How to build a SaaS Partner Program
When I started selling in 1999, much of technology was sold through channels.
The CDs needed installing, the servers required connecting, the cables needed plugging in - and for many smaller companies this meant working with a local IT service provider.
Companies like Microsoft, Cisco and Symantec developed global partner programs, with multiple tiers, education, incentives and marketing support to assist this army of hundreds of thousands of service providers in promoting, selling, implementing and supporting their customers.
Two main models existed:
Distribution and Resellers - (often called VADs and VARs) - these partners owned the billing and support relationship with the customer buying at a discount off list price from the vendor.
Affiliates - (or called Associates or Referral Partners) - these partners passed qualified leads into the sales team at the vendor in return for a commission (typically 10-20%) of the first year sales price.
Both of these models gave vendors benefits:
Access to the market - a global partner program could give a tech company access to customers and opportunities they could never get to directly with their own sales teams - new geographies or into companies that had locked down purchasing to an approved vendor list.
Reduced cost of sale - whilst they needed to pay the partner a margin, on top of the partner manager in their team - the economics of this were better compared to maintaining a large direct sales team for these deals.
Reduced cost of serve - the partner was onsite and had the support relationship with the customer, meaning fewer support calls to the vendor themselves. Even in an affiliate model where the partner was not paid to provide support, they often had the answer at hand avoiding a call to the vendor.
Cloud went direct
The arrival of cloud solutions in the mid-2000s changed this approach for many newer vendors.
“If we don’t need to send anything physical to our customer, do we need a partner to manage the customer relationship and eat into our margins?”
Companies like Salesforce came to market without any meaningful reseller or referral programs.
(Salesforce does provide referral margins to partners under very strict circumstances, but it is a running joke in partners that its almost impossible to qualify for the payment)
Most SaaS vendors copied this model - in researching this article I’ve looked at 50 SaaS businesses, and just a handful have any form of partner channel visible on their website.
Where partners are listed these are typically technology and integration partnerships rather than sales channels.
But SaaS is coming back to partners
In G2’s 2022 Buyer Behaviour Report they note the percentage of cloud software being bought directly from vendors is starting to decrease again, as customers try to consolidate the spend, the management, and the security of sometimes hundreds of different platforms.
Across all customer segments we see around 40% of software being bought through a partner channel.
If you don’t have those channels open, then you are missing out on revenue.
How to build your SaaS Partner Program
There is a lot that goes into deploying a successful partner program, but here are a handful of suggestions to get you on your way.
Interview your target customers
Meet with them and ask them:
Who do you take advice from?
Who do you buy from?
Who supports your IT and functional (HR, Finance, Sales, Service etc) team?
What are your goals with software purchasing - consolidation, security, cost control?
Who do you trust?
They will mention small or large consulting firms that advise them on business process and strategy.
They will mention technology resellers where they purchase their hardware
They may mention cloud service providers like Azure, Google Cloud Platform or AWS where they are adding in pre-integrated apps.
Just as in 1999 - customers are trusting the relationships they already have rather than the 80 SDR emails hitting their inbox daily.
You can then map the potential partner types across your target customers.
Determine what problem you are trying to solve
Is it access to the market, reduced cost of sale, reduced cost of serve - or any other objective that partners can help you with?
Considering the conversations I have with founders and revenue leaders - the primary goal is access to the market “we need more pipeline”.
Some partner types are good at creating demand, and some are good at soaking up existing demand.
Large software resellers can look attractive because of their size and customer relationships, but they are not going to break your product into the market. They are good at receiving calls and processing orders once you have achieved inbound demand “Can you get me a price for X”.
Instead, in the early days, it is often the smaller IT Service Providers and Business Consultants that are in your potential customer’s office and that have the ear of the economic buyer.
When this partner says “I’d recommend you get X” there is a very high chance that the customer takes their advice - that is what they pay them for.
Have empathy for those partners
A 15% commission off one of your deals is unlikely to give them a sustainable business - so its important to spend time with a few of your target partners and understand how their business does work, and what is important.
Typically an IT partner will have three revenue streams:
Technology purchasing - buying hardware, software and connectivity on behalf of the customer and making a small margin (or referral payment) on the transaction.
Technology integration - installing, configuring or customising that technology for the customer
Technology management - ongoing maintenance and support of that technology, typically on a recurring revenue basis via annual contracts
You will see that the first of those, the purchasing of technology, might be very high revenue, but will be very low margin (single digit to near zero).
The business is sustainable by moving customers to higher margin consulting and even higher margin management of that technology.
As you build out your partner program consider the margin you provide on the deal as a nice “thank-you”, but you can best support your partners by giving them the skills and support to provide consulting and ongoing support to your customers.
SaaS companies have built their customer lifetime value model on the customer onboarding and ongoing experience with their direct CSM teams - so consider how this will change (or be enhanced) with partners involved. Can you include your partners in your Success Plan?
Enable, inspire and reward
Microsoft, Cisco and others from the pre-cloud world have not forgotten how to support their partners - and you can borrow some strategies from them.
Not For Resale (NFR) - when software came on CDs vendors would provide their resellers with NFR CDs that had the software on but could only be used within the reseller for demos or their own use.
Vendors knew that if their resellers used and relied on the products themselves they were much more capable at referring and reselling them to their own customers.
Can you forgo the revenue from a small partner by giving them free or heavily discounted access to your product?
Marketing Development Fund - vendors provided marketing funding depending on the level of business that a partner produced, or the program tier they were in. A partner might receive $20,000 of funding to go 50:50 with the partner’s own funds - for an event, or promo campaign.
What type of marketing would you like your partners to support you with - customer case studies, video testimonials, “how to” training videos, round table breakfasts for peer networking?
Accept some overlap - I mentioned earlier the view in the Salesforce partner community that it is almost impossible to qualify for the referral payment. After all, Salesforce SDRs and AEs should be ‘aware’ of every prospect in their patch and therefore how could a partner possibly introduce them to an opportunity for the first time?
There will be situations where a partner brings you an account or lead that your SDRs or AEs are already working. But that partner can still accelerate, expand and de-risk your deal - so get them involved rather than introducing conflict between the partner and your direct team.
Sales Incentive Clubs - when I ran a program like this at email security firm MessageLabs we launched “Club MessageLabs” aimed at individual reps at our partners.
While the company themselves received 15% for a referral, the seller also received a monetary reward on a branded pre-paid debit card. When they paid for a meal or bought some tech using the Club MessageLabs card it reinforced why we were the partner to work with.
End of month promos - Again at MessageLabs, we used to send out a case of beers and wine to the top partners for the last day of the month. Times have moved on a little from then, so maybe there would also be some zero percent or alternative gifts - but it showed that we were thinking about our partners and their own targets and successes.
Trips and Awards - Each year vendors would often take their top performing partners (leaders or individual contributors) away on a President’s Club style trip. These trips were an opportunity to provide awards to the top performers and reinforce the personal relationships that these partnerships were built on.
Don’t wait to start
So there we have a few ideas around building out your SaaS partner program.
As you see the number of Quality Conversations per SDR per day continues to decline - perhaps now is the time to consider if your customers want to buy in a different way?
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