Mark Tice Returns:  It’s Time For SaaS Companies To Do A Channel Check.

About three years ago, I had a conversation with an old friend that led to a post, Ten Pearls of Enterprise Software Startup Wisdom from My Friend Mark Tice.  In that (quite popular) post, I shared Mark’s top ten list of mistakes that enterprise software startups make in sales and go-to-market.  If you’ve not read it, take a look — particularly (in today’s environment) with an eye toward mistakes five through ten.

I enjoy talking with Mark because our skills and experience are complementary.  My core is marketing.  Mark’s is partners.   While we’ve both done bigger things from those foundations (e.g., Mark was a CEO and an operating partner at a PE firm), I believe you’re never quite as comfortable and fluent as you are in the area where you grew up. 

Moreover, since partners is generally considered even more of a dark art than marketing, it’s great to have a friend in the business.  When it comes to partners, the Twitter cliché few understand this is actually a reality.

Before diving into Mark’s guest post, below, I want to try and drain the swamp by defining some basics:

  • Partners should be used as the catch-all term to describe companies with whom you have one or more relationships that are presumably friendly and mutually beneficial.
  • Alliances are a type of partner relationship.  Alliances partners collaborate with you to help sell your software, but — and this is key — they do not sell your software.
  • Channels are another type of partner relationship.  Channel partners sell your software (i.e., “they take the paper”) and they may do so either working in collaboration with you (e.g., a local system integrator who does implementations and takes paper) or on their own (e.g., a software vendor who embeds your product in theirs and sells the composite).

The thing that took me years to learn is that we should classify relationships, not companies.  For example, Deloitte is one of several global systems integrators (GSIs).  GSI is a type of company; it describes their business.  It is not a relationship type.  In fact, a software vendor may have several different partner relationships with a GSI.  For example,

  • A North American co-sell relationship (alliance) whereby the GSI agrees to place the vendor on their recommended solutions list, work with them to sell and implement customers, and perhaps do some joint marketing programs.
  • They may have a global embedded resale relationship (channel) with the GSI’s Financial Services practice where the software vendor’s product is sold as part of a bigger vertical solution, with no involvement from the vendor.
  • There may be a services relationship (channel) where the GSI agrees to use the vendor’s strategic consultants, acquired at a wholesale price, blended into the team responsible for a project (and in order to ensure there is specific product expertise on the team).
  • There could be a value-added resale relationship (channel) in certain regions (where the vendor does not yet have a presence) where the GSI sells the software and associated services, acting as a geographic distributor in those regions.

Thus saying, “we have a GSI relationship with Deloitte,” as you can hopefully see, doesn’t make a lot of sense. GSI is a type of company. We can and often do have several different relationships with a single GSI.

To summarize, at a high level there are two types of partner relationships: channels and alliances. Channels sell software, alliances don’t.

Note that most people are not this rigorous in their thinking and tend to use partner, channel, and alliance as synonyms and refer to companies using relationship types — and confusion can sometimes result.

With those basics in place, let’s move on to Mark’s top five recommendations for how SaaS companies can do a “channel check” — well, I suppose he means partner check, but channel check does have that alliterative ring to it.

Over to Mark 🡪

The other day Dave and I were discussing how companies are adapting to the many changes in today’s landscape and I honed in on one of my favorite topics, partnerships. 

For healthy SaaS companies, 25 to 50% of ARR is positively influenced in some way by partners.  Some resell.  Some recommend.  Some create a vacuum in the market that can be exploited (e.g., technology alliance partners). And yet, in most SaaS companies, the person looking after partners has an office that’s the equivalent of Harry Potter’s bedroom underneath the stairs and their phone only rings when the company needs a quote for a press release or sponsors for the user conference.  Compound this general lack of attention with reductions in headcount and tough economic times, and partners can devolve from an afterthought to a never-thought. 

As a former channel sales manager, strategic partners executive, CEO, and operating partner at a private equity (PE) firm, I talk with a lot of companies (and investors) about how to leverage partners to grow SaaS businesses.  Here’s my list of top five partner-related issues that you can use to do a “channel check” on your SaaS company. 

