Best Practices in Ranking and Prioritizing Your Partners


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Aligning resources to engage and enable the right partners is crucial. To get it right, you must invest in the right partners to meet your business objectives. Explore best practices in this white paper.

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Best Practices in Ranking and Prioritizing Your Partners

  1. 1. White Paper Partner Segmentation Best Practices in Ranking and Prioritizing Your Partners As margins shrink and competition soars, optimizing partner “Our focus is on selecting the right performance and channel investment are critical. The key to your partner for the right market or the right industry.” success is to enable your channel partners, but this task may be more Doug Kennedy, VP Worldwide Alliance difficult than it first appears. and Channels, Oracle Many technology vendors struggle with the traditional 80/20 rule—the division between top-performing solution providers and smaller, hard- to-reach value-added resellers. What are you doing to get beyond that first 20 percent? How do you identify the “diamonds in the rough” among next-level partners to successfully move from the traditional Contents: 80/20 ratio to a more ideal 70/30 ratio and beyond? Make your partners a competitive advantage ................. 2 In this white paper, we explore best methods of ranking and A unique approach to the prioritizing partners, based on a unique, four-level approach to the traditional 80/20 rule .................... 2 traditional 80/20 Pareto Distribution rule. We then examine how to Proven methods to effectively rank and prioritize partners ........... 3 most effectively apply proven, predictive modeling methodologies. In conclusion ................................ 4 This approach has been applied in real-world situations for hardware and software companies in North America, Latin America, Europe and Asia, resulting in significant increases in revenue and partner satisfaction.
  2. 2. Make your partners a competitive advantage. If you’re a channel sales or marketing manager, you’re tasked with the constant need to identify, prioritize, target, invest, and measure the performance of your Key to Success partners. By effectively enabling your partners, you have the potential to transform The key to channel success lies your channel—and propel your business. in identifying partners with high Aligning resources to engage and enable the right partners is crucial. To get it right, potential and providing them with you must invest in the right partners to meet your business objectives. But this the right tools and resources so they may be easier said than done. Basing your enablement efforts on size of partner, become bigger players—and you revenue, accreditation, volume, or tier could lead you to support only your largest more deeply penetrate 20% partners. This approach could potentially result in insufficient coverage and missed 5% 5% key markets. 20% opportunities, as in the case of emerging countries—like China and Russia—or 15% 15% emerging vertical markets—such as healthcare. 30% 80% The answer 80%in pinpointing and rewarding the right partner for the right market, lies 80% industry, application, product or geographic region. By identifying partners with very 50% high potential—in expertise or industry-specific capability—and providing them with Partners Performance the right tools and resources, you can give them a boost so that they become big Partners Performance Partners Perfo players, and you more deeply penetrate key markets. 50% 80% 30% 20% A unique approach to the traditional 80/20 rule. 20% 5% 15% So, how can you pinpoint these high potential partners? Let’s take a look at a 20 unique, four-level approach to the traditional 80/20 Pareto Distribution rule and examine three proven methods that range from good to better to best. Four-Level Pareto Distribution The classic Pareto Distribution rule predicts that 80% of any large number—like 4 Level Pareto Distribution wealth, taxes or channel performance—will be generated by 20% of the population. 5% % Actual 20% 15% Performance Rather than a simple two-level 80/20 division of partners based on performance, e or Value value total and partner count, we break the partner base into four levels to provide c 30% granularity and to identify and focus on “opportunistic” partners. 80% This four-level breakout anticipates that the top 5% of partners will produce 50% 50% of the total used for distribution, the next 15% will produce 30%, the next 30% will produce 15%, and the bottom 50% of partners will produce only 5% of the total. Partners Performance Together, Level 1 and Level 2 breakouts add up to 20% of the accounts that will 50% 4 % Total produce 80% of the total number used for the distribution. Levels 3 and 4 combined Accounts 30% 15% represent 80% of accounts that will produce 20% of the total distribution. 5% 80% ive This four-level approach is superior to other uses of Pareto distributions because 20% it provides the granularity needed to identify appropriate partner groups. It is also Figure 1. A four-level approach to Pareto superior to subjective methods of prioritizing and ranking partners such as tiering distribution offers granularity to identify by accreditation or competency level, which may or may not correlate with actual “Golden Rules” and invest in “opportunistic” partners. partner performance. ◆ Objective versus subjective methods of ranking and prioritizing partners are s essential. he ◆ Assuming that only more highly l. 2 accredited partners are your best performers is not always true. Use You buy a lot, so measures and analytics to iden- other you “Managed” Tier 1
