When we work with our B2B SaaS clients, one of the first things we think about is your go-to-market strategy. How do you go-to-market, how does an indirect model compare to a direct model, when do you engage in a channel strategy and when do you recruit, find or partner up with other parties to go to market together?
When you think of a channel model and whether you need one, there are really only three reasons to go to market through a channel:
1. Complimentary Value Props
The first reason is that a channel can help you complete your solution. Let’s call this IP (intellectual property). If your solution doesn’t satisfy the complete needs of your customer, a channel relationship could be important because they complement the solution that is now exactly what this specific customer or industry needs. Maybe you have 50-60% of the solution, but for it to work or do exactly what your customer needs, you need to partner up with a channel partner that compliments your solution.
You see this a lot in the world of ERP solutions that have accounting software, project management software, etc. but they may not have a spend management solution. So for these customers that want a spend management system, they cannot do that without accounting software and the accounting software cannot fulfill that need without the spend management software so you need to have a partnership that allows you to fill both those needs.
These are often partners called ISVs (Independent Software Vendors), that compliment the solution and make it a more complete value prop for the customer.
2. Market Access
The second reason to go to market through a channel with partners is for increased access. Do certain partnerships help you access certain parts of the market you couldn’t access yourself? There might be a need to have a channel partner to go to a certain market. If you have an English language product and you only have an English-speaking sales team, you may need a partner in France to go after the French market.
If you want to access a certain marketplace, maybe there’s a partner who has thousands of customers who have already members of a certain marketplace, catalog or solution ecosystem and to get access to that group of customers, you’ll need a partnership. White-labeling and OEM relations is often what you do to get access to a market you can’t access yourself, or it would take a lot of time and a large investment.
3. Economies of Scale
The third reason to partner is because a partnership will allow you to do certain things at a better ROI than doing them yourself. Think of sales, marketing, support - if you can find partners who are better at selling your software, or who are better at doing the implementation of your software, servicing the software or providing support, then those are good reasons to have a channel model because they’ll do those things better than you can.
How to put a price tag on your channel
Three reasons to have a channel are because they complement your solution and allow you to service a part of the market you couldn’t service yourself, they provide you access to a certain part of the market that would be very expensive or almost impossible to access yourself, or they could provide better ROI than you could when you provide the sales, marketing, services etc.
All of these things represent a certain monetary value and if you’re very clear on what that is, you’re ready to build a channel model because now you know what sort of margin you’d be okay giving up to a channel partner, what type of investment you’re willing to make in that channel, to train them, enroll them, sign them up and recruit those partners.
But you need to answer this question before you can start defining what the channel program would look like: which of these three (or which combination of these three) is the reason that you need a channel model, and what’s the value of that?