Just for fun, we’ll do it in countdown format.

5.  Enablement.  More often than you might expect, partners depend not on your partner program, but on relationships with individual sales reps or marketers to get the latest news, slide decks, competitive information, and collateral. The simple fix is to spin up a portal that gives partners self-service access to basic sales tools and training.  Yes, you should be careful to keep confidential information confidential — and that might require a few edits here and there — but providing easy access to the latest and greatest information will really improve the health and abilities of your partners.

4. International.  We could dedicate the entire blog post to going international, but we’ll keep this brief by focusing on an example I recently found working with a $50M SaaS company.  They were the leader in the US market but in fourth place internationally, so I asked why they weren’t paying more attention to the international opportunity.  They answered that they needed to focus on getting another few points of market share in the US and that they viewed international as “tactical revenue.”  Now I’m not sure what they meant by tactical revenue [1], but my take is any revenue that we can get — without introducing new core product requirements [2] — is good revenue and if we can’t get it ourselves, then why not use partners to get it?  Moreover, geographic distribution is one of the cleanest forms of partnership because you can set up distributors to entirely avoid dreaded channel conflicts [3].

But in this company, the person running partners was an entry-level marketer who lacked both the experience and the influence to drive the business. They’d signed partnerships with geographic exclusivity, partners were pricing far below market, and (despite the low prices) their win rates were far below those of the direct sales force.  The worst example was when a partner who had long-term exclusivity in a major country called to inform the company that they were handing off their business to their son because he was too old to keep working in construction and who had zero software experience.  (Guess we won’t be selling anything in that geography for a while.)

Don’t do this.  Instead,

  • Leverage geographic distributors to sell your software in low-hanging-fruit countries [4].
  • Sign de facto preferred, but not exclusive distribution relationships.
  • Pick the de facto preferred partner based on who presents the best market development plan for the geography.
  • Hire a professional partners or channels manager to oversee the distributor relationships.

3. Pricing.  There are 3 keys to channel partner pricing. First, make sure the price list is appropriate for the intended market. This is most obvious in the international example above, but it also applies domestically — e.g., if partners are representing your company in the mid-market, be sure your pricing is appropriate for the value you deliver and your position in that space.  Second, be sure your pricing includes all of the elements required for success (e.g., starter kits).  Don’t give partners a partial price list that leaves customers hanging in deployment or solution development.  Third, always tie a channel partner’s discount to your price list and not net revenue.  (Or, if you have to use net revenue, then make sure there’s a sufficiently high floor price in the contract [5].)  Royalties based on net revenue almost always encourage partners to discount your product disproportionately and shift the revenue to the higher-margin portions of their solutions. 

2. Sales alignment and compensation.  Getting the right alignment and compensation structure requires a Goldilocks solution.  Paying a kicker to reps when partners resell may cost you additional commissions and lost ARR if there was an opportunity to take the deal direct.  But refusing to pay a finder’s fee when a partner brings you a big deal may cost you not only that big deal but also drive the partner (and all their other deals) to a competitor. Getting clear on how you want the sales team to interact with partners and tuning sales compensation to match is key.  It’s hard work.  There is no one right answer.  And there will always be conflicts — the goal isn’t to eliminate them, but to manage them.

By the way, if you haven’t adjusted your sales and partner compensation models for a few years, then they’re unlikely to be “just right” today.  Run a review. 

1. Partner strategy.  Most SaaS companies treat partners as tactical extensions to their business – necessary evils on bad days and nice-to-haves on good ones. The key is to get clarity on what you want from partners, identify and recruit the right partners on the right business terms, put together the right enablement program, and then execute like crazy.

The strategy and elements underneath it should be revisited once a year as your business evolves. You change over time and so do your partners.  You need to revisit strategy and relationships accordingly.

