3 Sins in Partnerships
Published on June 5th, 2024, written by The Partner Guru Team
Whenever we talk to our customers, reseller network and based on our experience, we’ve identified 3 factors that make partner programs dead on arrival. We’d like to share them so that you make sure you’re taking them into account when creating (and maintaining) your partner strategy:
1) Not incorporating the partner margin AKA add what you want
Many SaaS providers are in love with their product. Hell, we’d argue that anyone who has a product, regardless of what it is, has to be in love with it (if not, it’s a sign that it may have a shaky future). However, we’ve seen that many companies who want to start a partner network simply believe that since their product is so wonderful and irruptive, companies will want to resell it. With no margin. As Betamax taught us, not necessarily the best technology wins the fight. And always remember, that just like you, your partner network has to pay the bills. So when you tell them “This is my list price, I’ll sell it to you for the same and you can add whatever margin you want”, you’re setting yourself up for failure. Your competition is probably giving their partner network margins, so off the bat you’re probably going to be more expensive. If the end customer finds out your retail price, they probably won’t be willing to buy it from your reseller at a higher price. And what this ultimately leads is to a reseller that will discard your product because they don’t want to risk the relationship with their customers or because they aren’t making money off of it.
Your product is awesome. But if you want your partner network to be awesome, you have to share the love (love being revenue).
2) Not understanding your partner’s economics
Recently, a cloud provider changed their margins on renewals on a software product from 20% to 12%. It’s only 8 points! you might think. But if you put yourself in your partners’ shoes, what it really represents is reducing their margin by 40%. Imagine if someone changed your net earnings by almost half!
In order to have a truly healthy partner program, it’s key that you understand how your partner makes money. And how they make money with your product in a holistic view. What that means is, maybe my margins are low, but if my partner can sell professional services associated with the implementation, it’s a better business for them. The only way to truly gauge your importance to your partner is to understand their business. Which leads us to…
3) The percentage you give is the percentage of your product in your partners’ mindset
When you have a product that is the predominant market leader or has a huge demand, you can get away with a product that gives low margins to the partner network, hoping volume makes up for profit. And if your partner can make money off of your product through support, education, professional services or other revenue streams, maybe they’re willing to withstand this situation. But if your product is emerging, trying to gain market share and doesn’t represent much additional revenue to a partner, the only way to get the partners’ attention is to make sure you make it worth their while. If you’re starting, and are giving them 5%, you can bet (at most) you’ll get 5% of their attention.
Always remember that the key to a good partnership (this applies to software, your marriage and everything in between) is that both parties are getting a fair value out of the relationship. It has to be a sound business for the two. The more it becomes one sided, the more one of the parties drifts away, maybe to a better suitor…
Here at PartnerGuru, we have the know-how to make sure your software has the best partner program possible, with the best partners. Hit us up below if you need help!