Why do partnerships exist?
Partnerships exist as a part of your overall go-to-market strategy – they’re not this nebulous concept under a separate department. They exist as part of your overall go-to-market strategy. Customers demand you work with partners because customers need them to deliver the complete solution.
Partnerships help you get in front of customers in your market – this is the most important concept from Geoffrey Moore’s “Crossing the Chasm”: a market is a self-described group of people who refer to each other for purchasing decisions. When you’re doing marketing, and you want to win that market, you need to put your brand where your buyers are looking for information. Some of those actions you can buy with advertising on relevant sites, some of them you can win with content on YouTube or through SEO, but some of them are controlled by other people. That’s where you need partnerships, because it’s a relationship-informed sale. You need to get your brand connected with the partners your customers are going to learn about.
How are SaaS partnerships different from licensed software partnerships?
It’s harder to resell subscriptions – around the world the majority of licensed B2B software is sold through partners; but less than 20% of B2B SaaS is because subscriptions are hard to retail and resell. It’s challenging for a reseller to create accounts or manage ongoing billing for a subscription product, and so they end up making their customers do all the work to sign up (which they hate). It’s the equivalent of a plumber making a customer buy their own pipes. My startup, AppBind, is built to solve this problem.
SaaS has led to a huge network of API’s – licensed software did not have this. The real driver of partnership activity in the cloud has been integrations (and app marketplaces).
What are the different types of partnerships?
Brand partnerships – these are basically a messaging game: guest blog posts, marketing affiliates, co-marketing and pushing out bundle deals. It’s still working with another company, so that’s still a partnership, even if it’s not done by a partnership person.
Integrations/tech partnerships – the absolute fastest way to grow market share is to integrate with other products in the customers’ stack, because customers who buy software tend to buy more software. If you can integrate to create complete use cases, you stand to gain a lot of business.
Channel partnerships – these are usually with service partners. Think marketing agencies for MarTech, sales consultants for sales tech, accountants for accounting software. Channel partnerships are mostly to drive sales. The level of partnership tends to step up over time because service providers are wary of the risk of embedding a bad software experience into their offering. They’ll often start by recommending you, then they’ll go to referrals, then co-sales, then reselling (or brokering).
Important tip: don’t call these service providers VARs; they hate that. But for some reason we hang on to old “OEM” and “VAR” partnership terms from the 1980s. Use the term that they use with their customers: if you’re talking to a WordPress hosting company, call them a WordPress hosting company.
Distributors – directories like G2 crowd and app marketplaces. These are basically marketplaces that aggregate demand. How they execute that and transact varies. For instance, G2 Crowd is basically an ad listing whereas the Shopify App Store does all the billing and transacting on a AWS marketplace involves a very complicated sales process. However it’s structured, they’re doing aggregation; these are massive, massive channel partners.
Why invest in partnerships?
You need to work with the other things in your customers’ world – in order to win, you have to work with other companies that they already work with. Your customers have their own lives, their own customers, their own businesses. To matter, you need to fit in to what they’re doing beyond your product.
Use partnerships to gain efficient scale – you cannot call, email, and advertise to every single customer directly without eroding margins. You need to go through the value chain.
Ecosystems always win – you end up eating up more of the market share. Coca Cola is the number one soft drink in the world not because Coca Cola is necessarily delicious, but because they built the number one distribution network in the world. Microsoft’s partner ecosystem is 1% of the world’s economy. Microsoft gets $1 for their partners’ $9, but it’s all Microsoft’s network. You can dream of knocking Microsoft out, but you never win.
Does it make sense for small companies to have partnership strategies?
Yes, you don’t have to have a huge scale. Just figure out who your customers are – if you’re a small company and don’t have the resources to eat the whole world, what you need to worry about is: Who are my customers? What else are they using? What do their lives look like? Who do I need to work with in order to complete that sale? Those are your partners, and then your metrics should be about how you’re going to place yourself into each of those things.
How should you approach integration partnerships?
Figure out what your customers are using and integrate with it – that should be the number one priority for partnerships. You have to build an ecosystem around integrations because you live in an ecosystem. You’re not in the market alone. Within that, there are a million tactics for how to launch partnerships (check out the Cloud Software Association’s partnership launch checklist).
Move data towards you – customers follow the data, make sure you have integrations moving the data in towards you.
The partner who gains more customers builds the integration – if you are the recipient of customers, you will have to build the integration. If you’re bigger than the other partner and you’re sending more customers the other way, then they build the integration. The only exceptions are when the customers demand an integration to something because it fills out the product portfolio. For instance, if customers want SMS inside your product, you might do the SMS integration because it’s part of your overall experience.
Don’t let engineers drive your integration strategy – they’ll screw up your marketing. Engineers can outline what the integrations will be, but never launch an integration without going to marketing first. Never build the integration before talking to the partner; you’ll lose the opportunity to get them to agree to do marketing for you first.
How should you approach channel partnerships?
Service partners do not exist to sell technology – if you approach them as if they’re going to sell your technology, you’re going to burn that relationship. They are absolutely not interested in that. What every partner is interested in is selling whatever they are selling to their customers. Investing in positioning is really valuable here; they need to understand what exactly you are and what problem you’re solving, and how that helps them make their sale to the customer.