What should you do to make sure you’re maximizing your partner ecosystem?  Remember these three principles:

  • Channels are about optimizing market reach versus margin. 
  • Partnerships shouldn’t be an afterthought. Tending to the basics of partnerships should be part of business as usual.
  • You get the channels/partnerships you deserve.

There’s a simple test to see if your partner strategy and program are sound. Hop on a Zoom (or get in a conference room) with your CEO, VP Sales, VP Marketing, and head of partnerships.  Ask everyone to take five minutes to write down a short description of your partner strategy and list your top 3 partners. Then spend 30 to 60 minutes talking about your answers, how well they align, where they don’t align (you might be surprised here), and what you want to do to get on the same page.  Agree on a new set of goals and then set OKRs accordingly.

Once you get more deliberate about partners, there are three things to keep in mind:

  • The 80/20 rule definitely applies to partners. You don’t have to do anything extraordinary to make the business thrive. Do the basics and do them well and that will almost always lead to success.
  • If your company is challenged to sell direct, fix that first. Don’t fall into the trap of thinking, “we can’t sell our products, so we’ll get partners to do it for us.”  It never ends well [6].
  • Most SaaS companies will exit to larger software companies and the best exits often start with partnerships. It’s never too early to partner with big players and form executive-level relationships so when the acquiring General Manager hopefully signs up to pay above-market price for your company, they’ll do so with the full confidence that you can deliver.

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Notes (by Dave)

[1] They probably meant non-strategic or opportunistic revenue which is a reasonable concept when considering target markets.  That is, if you have a strategic focus on financial services, that revenue is strategic in the sense that you are actively looking for more of it and thus eager to hear about product requirements that will enhance the product for other financial services customers.  But, at the same time, if a pharma company wants to buy the product “as is,” then you should be happy to sell it to them.  With strategic revenue, you can entertain new product requirements discussions.  With opportunistic revenue, sales need to sell what’s on the truck.

[2] And if the product is properly built, localization isn’t really a core product requirement.  Moreover, localization isn’t even always required.

[3] By using either contractually exclusive (undesirable) or de facto preferred partners in any given geography.  

[4] That is, where it’s easy, where localization requirements are limited, and you don’t need to build language skills within your company to work with local staff.

[5] They can always call to request a special discount below the floor.  In practice, this usually acts as a highly desirable big deal detector.

[6] Amen to that.

Mark is currently working as an advisor.  If you want to reach him, shoot him a LinkedIn message or Inmail. If you have questions or comments, you can also post them as blog comments here and I’ll make sure Mark sees them.

Slides from my SaaStock Presentation: How To Connect Your C-Suite to the Ground Truth

Earlier today I spoke at SaaStock USA in Austin and gave a presentation on connecting your c-suite to the ground truth. I think it’s important that startup founders and leaders understand how easy it is to get disconnected from the ground truth (i.e., the reality of the field, deals, and customer conversations) and how that problem only gets worse as you scale. Largely it’s caused by layers of management, but it starts early — with just one.

It’s also caused by process, specifically the review process that most startups use. On messaging, you see the blueprint (in a QBR session), but not the house. In sales, you review the playbook, but don’t see the play. Thus, constantly seeking the ground truth — what’s actually happening on the ground — is an important part of any startup leader’s job, for both operational and strategic reasons.

In this presentation, I dive into why the problem occurs, why it’s worth solving, and what you can do about it. Specifically, I offer three ways you can connect yourself and your c-suite to the ground truth:

  • Deploy conversation intelligence (CI) software. If you’ve done so already, try to climb the value stack I outline.
  • Run third-party win/loss analysis.
  • Perform an annual or event-driven proprietary market study where you answer both fairly standard questions and ideally, a list of special questions you’ve accumulated using a hypothesis file.

The slides are embedded below [1]. You can download them on Drive [2].

Thanks to everyone who attended and to SaaStock for having me.

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See my blog bio and FAQ for relevant affiliations.

