Effective channel management keeps companies from losing countless numbers of sales opportunities and millions of dollars in revenue. It costs 80% of companies $2 million to $20 million each year to distribute leads to through an indirect channel. The channel drops 80% of these opportunities because they are not distributed to the right partner or because there is insufficient follow up and support. It doesn’t require a Ph.D. to figure out that a channel strategy needs to be an integral component of every sales and marketing strategy.

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Four Steps to Effective Channel Partner Management

The purpose of your channel strategy should be to forge partnerships that align the goals of similar companies that are financially attractive to both parties. Effective channel management involves four steps: developing your channel strategy, channel development, day-to-day channel management, and channel evaluation.

a. Channel Strategy: Understanding the desired customer experience and obtaining a comprehensive view of the channel landscape drives a channel strategy. The first question you need to answer is WHY. Why are you developing an indirect channel. Consider which of these questions best reflect your reason:

1. To increase your customer access, that is, to extend your reach.
2. To  enhance your speed to market.

To better understanding what our customers need.
Your reasons for employing an indirect channel will shape your strategy and help you identify appropriate channel partners. 

b. Channel Development: It is imperative that you develop a channel schema. This allows you to strategically structure your channel. Some companies create a structure around the degree of directness, that is how straight is the line between the channel partner and the target market and customers. The target marketers and customers might be tiered by value, segment, or revenue opportunity. Other tiering approaches might be geographically or by domain expertise.

The structure should be designed to allow your channel members to be as efficient and effective as possible. Again, the structure you define and establish has implications on the partners you select.  Successfully bringing partners on board requires a win-win scenario, demonstrating not only why the relationship is important to you, but also why it will be important to them. Write a partner brief that includes:

• a statement that articulates the compelling reason(s) for these prospective partners to do business with you
• the rules of engagement so everyone understand how they will gain financially
• the strategy for ensuring a successful relationship
• the terms on which opportunities each party will pursue

c. Channel Management: Frequent contact with your channel partners is integral to ensuring that the relationship remains strong. Partner retention plays a role in customer retention. We highly recommend that someone in the company is dedicated to building the channel either as part of their existing responsibilities or as a full-time job.

Establish your metrics for success at the outset. For example:

1. Just as share of wallet is an important indicator with customers, share of sales is an important indicator with channel members.
2. Just as your goal is to become the dominant provider to your customers, you aim is to become the dominant provider to your channel. Experts recommend that you aim to have a 50 percent share of sales within your partner’s channel portfolio for certain Line of Businesses. To reach this number, you will need invest in training your partners and providing them with all the necessary tools and support they need to succeed.
3. Opportunity scoring. Pushing only low-value leads and opportunities to your channel partners will not allow them to be successful and eventually they will defect in search of more lucrative opportunities. Work closely with your partners to develop joint Marketing programs that will help them identify bonafide opportunities for them to pursue. Make sure your partners have solid opportunity management skills and that you are both using the same opportunity scoring model. If necessary, install a opportunity management system for them and train them on how to use it.

Jointly establish performance targets and reward your channel channel partners for both the initial opportunity and growing the customer relationship throughout the lifecyle.  Provide continuous training programs to ensure your partners understand your offerings and how they compare to others on the market.

d. Channel Evaluation: Establish a formal evaluation process for channel partners and be sure they understand this process prior to signing an agreement. The metrics you both agreed to as part of the channel management steps should serve as the basis for the evaluation. As much as possible tie your channel metrics to measurable business outcomes. For example, some of the measurable outcomes might be a certain amount of market penetration in a segment, a close rate for qualified opportunities, and/or winning some critical high-value customers.

Use these four steps to keep your channel partner relationships on track.

FAQ:

• Channel Strategy: Clarify your objectives for using an indirect channel (e.g., broader reach, faster market entry, deeper customer insight).
• Channel Development: Organize partners by value, segment, geography, or expertise. Provide a partner brief that defines mutual benefits, engagement rules, and shared goals.
• Channel Management: Maintain regular contact, set clear performance metrics (e.g., share of sales), invest in partner training, and collaborate on joint marketing and opportunity management.
• Channel Evaluation: Use a formal evaluation process with agreed-upon, outcome-based metrics (e.g., market penetration, win rates, key customer acquisition).

• Assign responsibility for channel relationships
• Set and monitor performance targets (such as share of sales)
• Continuously train and support partners
• Collaborate on marketing and opportunity scoring
• Reward partners for both initial wins and long-term growth

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