Get a Dog If You Want Loyalty

Partner loyalty is overrated, distracting, and, sometimes, a dangerous metric. Instead, vendors should create economic models and conditions that inspire partners to commit to a common vision.

By Larry Walsh

The channel seems obsessed with partner loyalty. Ever since Bain & Company created the Net Promoter Score (NPS), vendors look to their loyalty quotient – how many partners they can count as promoters – as a measure of success and partner commitment.

Well, if you want loyalty, get a dog.

If you want productive, committed partners, build models that help them capitalize on market opportunities.

Partner loyalty is overrated.

At 2112, we frequently conduct partner satisfaction studies on behalf of our clients. We’ll measure the efficiency of various aspects of channel programs – sales enablement, sales support, technical training, product quality, marketing programs and more. Every partner satisfaction survey includes that NPS derivative question: “Would you recommend this program to a friend or a colleague?”

We often find in our satisfaction studies that partners are extremely loyal to their vendors regardless of their experience with or ratings of the various aspects of channel programs and operations. Vendors will earn acceptable to high partner loyalty scores even when they have a broken deal registration program, insufficient marketing support, poor technical support, and onerous training requirements.

Even when segmenting partners by tiers or gross revenue, partner loyalty typically doesn’t correlate with the level of satisfaction or quality of other channel program and operational attributes.

Partner loyalty isn’t necessarily a bad metric, but it’s not the best one for measuring partner propensity for performance and growth. The reason: A vendor can have extraordinarily loyal partners that do nothing and not-so-loyal partners that can be banked on to hit targets.

So, while good partners aren’t necessarily loyal, they are committed to a mutually beneficial vision, strategy, and set of objectives.

In a recent 2112 study, we found an interesting correlation when looking at the general partner population versus the fastest-growing partners. Across the board, partners expressed high loyalty with a strong NPS, but that score didn’t change when segmenting high and low performers – that is, the score barely moved when we segregated the top-tier and bottom-tier partners.

What did separate the high and low performers, though, was what they said motivates them to grow. We asked all partners what would influence them to sell more products and services. Generally, partners said better margins and incentives – as they typically do. But the fast-growing partners cited better strategy, communications, and planning as stronger influencers of their investments and growth.

Again, though, Isn’t loyalty important? No. Sometimes, in fact, loyalty works against the interest of partners. Consider this: Vendors like knowing they have the lion’s share of a partner’s wallet. Share of wallet is a measure of control; if a vendor has a substantial share, it can influence – if not dictate – terms. What happens to the partner if it remains loyal to the exclusion of its own interests? Does it miss opportunities? Is it overexposed to the vendor’s changes and downturns?

Sometimes, being too loyal to a vendor exposes a partner to a high risk of disruption.

Good partners – the ones vendors always say they want in their programs – aren’t loyal because of compensation and incentives. They’re loyal, committed, or aligned because it’s in their best interest from an economic and market perspective. If a vendor creates the right economic models that align with market opportunity, it doesn’t matter whether it’s creating loyal partners. Partners will remain in a vendor’s orbit as long as it remains advantageous.

What are the factors to which partners respond positively?

• Business Planning: 2112 research finds partners that engage in joint business planning with their vendors deliver two to five times more revenue than those that don’t have business plans.
• Ease of Doing Business: According to the 2112 Ease of Doing Business Report, vendors that have frictionless channel programs have three times the share of partner wallet than difficult vendors.
• Collaboration: Vendors that work with their partners on market development, account planning, and sales execution are more likely to see a faster-than-average rate of channel sales growth.
• Economic Modeling: Vendors that look beyond partners as a source of revenue and align channel models with partner interests and capabilities typically have a more predictable and growing indirect-revenue Moreover, providing partners with an economic model gives them the freedom to develop their own profit model that makes them more productive and less dependent on vendor compensation support.
• Transparency: Vendors that provide partners with easy access to information – everything from program status to product order updates – tend to have more engaged partners.
• Value-Centricity: Vendors that provide partners with a valuable resource – quality product, expedited technical support, training to enable professional services – tend to have more aligned and committed partners than vendors that focus on transactional sales and transient opportunities.

Some people may say that working on those things will engender partner loyalty. Perhaps, but loyalty is still a secondary consideration, or objective. The first one is defining market opportunities that allow partners to have a true impact on the vendor and end customers.

So, as I said at the beginning, get a dog if you want loyalty and focus on the economic fundamentals that result in productive partnerships.

The 2112 Group works with vendors and distributors around the world to develop sound go-to-market strategies and partnership economic models. For more information about how 2112 can help your company create economic models that get partners excited and productive, e-mail info@the2112group.com.

Larry Walsh is the CEO of The 2112 Group, a business strategy and research firm servicing the IT channel community. He’s also the publisher of Channelnomics, the leading source of channel news and trend analysis. Follow Larry on Twitter at @lmwalsh2112 and subscribe to his podcast, Pod2112, on iTunes, Google Play, and other leading podcast sources. You can always e-mail Larry directly at lmwalsh@the2112group.com.