[1] As a series of images using a WordPress blocktype. This is new for me so please excuse any bugs. I had to stop using Slideshare because they have become amazingly intrusive with advertising (so as to make the site unuseable IMHO) and I no longer want them monetizing my content.

[2] For the time being, slide downloads are only available on Drive. Of late, I had been making them available on Drive and Slideshare, but I can no longer use the latter, see note [2].

Come to my SaaStock Presentation: How to Connect Your C-Suite to the Ground Truth

This is a quick post to remind everyone who’s attending SaaStock USA in Austin later this week to come to my session at 2:30 pm on Thursday, June 1 on the Scale Stage, entitled How to Connect Your C-Suite to the Ground Truth.

I’ve always believed that the hardest part of strategy is not figuring out what to do given what’s going on, but instead, more fundamentally, figuring out what’s going on — and getting consensus about that with your C-suite team. Towards that end, in this presentation I’ll discuss three things you can do to better connect your C-suite to the ground truth so you can better understand what’s going on, upgrade the quality of your execution, and better assess the effectiveness of your strategy.

The full agenda for the event is here. I look forward to seeing you there.

Here’s a link to my post with the slides and, if SaaStock posts a video of it, I’ll link to the video as well. Please join us, it should be a lot of fun.

My Appearance on the Exit 5 Podcast: Traits of a High-Performing CMO

Just a quick post to highlight a recent podcast appearance I did on the Exit Five podcast, which is produced by the Exit Five community for B2B marketers, led by veteran marketer Dave Gerhardt.

In the episode we touch on the following topics:

  • My background and career path and my positioning of such: 10 years a CMO, 10 years a CEO, and independent director at 10 companies.
  • The origin of Kellblog, which was originally called The MarkLogic CEO Blog, created so I could walk in the footsteps of my media customers.
  • My early experiment with ChatGPT, see the comments on the post for an example that a friend did to prompt it better.
  • What makes a great CMO?
  • How to be a great partner to sales.
  • How and why to become the dispassionate analyst. (Or anchor — I don’t make the news, I just tell you about it.)
  • How to be a great partner to CEO.
  • Why is it often hard to partner with sales? Misaligned incentives or more than that?
  • How and why to become Woodstein with the VP of Sales.
  • How to call out misalignment and what to do about it.
  • When in doubt, serve sales, not the CEO.
  • How to avoid finger-pointing at the stage 1 to stage 2 handoff.
  • The idea that marketing owns a lot of the high funnel, and rides shotgun on the low funnel — and can help on both.
  • How to present information, non-defensively, and without automatically providing reasons or fixes. (Instead just seek discussion on whether we think it’s a problem and how high a priority it is to fix it.)
  • The right answer to most marketing challenges is this: the one I agree to with the VP of sales. The idea being that you have 15 marketing tools in your bag to fix something and want to agree with sales on which ones to use, when.
  • The importance of benchmarking and metrics.
  • A reminder to use market research — for many reasons, but in particular to avoid navel-gazing.
  • Spend 5-10% on measurement to ensure effectiveness on the other 90-95% rule.
  • Why the CMO should develop a strong overall understanding of the business and its metrics.

The episode is available on Apple, Spotify, Google, and Castbox.

I thank Dave for having me. I think the episode turned out really well thanks to his thoughtful and informed questioning.

Bottle the Love: Selling Customer Satisfaction vs. Vision

A funny thing can happen with startups. Sometimes, the reasons customers love the product end up not being the same reasons that the founder wants them to love the product. This may sound bad or scary, but it’s not. It’s actually an opportunity, provided you recognize it, understand it, and take advantage of it.

I’ve blogged previously on the difference between selling solutions and selling product and on the difference between selling product and selling vision. In today’s post, the distinction [1] we’ll draw is between selling the reasons customers actually love the product and selling the reasons founders want them to.

Can such a gap develop? Absolutely. The founder is usually thinking about the future, implementing exciting new features that align with a vision of not only what the product should be but, more importantly (to them), how it should properly be used. Meanwhile, back in the trenches of reality, overworked directors and VPs are buying the product to solve practical problems that make their bosses happy and let them live to fight another day.

