Incentivizing Channel Partners in a SaaS World
The channel has witnessed an influx of new partner types alongside new business models in recent times. These changes have meant that vendors must adapt how they engage with their partners in order to thrive. One of the most important changes for a vendor to consider is how to best for incentivizing channel partners in this new world. The world of Software as a Service (SaaS) and monthly recurring revenue (MRR) models.
This was one of the topics under discussion on our recent webinar: ‘Modernizing Incentive Programs for Today’s Channel’ with Kenneth Fox being joined by two truly amazing Women of the Channel: Sunny Song, Director Channel Operations at SentinelOne and Margaret Fetting, Channel Strategy, North & Latin America with Zebra Technologies. These two channel incentivizing experts weighed in on the best way for vendors to adapt their incentive programs to meet changing partner needs.
Download the full webinar here: “Modernizing Incentive Programs for Today’s Channel”
New Model, New Incentives
It is firstly important to differentiate SaaS and cloud services from the traditional resale model. With the subscription model, the customer journey never really ends. Vendors, through partners, need to re-earn a customer’s business. This can be as often as every 30 days in some cases. As such, it calls for a new way of incentivizing channel partners.
“Some people are trying to run the same incentives and expect it to work for the new model and it typically doesn’t, just based on the pay-outs alone” said Kenneth Fox, CEO, Channel Mechanics.
So where should a vendor start when drawing up an Incentives Program for a SaaS business model?
“The principle of why vendors offer incentives to partners in the first place remains pretty much the same. But it’s about evolving the programs to meet the changing channel landscape” said Sunny Song, Director, Channel Operations at SentinelOne. “We want to incentivize partners for their loyalty, for bringing end customers and revenue to the table. But how the program roles are defined may need to be modernized a little bit more”.
Song said this might mean paying higher percentages for SaaS solutions, for example, or adding programs to capture business from referral and influence partners.
At the same time, it is important to ensure that, as a vendor, you are still capturing the existing business of your older products. So you need to differentiate between those legacy products and incentivizing partners for newer cloud offerings. This adds an additional layer of complexity for vendors.
Vendors should therefore have an operational process that supports the execution of incentives. This involves firstly, vendors having a way to measure the results to prove that the incentive is working. And secondly, that it’s effective.
Desired Behaviors and Results
Margaret Fetting, Channel Strategy, North & Latin America, Zebra Technologies said before starting any program, the vendor must have a clear strategy as to their desired end results. How they measure what partner success looks like is equally important.
“Before you go into anything such as an incentive, you need to have that strategy, and a definition of what the success looks like. Once you’ve got that, you can start moving into the desired behaviors that you’re trying to obtain from partners to determine the mixture of incentives you want to include in that incentive program. Whether it’s a spiff, points-based, or a rebate. Because each of these types will have a different impact on the behavior in the organization.”
The move to SaaS and MRR means there are a lot more moving parts that impact how vendors design their programs. This is in addition to the types of activities or behaviors that they now have to incentivize.
“An important aspect to keep in mind is being flexible. You want to make sure that you’re looking at your partner types, what type of business model they have, and adjust incentives based on their business model, as you’re migrating from a legacy business to a more SaaS or MRR type model,” said Fetting.
“You also might want to look at doing different pay-outs based on the solutions being offered. That new business that your partners are bringing – the earlier they bring you into the conversation, there’s opportunities to provide incentives there. And then as the channel migrates to a SaaS model, you have to think about renewals. What sort of incentives do you want to offer to make sure that the renewals are with your products?”
Ultimately, the partner ecosystem is changing. And the incentives that might have worked for traditional products and business models, won’t work in the new channel landscape.