  3. 3. Proven methods to effectively rank and prioritize partners. Now, we’ll look at three ways to most effectively rank and prioritize partners, based on the four-level approach to the Pareto Distribution rule and grounded in the While the first two methods use golden rules of tiering (refer to sidebar on page 4). trailing performance data, the These approaches depend on the depth and breadth of partner performance and third approach requires that the attributes. All three methods for ranking and prioritizing partners use the same core partner database be populated Pareto distribution approach. The major difference is in the calculated number that with a sufficient amount of partner determines a partner’s Pareto level assignment based on the data set we use— attribute data to calculate the total trailing performance, predicted performance or a calculated value score. partner value and priority ranking. First, we sort partners in descending order of performance or value score and then total the number of partners. Next, we divide the partner base into four Pareto levels that correspond to 5%, 15%, 30% and 50% of the total base. Then, we total the corresponding performance or value scores for the partners in each level. Acceptable: Trailing Performance Here, performance data totals for each partner from the last four quarters are used 4Qs Trailing $$$ as the basis for the Pareto distribution. Individual Account $1 $2 $3 $4 While this method is considered superior to other tiering and ranking methods, one Assign Individual Pareto Sum All Individual primary disadvantage is that it looks only at past performance rather than potential Levels Based on Descending Account Account Total Trailing 4Q 4Q Totals 4Q Total performance. C B A Better: Predicted Performance Figure 2. Trailing performance. This method has the advantage of looking forward. Simple, predictive modeling techniques establish a forecast for the coming four quarters based on the trend 5Q Trailing $$$ or slope calculation of the partner’s trailing five quarter results. We then use the Individual descending totals of these forecasts to assign the predicted performance of Account $1 $2 $3 $4 $5 partners in each of the Pareto levels. This combination, which uses the Pareto Sum All Accounts Individual Account Trend level structure and predictive modeling, provides a better basis to support Forecasts Next 4Q Forecast Projection partner enablement, offer program benefits, assign sales resources and target C B Af communications to the right partners. Figure 3. Predicted performance. Best: Partner Value Score In this method, we use a calculated partner value score as the basis for Pareto 5Q Trailing $$$ level assignment and top-down ranking of the partners. The score is evolved from Individual Account $1 $2 $3 $4 $5 the forecasted performance number discussed earlier. That initial number can be raised or lowered by using multiplier factors assigned to key partner attributes or Frequency Individual Account Trend Factor Next 4Q Forecast Projection to achieve specific product and/or customer segment marketing and sales goals. The final score provides true ranking in their order of partner importance. This C X B Af methodology is extremely valuable for prioritizing partners “on the fly” to identify those most appropriate when launching new products for different customer types X and sizes. Figure 4. Calculated partner value score. 3
  4. 4. In conclusion. The Golden Rules of Tiering Technology vendors depend on their indirect channels to • Use objective rather than subjective methods to rank maximize revenue, expand market reach, deepen market and prioritize partners. penetration, reduce sales costs and deliver comprehensive technology solutions to customers. But the ability to drive • Do not assume that your highly accredited or tiered business through the channel can be daunting. partners are your best performers. Employ other measurements to pinpoint true partner value. Although a smaller number of larger players will continue to drive the majority of revenue, the key is to identify, recruit and • Avoid concentrating solely on the top 20% of your enable high potential partners to achieve your strategic channel partners who typically produce 80% or more of your objectives and grow your business. Using a four-level Pareto revenue, as you may undermine your ability to serve distribution model can help you pinpoint, rank and prioritize your target customers. “opportunistic” partners, so that you can ensure you’re • Use performance data—like revenue, deals registered, maximizing your channel investment. engagement cost or MDF/co-op usage—to inform your channel strategy. • Capitalize on important partner attributes—such as business models, competencies, services, target verticals, selling methods, and geographic location—to strengthen your approach. • Focus on future partner behavior based on a calculated forecast—rather than historical performance based on trailing data—through simple but effective predictive modeling techniques to maximize ROI. About hawkeye Contact Us hawkeye delivers best-in-class channel solutions for the world’s leading technology companies to maximize channel investments. Whether you’re designing and Contact us today to discover how deploying a new channel program—or strengthening an existing one—hawkeye we can help you get the maximum can help give you a competitive edge with an end-to-end, integrated solution. Our return on your channel investment. expertise traverses best-of-breed strategies, research and program design; ultra- flexible, web-deployed tools powered by a proven platform; marketing techniques that compel action; and unmatched operations management and support. hawkeye gives no warranty or representation as to the accuracy, North America Europe Asia/Pacific completeness or legality of the advice contained in this paper, and any warranties implied by law are hereby expressly excluded Centerpoint, Cascade East Otterman House 8 Temasek Boulevard to the fullest extent permissible. 20819 72nd Ave S. 12 Petersham Road #42-01 Suntec Tower Three Suite 725 Richmond-upon-Thames Singapore 038988 Kent, WA 98032 USA Surrey TW10 6UW UK © 2010 hawkeye, all rights reserved. HCPKWPPS01042010v1