So when a new head of product marketing — chartered with a revised messaging exercise — shows up and asks, “why do people buy our product, anyway?” they’re likely to hear some pretty inconsistent answers.

Let me demonstrate this with two examples:

  • A data intelligence founder might answer, “because we help them build a culture of data-driven decision making.” A dataops director might say, “because it helps our pricey data scientists find data faster, so they can spend their time analyzing data instead of looking for it.” A data scientist might say, “because it helps me find clean data quickly, so I can train my models correctly the first time.” [2]
  • A conversation intelligence founder might answer, “because we help them do data-driven coaching to unleash each seller’s potential.” A salesops director might say, “because it’s cheaper than the big guys and offers all the functionality I care about.” A sales VP might say, “because it’s really well designed and my sellers actually love to use it.” A seller might say, “because it keeps me honest about how I’m doing on sales calls and ultimately will make me more money.” [3]

That revised messaging exercise now looks a lot harder than it did a minute ago, not because different buyer personas are giving different answers, but because none of them echo the founder.

What’s happening here? What should we do about it?

Two things are happening:

  • You’re hearing the point of view of different buyer personas on product benefits. This is great. Once we talk to enough of each to be reasonably sure we have the representative persona viewpoint, we can burn that into our messaging architecture, put it on the solutions-by-role section of the website, and give it to sales for customizing presentations.
  • No one is echoing the founder because the founder is messaging on another plane. A chief data officer might exactly echo the data culture claim. A chief revenue officer might see their job as unleashing the potential of their salesforce. But those are very high-level reasons, so high level, that we need to classify them as vision.

The founder is serving dessert before sales can serve the entree. They’re delivering an important message. That message will likely resonate with high-level, executive buyers. But it’s not a substitute for the actual reasons why customers buy and love the product.

In this situation, product marketing’s job is to do two things:

  • Identify the problem, and frame it properly. We should not be arguing over which is the “right” message for sales. These are two different types of messaging. Sales should talk about why customers actually buy the product. Founders should talk about their vision for the product and the market. [4]
  • Bottle the love. Bottle up — capture, distill, and structure — the key reasons that customers love the product [5], and build those into the messaging architecture, teach them in sales training, and drive them through campaigns. Those reasons — the ones that effectively came from the customer’s own peer group — will tend to resonate best. [6]

We can’t sell software on vision alone. We need to market the sizzle and sell the steak. To do that requires knowing the difference between the two, and then capturing, distilling, and structuring the actual reasons customers buy and love your product.

That’s what I mean by bottle the love.

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[1] As NYU’s Jay Rosen has said, when in doubt, draw a distinction. He demoed this most recently in an MSNBC interview that shows both the power of framing and excellence in practicing-what-you-preach when he ignores an odds-framed question in favor of a stakes-framed one.

[2] I pick spaces I understand because it makes my examples better. That said, readers should be aware that I’m in angel investor, former director, and informal advisor to Alation, a leading data intelligence provider. That said, this is just my take on their messaging, and probably a somewhat dated one.

[3] I love conversation intelligence (CI) as a category and have put in and/or recommended CI at many companies, all this well before I joined the board of UK-based Jiminny which inspired this example. See prior footnote and understand this is my take on what they do, not their latest and greatest messaging.

[4] While this will be controversial, I’m actually not a big fan of sales talking about the vision. It devalues the message, scoops the user conference keynote, and generally doesn’t come off well. It also has the potential opportunity cost of forgetting to sell the actual reasons customers buy and love the product. For these reasons, I recommend that companies who product formal vision decks restrict who can deliver them. Keep it special.

[5] Speaking broadly here. They may love the product because of the company that builds it, so I’m not presupposing that these are all strictly product feature/benefit messages.

[6] They can also help the founder bottle the vision messaging as well, for example, by helping structure the founder’s keynote presentation at the annual user conference. But don’t confuse that messaging with the standard one for new sales opportunities.