Aligning the Channel Partner Ecosystem for Customer Success
In the age of connectivity, it no longer makes sense for channel partners and vendors to market and sell products in separate silos. Today’s selling environment calls for close collaboration to deliver long-term value for customers. And thanks to readily available and instantaneous digital sharing of data, collaborating is easier than ever. Yet, within the channel partner ecosystem, there are many missed opportunities to optimize customer lifetime value. To do this, partners and vendors need to align their approaches to the customer journey with a unified Customer Success definition.
Successful alignment opens the door to higher margins, easier upsell, and competitive advantages.
In the past, technology vendors have closed hardware and software deals where most of their revenue came from the initial purchase and typically was a one-to-three-year agreement. In this model, the vast majority of the sales engagement centered on executing agreements related to the first purchase, with little focus on the new customer achieving a return on their investment. Contrast this with today’s model. The pervasive emergence of the cloud and the advent of the subscription economy have created a significant shift in strategies for protecting and growing customers.
Two fundamental changes have occurred as a result: 1) The barrier to entry for new technology vendors has lowered considerably, and 2) There is a substantial shift in buyer behavior. The specific buying group includes some 10 to 15 individuals by some estimates. An increasingly competitive marketplace compounds these factors.
A strong relationship between vendors and channel partners is the ideal response to these changes and can benefit everyone. The same (hopefully successful!) Customer Success strategy that vendors are executing with customers who buy directly must extend to their Customer Success practices within the channel partner ecosystem. Here is why:
Acquiring a new customer is anywhere from five to twenty-five times more expensive than retaining an existing one. Harvard Business Review
Recent SBI research indicates existing customers typically spend 16% to 41% more than new customers when trying new products or services. Sales Benchmark Index
A 5% increase in customer retention can increase profits somewhere between 25% and 95% . Bain at Harvard Business School
Customer Success is More than Customer Experience
Customer experience focuses on the interactions between companies and their customers and optimizes how those interactions take place. Customer Success focuses on delivering the perceived brand promise throughout the buyer’s journey, and the intangible benefits that customers enjoy as a result of products and services they have purchased. Companies who practice Customer Success appreciate the value of understanding their existing customers’ needs, desires, and motivations and realize that it is worthwhile to create scenarios that encourage the buyer to continue interacting with the brand in positive ways.
According to multiple sources, more than 70% of all goods and services are sold or fulfilled through indirect channel partners. Vendors delivering a brand promise at this scale and through numerous partner types require more than encouraging partners to start a Customer Success practice. Vendors should ideally regard partners as an avenue for extending their Customer Success strategy. They must take responsibility for providing the people, processes, and tools to guide and mentor and motivate partners. It is incumbent upon vendors to provide investments and resources for partners to thrive and deliver the brand promise the customer demands from the vendor and channel partner partnership. In this way, a holistic transformation of the sales landscape can take place.
A Good Partner is an Aligned Partner
Customer Success is more than merely automating a one-to-many email to engage the vendor’s customer base long tail. It starts with a commitment to collaborating with partners to scale Customer Success across the ecosystem’s entire customer base, and is particularly effective when customers engage the channel throughout their journey to purchase the vendor’s product. The critical ingredients for alignment include:
Shared responsibility for positive customer outcomes
Partner and vendor customer engagement points along the customer’s buyer journey
An established value and business proposition for the customer, vendor, and partner
Shared, trusted measures for customer health (including NPS, adoption, advocacy, and other metrics)
When vendor/partner/Customer Success engagement is tightly aligned and lived every day, everyone wins. Customers receive a quicker time-to-value that aligns with expectations set by the vendor during the buyer’s journey. Vendors benefit from lower product and service adoption costs and greater profitability. Partners increase their margins and customer retention rates and set up to retain and grow their hard-earned accounts.
Traditionally, most partners focus on transactional activity and measure it via margin preservation, top-line bookings, and service attach rates, often in that order. In the new paradigm, however, vendors will include their channel partners, alongside internal functional stakeholders (Supporter, Sales, Marketing, Product, CSMs, etc.), as another primary contributor in the journey toward Customer Success. However, there is a caveat. It’s a radical transformation when partners actively execute a Customer Success practice in this manner, and it won’t happen overnight. Many partners cannot invest without witnessing proof of reward. Therefore, the vendor’s responsibility is to prove the new paradigm’s value and then extend it across a broader set of partners.
Executing a Customer Success Practice
Vendors should seek out growth-minded partners. By continuously improving and delivering the model across a broader set of partners, they will gain multiple proof points across partner types within different target markets, setting the stage for motivating partners to embrace and effectively execute Customer Success. The following steps can ease the transition.
1. Re-profile your partners
Partner profiling has been used for years and ensures partner business practices align with the vendor’s ideal partner profile (IPP). Partner profiling helps determine the partner’s “opportunity for growth” and the type and frequency of touch needed to earn the lion’s share of the partner’s wallet. Having an active Customer Success practice should be a key component in the IPP.
