Partners: Are they engines of demand creation or primarily fulfillment channels?

Aligning expectations with partner capabilities.

You may find yourself in a position where you are debating on whether bring on partners as part of an expansion strategy. The idea is to leverage your partners and grow your sales at a non-linear rate greater than your staff expansion rate.

How partners Really Operate

I've worked in a couple of places where we wanted to open up additional sales channels or bring on partners for moderately complex products.  We thought we could extend our reach by adding more, partners, and brains to the sales channel. You need to really dig in and understand if your partner is really going to be a fulfillment vehicle or a demand-creation engine.

The partners could expand our visibility into areas we didn't have contact with. They always claimed that they could put us in front of their customers at a lower per-customer transaction price including their commission or fees. 

It turns out the partners often would fall back on their previous products and product areas that they already knew how to sell. Their staff would optimize around their pay plans which often meant fewer smaller transactions or transactions with shorter time-to-sale. Our product complexity was significantly higher and the value was more nuanced than their other products. Potential massively better Cost-per-sale pricing was often washed away by people selling more of the same thing they already knew how to sell. Partners would mostly fulfill the demand that we had created. I never saw a situation where partners were significant demand generators

There are specialty areas with high initial costs and learning curves. In these cases, the reseller may have reduced the customer's purchase friction making it easier to buy from us. The partners could drive demand in markets they had expertise. This was especially true in the USG space with its complex purchasing rules.

Amazon is a weird mixed bag. It is really a retail outlet that advertises internally and assumes you know you need to come to them for an item or product category. That should put Amazon in the demand fulfillment column.  It turns out Amazon is so visible that it is its own sales engine. Amazon can aggressively lower buyer friction greatly simplifying a purchase.  It probably doesn't generate much new demand on its own but instead makes it simple to find products or be linked to via other websites, ad campaigns, and forums.

Netting this out:  You need to be realistic about every partner.  Dig in and look at the partner's capabilities and execution of their current partnerships. Determine if they are the demand creation engine you wish or a demand fulfillment vehicle and plan accordingly.

The Curve

The first graph represents a linear relationship between headcount/expense and revenue.  The line is hopefully nonlinear as a product or service catches the attention of the market. This graph can flatten over time as inefficiencies of scale creep in.

The second graph represents the ideal case where partners add essentially free or margin-reduced sales non-linearly with the original company's staff and expenses.

The third graph represents the reality that partner onboarding adds staff and reduces efficiency while a company trains its partners and aids them in their initial business.

The fourth graph describes the growth in sales via partners who can only act as fulfillment agents when they were expected to generate demand.

What do we mean by Demand Creation vs Demand Fulfillment?

Demand Creation increases interest in a product or service.  This could be marketing-driven, referral driven, or some type of education program. It assumes that fulfillment can be handled by one or more channels possibly the same channel that is creating demand.

Demand Fulfillment makes it easier to deliver products or services.  It assumes that demand is being driven somewhere else.  As an example, in the federal government space, there are often a set of resellers that handle the complexity of federal purchasing and full fill government demand.

Revision History

Created 2022 10

This document was edited 2022 to add the line graphics at the top. The 2nd graphic was pretty but was kind of content free.


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