The 13 most common mistakes in building a software sales channel partner network
And here it is! Your software product is a success! It’s up and running, tested and is selling well at home. Now what? Is it time to expand to new markets and territories? Yes, now comes the phase of building a sales network through channel partners! But how to obtain them, keep them and motivate them? How do you achieve the greatest marketability at the lowest cost? It seems a simple task at first glance. But in reality, the process of obtaining sales partners for your software is much more complicated. We bring you an overview of the 13 most common mistakes made in creating and building a sales network through channel partners
1. Inadequate strategic planning for a software partner program
The decision to sell software through channel partners is a strategic matter requiring thorough preparation and adequate personnel and financial sources. It’s like when a family decides to have another baby. Once that baby’s here, it must be cared for accordingly. So right at the start you should think about whether you have enough funds available, so that you don’t give up the long-distance run called “ indirect software sales channel ” somewhere at the half-way point. Right at the start, draw up a clear plan with specific points of progress, divided into three basic stages: marketplace research, partner program optimization and plan execution.
2. Absence of an experienced, full-time software channel manager
Have you ever seen a musician who simultaneously plays the violin and the guitar? No? Then why do most software companies want to make their direct sales manager their indirect sales channel specialist as well? It just doesn’t work. Make sure that you have an experienced full-time channel manager to build sales channels for your software product, who will devote 100% of his time to carrying out your channel building strategy. You will not only avoid possible loss of concentration, but also possible conflicts between your direct and indirect sales departments. You also need to have one full-time person providing full technical support and training for channel partners.
3. Inadequate budget for starting up a software sales channel partner program
From a financial perspective, you need to count on an average of several months from the time you start building the sales network until you obtain your first revenues. You must have this period financially covered in advance. Some of your main expenses in this period are the costs of operation and administration. The most significant expense is the salaries of the channel manager and the technician. Naturally, you must also count on expenses for administrative infrastructure. Another significant expense is the cost of sales and marketing. On the psychological side of things, it is good to plan and reserve an entire budge in advance for building a partner network so that other departments in the company (such as direct sales) don’t feel that the indirect sales department is to their detriment.
4. Poor analysis of the competition
It’s ironic, but your competition is also your best teacher. If you are just beginning to build an indirect sales channel, your competition is most likely one step ahead of you. This gives you a great opportunity to watch their behavior and learn from their mistakes. Start by analyzing their software product, their web sites and their partner program. Put yourself in the role of their customer as well as their distribution channel partner. What do you think are their strongest points? What makes their software stand out? What makes their marketing stand out? How do they obtain partners? What are their territories? Can you compete with them? Is there room on the market for you? Incorporate all of the competition’s advantages into your offer and add your own benefit to differentiate yourself.
5. Targeting the wrong software channel partners
There are various categories of software channel partners: sales influencers, agents, resellers, value added resellers (VARs), distributors, system integrators (SI), OEM partners… the type, size, target group and sales strategy of your software makes all the difference when choosing the type of channel partners you should be approaching. If, for example, you sell anti-virus software targeted to a broad group of household users or small companies, we recommend building a network of domestic or international resellers focused on the retail target group. On the other hand, if you sell a narrowly specialized vertical software requiring additional service and consultations at the end customer, look for business partners with adequate industry and technology experience. The right selection of the target group of channel partners for your software greatly depends on the nature of your product. A precise definition of the target group of channel partners is absolutely imperative for the success of your entire sales network!
6. Choosing the wrong target country for your software
All software vendors aspire to makes sales in foreign countries on new markets. As in every business, it is also true in the software business that the greater the risk the greater the possible profits. The risk of expanding your software to new markets is mainly in the lack of knowledge of the shopping mentality and customs of the target market. So if you want to successfully establish yourself in a foreign country, we recommend engaging a channel manager or distributor who comes directly from the given country. When analyzing the potential interest in your product on a foreign market, you can use a method similar to analysis on your domestic market. But we also recommend increased attention to other unexpected details, such as the compatibility of your software with the given market. Also be prepared to address matters associated with language localization, diacritical marks or the legal compatibility of your software…
7. Inapt name for your software product
Maybe you think this doesn’t belong here, but the opposite is true. The name of your software product is one of the most important things for selling it to end customers and for building a software partners network. These days, when the value of a second is equal to the value of an hour, no reseller or customer has time to examine the details of your offer. They must clearly surmise, at first glance, what your product is about. And that first glance is usually to the name of your software. Do you sell ticketing software for the theatre? Which of these names is more apt? Amadeus ver 3.0 or TicketBox ver 3.0? The first impression is the deciding one!
