Should You Have Them?
Yes–you should absolutely have reseller levels. If you have a lead, and you have 10 resellers in the prospect’s area, who should get it?
The response: the BEST reseller. And how do you determine the best reseller? How about one that has shown initiative, learned your product, can support it–and sell it. Let’s call them GOLD.
You now have reseller levels.
Now what about your Gold partners that want a larger volume discount (more margin) because they sell a LOT more. Let’s also say they can integrate with it and can handle both first and second-line support. They will also commit to a higher quota (they do it anyway), plus are willing to pass a test to prove they can support the customer. Should you treat them the same? No. Let’s call them Platinum.
There are your levels.
BTW – stick with common names like Authorized, Gold or Platinum. This is not the place to get creative–sort of like Associate, Bachelors, Masters and PHD (this ways partners don’t guess which is higher (the double dip Platinum Diamond or the Gold Merange–I’ve hear some crazy names).
Plus, your program automatically creates the behavior you want–increased exclusivity and loyalty from a shared sales force (who can sell competing products). As it gets toward the end of the year, they will often have to reduce sales of competing products so they can hit your quota. You are getting exclusivity–without having to contractually require it (and most will not go exclusive unless you have a big brand (i.e., AutoDesk, Cisco)).
BTW, when you have a NEW program, do you actually have levels for your new partners? No–they are all new, nobody knows your product, and they have no sales track record. However, you “announce” you have levels (to reward commitment), but you still have to compile enough sales history once you have enough partners to set the quotas.
Your initial policy will say you’ll set the levels and requirements within the 6th month–so you have time for sales history, and to put together your training.
In addition, when you recruit, everyone comes in a the mid-level to start. Many already have domain expertise, your right customer/prospect type, and know a similar product–and they have paid their dues. They also don’t want to start over again (nor should they–they are are only new to your product, not the category).
When they come in at the mid-level they also get a decent margin to compete, until they can prove they can maintain that levels. The time depends on your sales cycle–if it takes 6 months to close a deal, they probably need a year to hit the volume. You have to set it up like this to start–so when folks come in later at Gold (so they can even compete), and your existing Gold and Platinum complain, you can remind them that they came in the same way–so long as it is fair, it is fine.
Plus, you should always try to recruit your competitor’s partners, and if they are already Gold (let’s say 30% margin), you’re going to have little success enticing them away with Authorized status and margins (20%).
In addition, if you have 10 resellers that come in at Authorized, you might have 3 that become Gold over their first year. But, if you start all 10 resellers at Gold, you might have 7 that work hard to maintain that level–since the fear of loss is greater than the desire for gain (Hey everyone, we’ve got to hit this quota or we will LOSE money).
I have some channel managers that say they will phase into levels. Rubbish. It is just as easy to run it with levels as without (even if not fully defined–it typically takes a full year for most programs to mature). And some partners won’t come on board without them. Plus, again… you don’t have the advantage of “Gold” to recruit away your competitor’s partners.
Gold and Platinum partners are worth more to you. You pay more, but they handle first and second-line support, commit to quotas, and are much more consistent. This has real value. But when they come on board, they can’t handle support, nor are they experienced with your product. So why not pay them less?
If you hire an experienced Direct Sales Rep, you pay them more than an unproven newbie straight out of college. Why? They may not know your specific product, but they may know your category. They already know how to CLOSE deals (proven sales experience). So, they cost more, but you get immediate results and they are a proven commodity.
Plus, you don’t get your best, experienced, proven direct sales reps at beginner rates–same with experienced reseller partners.
In addition, levels have been around since the early 80’s–resellers know this model and it is NOT too complex for them. Just because you don’t know about it (new to the channel) doesn’t mean you should change a program that has WORKED for decades. Welcome to their world–learn it and leverage it.