How to Break the 80/20 Rule with Channel Marketing

Getting over the 80/20 rule is a common challenge faced by channel marketers and channel organizations of all kinds.  The name “80/20 rule”  alludes to channels that get 80% of their revenue comes from 20% of their partners, or alternatively, that 80% of their partners are inactive while 20% are regularly producing. 

Inactive or underperforming partners are a problem for a few reasons including the missed potential revenue, increased cost per lead acquisition, and the resources spent recruiting, processing and managing them.  In the case of the revenue mix being 80/20, it’s not ideal to be reliant on a small number of producers, because that relationship going south could mean big problems. 

The 80/20 rule is such an issue that many of the vendors and top master agents in the channel have been adding production clauses to contracts and have, at some point in the past 5 years, “groomed” their partner base, i.e., terminated the agreements of inactive partners.  This may be an immediate cost savings but in the long run, it creates negative press and opinion in the channel, so it’s best to try to address the problem in a more positive way.  If you could shift the ration in the other direction, and get more partners producing regularly, you could even capitalize by creating goodwill in the channel in addition to the extra revenue. 

There are some strategies that, as channel marketers, we can and should employ to help the channel sales team fix their mix.  There are two areas you’ll need to focus on, which is your marketing and recruitment funnel, and your existing partner base.  I’m going to lay out a few strategies for each.  If you wanted to be holistic about it, the third area would be looking inwards at your channel operations and make sure you don’t have issues like commission problems, poor support or customer service, network trouble, bad product/market fix, etc, but that’s a different topic for someone else to tackle…  Let’s start with your marketing and recruitment funnel. 

Get Targeted 
Be sure to market to the right new partners. If your marketing and recruitment is highly targeted to the type of partners that have been historically successful, or to new markets you may be trying to enter, then the leads that make it through the funnel will be better aligned with your strengths and key value proposition.  

If you haven’t already, profile your partners and gather demographic and business model information (what type of partner, size, geographic model, sales model, vertical focus, etc).  Cross reference that data with sales number and growth number to arrive at the type of partners you should be targeting.  If you’re entering new markets, say you're a master agent that’s starting to try to tap the MSP community, then you need to do some research to figure this out.

Use a Content as a Filter
Your marketing message should clearly tell your addressable market that you are uniquely positioned to meet their needs.  You should have content in your marketing mix that substantiates the claims of your message.  Different types of content support different stages of the marketing journey, for example a well written case study can help a partner in the evaluation stage to understand how your partner channel could help them succeed by detailing how you helped a partner just like them achieve great results. 

The nature of this content, when created to substantiate the messaging claims you make around your unique selling proposition, is that it will be very specific to the needs of your specific addressable market.  So, if the prospect is consuming your content, and continues through the marketing journey, that content is resonating with them and they are likely to be the type of partner you’re looking for.  The ones that aren’t a good fit, should self-select out of the process.  

Using analytics, you could determine the viability of the marketing channels and advertising platforms you are using by checking to see the source of leads that entered then left the funnel.  If a lot of leads from any one source are bailing on your very-targeted marketing funnel, you know you’re reaching the wrong audience.  It works the other way too, to determine the best performing marketing channels.  

Define Qualified Partners
If you’ve implemented the above two strategies right, then the leads that actually come out the bottom of the marketing funnel should be qualified.  That’s why we call them Marketing Qualified Leads (MQLs)  But the criteria for an MQL shouldn’t be just that the prospect has a pulse and made it this far in the process.  The definition of an MQL should be agreed upon by channel marketing and channel sales.  There should be hard and fast rules that reflect the attributes of the type of partners that are most likely to be active and successful, like: partner is in a geographic region that fits your footprint, partner has consumed “x” amount of content (this is where lead scoring comes in if you have the automation), partner matches the model identified (e.g., VAR, MSP, telecom agent, SI)...  whatever best fits the profile, or persona, you identified as your target.  This will be variable for every different organization. The MQL should only hit a channel manager if they meet the criteria!  

Similarly, channel managers should have a script, process, and criteria for the defining a Sales Qualified Lead (SQL).  These criteria require a discovery conversation to uncover, and they should be met before the channel manager starts the sales process in earnest.  Some examples of the criteria may be: partner has more than one sales resource, partner has at least one engineer on staff, partner has over $1mm aggregate monthly billing… again this is variable for every company, but whatever critaria are set should be hard rules, and channel directors and VPs should hold CMs accountable.  

It’s important that management buys into the “quality over quantity” paradigm we’re creating.  Too many CMs recruit any partner they can get to sign an agreement, for a bunch of reasons, but at the end of the day the biggest reason I think you end up with the 80/20 rule is because channel organizations aren’t discriminating in the partners they recruit, so they end up with a lot that are a bad match.  This is compounded by the fact that a CM can only really effectively manage about 12-15 partners and but because they recruit any partner with a pulse they end up managing dozens.  Or, to be fair, sometimes they end up with so many because of CM positions being consolidated, or through M&A.  Either way, it’s a bad practice. 

Ok, so that’s one way to address the 80/20 rule, through more targeted recruiting in the first place to end up with partners likely to produce.  This is where to start, so you can stop the bleeding of new, unqualified partners entering our ranks.  Next, let’s address the partners you already have.  But you’ll have to wait until next week for that! 

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