8. Ambiguous distinguishability from the competition
Don’t ever forget that yours is not the only star in the heavens. The competition is always at your heels and they take more or less steps similar to yours when looking for partners. The very first question a potential channel partner asks is how your channel partner program and product differ from the competitions. What makes you better? What more do you offer? How can you make your channel partner’s life easier? Why should they start selling your software? Put yourself in their shoes! Ironically, product quality is not the partner’s primary concern. Although still very important, it comes in second. What a partner really takes into account are the benefits and amount of work the partner must do to make one dollar if they decide to work with you. The less work and more profit involved, the more interesting your partner program is for your partner. So make their work as easy as possible, for example by providing:
- more attractive commissions and end prices as compared with the competition
- several sources of income – presales, aftersales, maintenance services and training for your software
- quality brochures and promotional materials for your software product
- modern and quality corporate design (web site, photos, advertisement specimens)
- apt software packaging – boxes
- leads contacts for end customers
- partner section on your web site (brochures, price lists, manuals, samples of offers…)
9. Average quality and attractiveness of your software
How attractive your software product is to the end customer is an important criterion for your channel partner. They want your product to sell well without having to make exhaustive efforts. Is your software really competitive? Does it have better functionality, graphic interface and user ergonomics than the competitions? If so, the first part of this problem is solved. But there is another, even more important part. There are thousands of software solutions in the world. The end customer therefore has a difficult task in deciding which one is right. Just having a good product is not enough. You also need to know how to effectively promote it. Conducive to this is developing apt advertising materials. One of the most effective marketing techniques is a positive assessment by independent authorities – certificates and various achievements in competitions and reviews. Hands down, every channel partner will prefer to represent a software product that has already achieved the acknowledgment of experts over a product that no one has ever heard of.
10. Allowing software channel conflict
A channel conflict is a situation where the same group of customers is approached by several sellers with the same product. It’s like they say, ‘there can only be one king of the hill’. And in this way they are creating senseless competition in their own camp. So when building a partner network of sellers, pay careful attention to separating out the different spheres in which the different partners are active. This separation may be based on various criteria, such as according to country, territory, customer size, technology expertise or vertical sector. Conflict can also occur between your direct sales and indirect sales teams. Be sure to clearly divide territories in order to avoid pointless conflicts.
11. Inadequate motivation for channel partners
It has been psychologically proven that a person puts out higher quality results if he is motivated in the right way. Take care to set out motivators for your partners when you create your partner program. Standard separation of software resellers, for example, is based on level (silver, gold, platinum), grades based on turnover, certification or market standing. We therefore recommend creating a motivational system with precisely defined turnover limits or training level. But this also applies for the opposite – partners who do not meet the minimum results requirements should be penalized by being moved to a lower grade of resellers. One of the more enjoyable motivation methods for software channel partners is organizing various fun events, where personal human relationships can be forged – and this is exceptionally important for further joint business. Personal visits to channel partners are also extremely important in order to check their results in person.
12. Poor marketing and technical support, lack of training for software channel partners
Don’t forget that no one knows more about your software product than you. If you want your channel partners to do a large share of your work, you must be prepared to share a large part of your knowledge. So inform them of all aspects associated with the sale, marketing and service of your software by drawing up a detailed reseller manual, where your channel partners can find answers to all practical questions. Also organize regular training, ending in certification of your partners. As a rule, the less your channel partner knows about your product, the lesser the chances that they will have success in selling it. Likewise, as knowledge of your product grows the inner ties between your partner, your product and you will grow as well.
13. Inadequate promotion of your channel partner program
If you already have your partner program prepared, then you are ready for the final and very important phase – software partner recruitment – where you actually obtain partners. It’s like when a fisherman tosses a net into the water. But if he wants to catch the most fish, he has to know where to toss out his line. Your essential step should be the publication of your partner program on our web site or on targeted internet marketplaces such as SoftReseller.com or SoftwareCEO.com. We also recommend advertising in media with a target group focused on the software industry. A paid PPC advertisement on search engines is also very effective for a proper campaign, and promoting your channel program at software expositions is also effective.
This article was meant to point out the complexities and elaboration involved in obtaining and managing software channel partners. It is not a detailed instruction manual for success, but more of a basis to go on when you are thinking of creating your own plan for success in indirect sales of your software. If you decide to engage in indirect sales, patience is truly a virtue. You won’t see the first results until you have put in many months of hard work. But when you do see results, you’ll know that you have made an important step toward financial prosperity and toward establishing your software on new markets.
Author: Tom Jambor, SoftReseller CEO
SoftReseller is the largest software partner programs directory