Examining the Wisdom and Purpose of Incumbency Protection
Vendors should make account protection an earned reward, not a guarantee.
By Larry Walsh
In a recent consultation, a 2112 Brainstorm subscriber asked about incumbency protection programs and policies across the industry. The question was getting at the best practices for ensuring that partners of record have the first opportunity to renew a customer contract or engagement.
Incumbency protection is a long-standing practice among legacy hardware vendors and, now, some cloud-based service providers. Channel veterans even call it a cousin to deal registration, which gives a partner of record priority over all other would-be resellers when uncovering a lead to mitigate intra-channel competition.
Incumbency protection and deal registration share a supporting rationale: They safeguard the partner’s investment in developing a sales opportunity or customer. Everyone is familiar with the sales adage that it costs 10 times as much to win over a new customer as it does to retain an existing one. That adage is true, and customer retention, in fact, is even more important than acquisition in the recurring revenue model. If account retention drops below 90%, the recurring revenue model becomes unstable, according to 2112 research of managed service providers’ performance.
On its surface, incumbency protection makes sense and sounds like a reasonable benefit to qualified partners (those with status). However, the practice is full of nuances, and the conventional application approach is full of shortcomings at a time when customer experience is paramount.
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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, Spotify, and other leading podcast sources. You can always e-mail Larry directly at [email protected].