, but generally essential to the functioning of customer IT environments. The balance of the data maps pretty cleanly onto the customer requirements. It appears that there is a better match between essential requirements and target supplier positions than between sources of customer value and key sales messages.

This data, Techaisle believes, provides a clear call to action for vendors. First, partner executive teams should invest in identifying actual customer relationship drivers – by solution type, partner type, and other relevant factors – and substitute this insight for the channel’s perception of crucial relationship factors. The vendors should then access marketing resources to ensure meaningful linkages between channel sales messages and customer needs. Doing so will help the channel better understand the underpinnings of successful customer relationships and drive better alignment between customer motivators and channel key selling points.

Traditionally, vendors have validated channel ‘value add’ in terms of the reseller’s ability to demonstrate that they augment the base product with some combination of technical and logistical support. However, the need for this type of validation has diminished over time. Customers themselves opt for the sales approach that suits their business objectives. Some prefer to work with firms that build advisory relationships and deliver solutions per a mutual understanding of business needs. In contrast, others prefer a more arm’s-length approach, defining technology strategies internally and looking for suppliers to provide competitive pricing and reliable deployment and support.

While there will always be demand for both approaches, Techaisle believes increasing reliance on technology and the increasing complexity of the platforms used to support business activities will establish the value of consultative/advisory relationships. For example, it may be that P2P alliances within the channel itself bring the best of both worlds to the customer. The primary supplier may offer strategy, roadmaps, and risk management, and subordinate providers may handle deployment, integration, and support, at least for some parts of the overall IT portfolio. Increasingly, though, we see new procurement models, such as outcome-based procurement, emphasize the connection between IT and business results, rather than honing in on component costs – and associating supplier payments with successful system adoption.

This transition is likely to be jarring for the IT supply community as a whole, including the channel: traditionally, the actual performance risk associated with IT solutions has devolved onto the customer, not the supplier, and purchase arrangements that tie receivables to outcomes will be challenging to navigate. In addition, channel firms and vendors with advisory relationships will need to understand the business impact of technology in new ways, not with component delivery but with user adoption and benefit. Finally, those with a transactional approach will need to either develop consultative niches or customers will freeze them out of outcome-based contracts.

The good news for the channel is that this transition is well underway at the first stage of this journey. Nearly 80% of channel partners today, and more than 70% of firms pursuing each of the five major channel business models, report that they currently enjoy consultative/advisory relationships with clients. Moreover, survey research data shows no demonstrable difference in expected revenue growth in 2022 between consultative and transaction-focused channel partners. However, partners with consultative customer relationships will see a long-term upside. In addition, transactional suppliers will benefit from large, product-hungry customers or as central members of P2P alliances.

However, the vendor perspective on the transition from advisory to outcome-based, shared-risk engagements may be less optimistic. As per the data, roughly one-third of partners look for sell-with relationships with suppliers. A similar proportion prefers sell-to relationships where the vendor product/service is integrated into the partner’s solution. In both cases, outcome-based contracts pose a receivable and reputational risk for the vendor. Therefore, partner management executives will need to be sure that their channels can back advisory relationships with an accurate understanding of the nature and extent of the user benefits gained from solutions to ensure that they can profit from having a well-connected channel.