There’s no denying that the subscription economy has been turning business on its head. According to Gartner, more that 80% of software providers will have shifted to subscription-based business models by the end of the decade.
If channel sales organizations are worried that the transition to SaaS products and services will leave them behind, Jen Spencer, vice president of sales and marketing at Allbound, a leading provider of partner sales acceleration technology, had encouraging news for them in a blog in March.
Channel Marketer Report (CMR) caught up with Spencer to learn why and how SaaS vendors should rely on channel sales to play a leading role in the growth of their businesses.
CMR — In March, you commented in a blog that software-as-a-service brands – if they haven’t already – are going to realize they need strong channel partners to build their business. What have they learned that’s compelling them to create channel programs?
Jen Spencer — There are three specific learnings SaaS companies have found in developing strong channel partner relationships (Tomasz Tunguz of Redpoint writes about this beautifully):
CMR — The cost of acquiring new customers and the profit contribution recovered over their lifetime are primary drivers of a successful SaaS business. How important is a high-performing partner channel to maximizing these metrics?
Jen Spencer — Whether you’ve built a referral-based program, a sell-with co-branded program, or a straight-out reseller program, your customer acquisition cost (CAC) for indirect, partner leads is far less than any of your direct lead source efforts. The cost isn’t a nice round goose egg, but if you’ve built your program effectively, it should be a very small fraction of your direct CAC. Just think — the cost that goes into producing inbound lead generation and sales enablement content is static, regardless of if you’re sharing that content with your 30 direct sales reps or 300 indirect sales reps at your partner organizations.
CMR — You highlighted customer retention as being critical to the success of SaaS companies. How can SaaS vendors empower partner channels to reduce customer churn?
Jen Spencer — If you have a channel sales team selling your SaaS solution in a variety of different markets, you’ll have a far clearer conception of what your customers are actually doing with the product. You’ll discover, for instance, if there are features that a substantial number of different end users are asking for, or if end users are using a competitor’s product as an “off-label” workaround in conjunction with yours that could inform a feature you could build into a future release.
CMR — How ready-for-SaaS are traditional partner networks? Is there a new generation of partners that SaaS companies should be looking at more closely?
Jen Spencer — For far too long, we’ve seen partner programs focused on quantity rather than quality, thus resulting in situations wherein only 10% (or less) of a company’s channel partners are generating 80% (or more) of its channel revenue. Today, that’s simply not acceptable nor affordable. That’s why, as SaaS companies dive into partner recruitment, they need to approach their searches strategically. Start by identifying the qualities in a partner whom you’re interested in working with (aka, a partner persona). And of course, it’s not just “qualities” but also proven quality that you need in a partner. Look for ones who will promote and implement your solution effectively as well as add value to your channel sales ecosystem.
CMR — What are the must-have channel management capabilities that SaaS companies need to ensure the success of their channel sales?
Jen Spencer — The number one MUST is the ability to segment both content and engagement experiences based on partner profile. The nature of your channel is rarely homogeneous, and the resources needed by a newly on-boarded partner will be different from your most seasoned VAR; or your referral partners versus your ISV partners. In today’s modern channel environment, user and group segmentation are table stakes.
A few other must-haves:
Jen Spencer blogs regularly. Stay on top of key industry trends by reading her observations and insights here.