ASK CHANNELNOMICS: Are Partner Tiers in Channel Programs Obsolete?

At Channelnomics, we field questions about best practices, partner strategies, and channel programs every day. “Ask Channelnomics” provides the answers to some of the most frequently asked questions we receive from vendors, distributors, and partners.

Question: Tiered channel programs seem like a thing of the past, the way the old channel operated. Do partner tiers in channel programs have relevancy and value in the service-based ecosystem channel of today, or are they obsolete?

Answer: That’s a great question. Many vendors have experimented with point-based and single-track channel programs to level the playing field, provide new means of distributing incentives and resources more equitably, and simplify the partnership process. In our estimation, they all lead to the same place: back to something resembling partner tiers.

Partner tiers in channel programs serve a useful purpose regardless of the era. They give vendors a mechanism for segmenting resellers, integrators, and service providers based on defined criteria: revenue generation, productivity, capabilities, engagement, etc., so they can apply their limited resources with greater focus. Vendors can’t give all partners the same level of attention, incentives, discounts, and support. Partner tiers are a means of aligning resources with partners more equitably.

In practice, point and track systems often mirror the segmentation of partner tiers. This is a valid concern; however, vendors can create partner tier structures and requirements that offer all partners an equal opportunity to obtain status and benefits. This can be achieved by emphasizing commitment and investment over revenue for status determination. Some vendors will grant status based on frequency and consistency of sales, customer success, renewal rates, and other performance-based metrics.

Vendors can have flat, non-hierarchical partner program structures. They can offer all partners access to resources, support, and benefits. Considering that up to 80% of channel sales involve nonstandard pricing, which includes additional discounts on top of standard benefits and incentives, a vendor can give partner opportunities special consideration on a case-by-case basis. However, most vendors will want to enact controls around this process to prevent abuse, and the creation of standards often looks like tiers.

Channelnomics doesn’t foresee an end to partner tier structures in the channel. While tiers may evolve and become more creatively implemented, vendors can establish programs within their partner programs to provide opportunities for disadvantaged partners. Nevertheless, partner tiers will remain a vital part of the channel paradigm, serving as a means for vendors to categorize similar groups of partners and align limited resources.

Have more questions? Our analysts have answers. Send your inquiries to mfrank@channelnomics.com.