Service partners do use technology to deliver better results – they don’t sell technology, but they absolutely need it because they’re promising their customers a high performance, reliable result, done quickly and efficiently. And they’re selling their trusted expertise. So if you show them a product that will make their output better, they’re going to use it.
Trust is hugely important – service partners are often low margin businesses, and they’re afraid of any risk. They cannot embarrass themselves in front of customers because they’re selling trust. If they screw up in front of a client, they’re going to lose that client, so they don’t like bringing technology partners in unless they trust you.
How do you go about developing channel partnerships?
You may already have a “shadow channel” – you may have service providers already recommending your software. They need it for their customer work, but they can’t buy it on their customers’ behalf, which means they have to get the customers to buy it. Find where there’s channel work already happening around you and make it easier.
Move from referrals into co-selling or, better yet, reselling – service providers limit the number of vendors they refer to the client, because after five or so, the client starts to think, “this is too much work. I hired you to take care of this problem for me. And now I’m doing all this work. And, you want me to use referral links so that you get a kickback for all this work I’m doing for you.” You need to lower the barrier, so that partners can manage your software on behalf of their customers (that’s what AppBind solves).
Highlight how your software helps them offer more services – what partners care about are the retainers that they’re selling on top of your software. So if you’re selling HubSpot, what the inbound marketing agencies want to know are what are the inbound marketing services they can sell and how much money they can make writing blog posts, managing social, doing analytics etc.
Commissions don’t matter as much as you think – what matters are whether you send them customers, or that you put the partner’s name on your website, so they can find more customers and get credibility. You pay them commissions because they’re spending time with you, but if you have mercenary messaging that seems like you’re “buying” their customers, when the customers see those pages, they might fire the service partners because they felt like they got sold out.
How should you approach partnerships if your application is your customers’ “core” application?
It’s great to be your customers’ home base – customers follow the data. If your app is where they operate their daily activities, then the data lives there. That’s their home base, their anchor app or platform app, and you’re going to win. Most customers or teams within customers can only handle one anchor app: the marketing automation tool, the CRM, or the accounting package; there’s only going to be one. If you’re the anchor, you’re driving demand to the other partner.
Run an ecosystem play; get your logo everywhere – if you’re in a position to get an ecosystem play going, your goal is to get your logo everywhere. That’s always a partnership’s goal, but if you’re the anchor app, you’re in a very good position to do it. So in my opinion, I know not everyone agrees, quantity over quantity. You just get as many partners as you can and get your logo in as many places as possible. Then your ecosystem strategy is to basically run a funfair, where you’re driving leads out to as many people as you can, to get as much activity for your partner ecosystem as you can, so that people get addicted to you. That’s how you become central to the market, and everything will then build on top of you. And the more stuff that builds on top of you, the more you become irreplaceable in the market.
To operate efficiently, build one capability and get as many partners on it as possible – you have limited resources in the partner team. Because you’re placing bets, run them as programs against a similar target. Build one capability internally, and then try to get as many partners onto that one thing. For example, if I did an API for SMS messages, I’d try to get as many SMS providers onto that as possible in one quarter, and then go to the next one, and then next one, and the next one. You focus sequentially because you don’t have enough resources to do everything.
How do you measure success of partnerships?
Partnership metrics depend upon which part of your business the partner is enhancing – some partners are on the sales side. Those are the most interesting ones for sure, but you might also have an implementation partner, or an integration that you build to drive retention. Not all partnerships are about bookings; the core metric for the partner is always the same metric as the part of the customer lifecycle that they’re touching.
Driving demand – for a channel partnership that’s intended to drive demand, you might look at opportunities sourced, revenue, sales velocity, etc.
Driving adoption – you might have a services partner relationship with an SI for implementation work, oriented more around activation.
Driving retention – when a customer comes into your product, you might want them to connect with another application like QuickBooks because it decreases churn.
How long will it take to see results?
It’ll take a little while – it takes 3 to 6 months before results start to grow. It’s actually harder than sales to start because you have less control. Partnership people are always anxious because they’re placing bets all the time – their job is to be gamblers! They’re betting your resources, your engineers, your money, your time, on another company to deliver a result, and they have no control over that company. All they have is their reputation to close the deal. So if you’re a good CEO, and you’re empathetic to your partnership person, you know if you’re freaking out, they’re freaking out, and then they’ll freak out their partners, killing the deal.
What’s most important to get right?
Get your logo everywhere – you need to put your brand where your buyers are looking for information; if you don’t get your logo everywhere, you’re going to get wiped out by the person who does get their logo everywhere. You can’t win if you’re not even in the game.
What are the common pitfalls?
Don’t just spam partners – people are just doing cold email outreach to each of these partners and just spamming all the agencies thinking you just have to hammer them to death. You don’t. First you need to earn your position in their world – look at HubSpot, they made inbound marketing agencies exist, and now those agencies are dependent upon HubSpot.
Partnerships reporting up to sales doesn’t necessarily work – sales is always under a lot of short-term pressure. When the CEO takes out their anxiety on the VP of Sales, the VP of Sales pushes the partnership person for more revenue (without really understanding how partnerships work). If the partnerships team doesn’t know how to deal with that pressure, they push it on to the partner, and the partner then thinks, “I don’t care about you.”