To begin this process, vendors should select a manageable list of partners within their partner ecosystem and profile them based upon positive responses to these key questions:
Is the partner leadership team committed to Customer Success?
What is their expectation for ROI from their Customer Success investment?
Are services a core part of their business model?
Does the partner have a customer lifecycle management practice headed by a Customer Success executive and supported by a dedicated CS team?
2. Affirm who owns what in the vendor/partner relationship
Do your partners own your SMB business? What is their role, if any, in enterprise and mid-market prospect accounts and customers? Most vendors deploy their Customer Success efforts and resources to enterprise clients and sometimes to mid-market customers and count on partners to extend these activities throughout the sales cycle.
3. Demonstrate opportunities for growth and ROI
Demonstrate to the partner how investing in Customer Success will have a positive impact on their profitability. Determine how they measure return on investment and where they see revenue growth today. Typically, partner revenue growth comes from:
Product Revenue. Protecting and growing existing accounts are table stakes. Remember, the probability of selling to an existing customer is 60% to 70%, while the chance of selling to a new prospect is just 5% to 20%. Cross-sell and upsell to existing customers because up to 75% of new growth typically comes from current accounts.
Services Revenue. Services can yield margins of up to 50%. A good Customer Success practice creates more advocacy for the partner within the account and gives them a line of sight to areas where additional services can deliver value for the client.
Attracting New Customers. Aside from traditional demand and lead generation from marketing and sales activities, a dedicated Customer Success practice will generate new leads from advocates within current accounts and associates within their “communities.”
4. Share customer insights
For many vendors, partners are closer to the buyer than the vendor. In many circumstances, the vendor and partner have stronger relationships with constituents in different departments and LOBs in the same account. Think about all the valuable information collected along the way: customer engagement frequency, intent data, business outcomes data, and interactions within general communities housed in partner and vendor SFDC instances. Vendors and partners should create a process and systems for sharing this data to drive a coordinated account strategy to:
Capitalize on cross-sell and upsell opportunities
Track and close renewals
Guide engagement strategies, including who, when, why, and how to touch the right customer constituents with the proper messaging
Share insights regarding products, competition, and engagement playbooks feedback
5. Enable partner Customer Success
Besides receiving enablement in the form of ROI models and customer health data, partners need continued support from their vendors.
Success Engagement. Training and guidance regarding the type and frequency of Customer Success touchpoints give the partner leverage to:
Facilitate the buyer-to-customer conversion
Address low adoption and utilization rates
Nurture and close renewals
Customer Success Development Managers. This is a new channel development role deployed at the regional level. The Customer Success Development Manager works with strategic partners, onboarding and nurturing customer success practices with new partners. A key benefit is that it frees the channel account executive or manager to remain focused on acquiring new partners and working with current partners to find new buyers and continue to grow top-line revenue in their respective regions.
There will always be partners requiring the vendor’s help in “raising their game.” The Customer Success Development Manager ensures the partner’s Customer Success offering is as robust as the vendor’s and ultimately enhances the partner’s relationship with the customer, defuses any channel conflict, and avoids the vendor’s customer retention cost.
It is essential for a partner to view these Customer Success enablement programs as opportunities for empowerment, to grow revenue and profitability, and enhance the partner’s ownership of the client relationship, rather than a distraction from the vendor.
6. Measure for unilateral effectiveness
Businesses must measure the effectiveness of any investment. When approaching partners with investing in a Customer Success practice, vendors and partners must mutually agree on measures and hold one another accountable for how they perform. Performance should be measured quarterly at a minimum and objectively measured to avoid the dreaded (and unproductive) “he said, she said” situation. While these steps require some effort and investment in a shared toolset, they’re critical to aligning the vendor, partner, and positive customer outcomes.
As we examine the vendor+channel partner relationship’s future, we should consider the possibility of a partnership agreement with dynamic margin percentages based on targets for Customer Success metrics. These shared risk / shared rewards are a logical next step once vendors and partners agree to invest together in their mutual customers’ success.
Recognize that the vast emergence of the cloud and the subscription economy has created a significant shift to protecting and growing customers.
Collaborating with your partner ecosystem is an effective way to scale Customer Success across your entire customer base.
Protecting your brand across the customer lifecycle is critical, whether your team or a partner is taking the lead on an activity.
The critical ingredient to partners adopting and assisting vendors in accomplishing their Customer Success goal is alignment on:
Shared responsibility for positive customer outcomes
Partner and vendor customer engagement points along the customer’s buyer journey
The value and business proposition for the customer, vendor, and partner
To deliver their brand promise through their partner ecosystems requires vendors to do more than encourage partners to start a Customer Success practice. They must provide the right people, processes, and tools to guide, mentor, and motivate partners through the transformation and become an extension of the partner’s Customer Success strategy.
To begin, start small. Profile, recruit, onboard, and continuously enable the “right” partner to achieve your Customer Success goals.
Would you like insight into the people, processes or technology that can make your channel partner ecosystem more effective? LET’S TALK >>