As technology companies drive more and more revenue through subscription offerings, one of the biggest challenges you may face is how best to work with your channel partners. Most of the time, both the vendor and the partner are set up to sell and support traditional transactional offerings, and these relationships have been in place (and largely unchanged) for decades. The movement to XaaS has caused such a challenge that TSIA launched an entirely new research practice, XaaS Channel Optimization, this past year to help you navigate these waters.
And while the initial sale of XaaS offerings is challenging enough, driving additional upsells and cross-sells through partners is even more difficult. Even for direct sales and customer success organizations, it’s confusing enough for companies to figure out who handles the expansion sale, how to best enable it, and how to make the whole thing cost-effective.
Channel partners have, at best, a limited understanding of your offerings and their value proposition. If you’re going to leverage their capabilities and expertise to drive expansions, you’ll need to avoid some of the common mistakes that our member companies have made in trying to make this happen. That’s why Anne McClelland and I came up with a list of the 5 most common mistakes companies make when they try to drive XaaS upsells and cross-sells through their partners:
#1 - They don’t choose the right partners.
Selling (and upselling) XaaS offers requires an entirely different go-to-market model than selling traditional transactional offers. TSIA provides its LAER (Land, Adopt, Expand, Renew) customer engagement model as the north star for navigating this process.
For partners to drive expansions effectively, they need to be able to land the deal in such a way that adoption is possible, aligning around outcomes and the ability to successfully implement the deal.
Adoption plays are even more critical for successful expansion. After all, if the customer doesn’t use what they’ve already bought, it’s unreasonable to think they’ll buy more.
Partners need to have capabilities around each of these motions (more on that in a bit), and if they don’t have them in place already, it’s unlikely they will be able to put them in place just for your company’s sake. Choose partners that know the space and have the required expertise.
#2 - They assume that expansions “auto-magically” happen on their own.
In TSIA’s Expand Selling research, we coach our members that you can’t rely on relationships to drive customer growth. You have to be proactive and intentional about enabling the process.
Does your company have a way to systematically provide leads to your partners? According to TSIA research, less than 30% of companies do.*
If you’re assuming your partners understand your XaaS offerings well enough to provide a prescriptive path around upsell, or that they know your service offerings well enough to suggest additional services without your very prescriptive guidance, you’re probably deluding yourself. If you want partners to help you expand your customers, you have to proactively help them by telling them where to look and what to sell.
#3 - They underestimate the value of data and analytics.
So then, how do you help your partners find new opportunities? One of the best ways is to leverage the data you have on how the customer is using your offerings and the problems they’re having.
In an XaaS environment, it’s the vendor who has most of the insights into the customer, not the partner. The vendor knows how much capacity the customer is consuming. They know what features the customer is using. They know what problems the customer is having. They know when the customer’s contract comes up for renewal. All of these things are important to the partner if you want them to be able to expand the customer’s use of your offerings. You need to make sure you have a systematic method to get this information to the partner in such a way that it’s timely, accurate, and useful.
#4 - They overestimate the value of training and compensation.
Anne McClelland can’t even tell you how often she hears questions like “How should we train our partners on selling our XaaS offers?” or “Should we pay our partners on TCV or give them a cash SPIF on selling our subscription offers?”
TSIA has a strongly-held position that, while compensation and training are important, they come last, not first, in your go-to-market plan. As we show in our 7 Levers of LAER transformation, you first have to figure out how to align your strategy with partners, make sure you have consistent measurements (KPIs), know what has to be done to make it work (critical practices), and who is capable of doing it (roles and responsibilities).
Only after those things, including the creation of compelling offers and proper segmentation, are in place can you even think about training and comp. It’s clear...very clear...that training and compensation will not solve this problem by themselves.
#5 - They don’t focus on capabilities...theirs or the partner’s.
TSIA defines capabilities as the people, processes, and technologies required to accomplish a business objective. To choose and enable partners effectively, you need to understand what LAER-based capabilities are required to get the job done, and where the partner has gaps.
For example, companies who are successful about driving XaaS offers through partners often provide adoption assistance to their partners. However, only 40% of them provide customer success managers or share customer success plans with their partners. Only 30% share adoption analytics. Less than half train their partners, not just on the offerings themselves, but on the required adoption plays. That’s extremely unfortunate, as training on the adoption of offerings is tightly correlated with success.*
Avoiding These Mistakes. What Can You Do Differently?
We suggest taking the following steps to learn more about the topic of growing your existing customers through channel partners:
Watch the webinar: Anne and I just completed a 45-minute webinar on this topic, where we go much deeper into the ways you can avoid each of these pitfalls. It’s worth taking the time to dig into the details.
Read Anne’s compelling research paper: “The Evolution of Partner Trends in XaaS.” This report provides insight into the results of TSIA's Channel Ecosystem Maturity Survey, which covers topics such as:
- Building partner incentives and programs in XaaS
- Metrics that matter in transitioning to XaaS
- The importance of lower cost of selling through the channel
- Creating enablement and tools for partners
Take TSIA’s Rapid Research Response Poll: This 6-question survey will take you less than 2 minutes to complete, and covers incentives for driving subscription sales, expansion, and renewals through partners. You’ll see the results instantaneously and learn real-time how your peer companies are tackling the issue.
Sources:
* TSIA 2020 XaaS Partner Ecosystems Trends and Directions Survey