Customer relationships are based on good intentions. Businesses spend a lot of time and money getting to know their market and their customer, so that when they can deliver the right product at the right price at the right time, a marriage of wishes will take place. A successful union means customer loyalty, and the opportunity to provide services and more products.
But increasingly, companies don't meet their customers directly. AMR Research estimates that 70 percent of companies today earn most of their revenues through indirect channels: dealers; agents; value-added resellers; wholesalers; and distributors. These are the matchmakers of business.
Partner relationship management (PRM) is the automation of complex and difficult to execute tasks between companies and their indirect sales and service channels before, during and after a transaction. It's part software, and part process. Usually accessed through a portal, PRM software works to take labor costs out of processes, improves the quality of information flow, and allows measurement and analysis of channel partnerships.
Indirect partner relationships are often carrot and stick affairs that receive the same scrutiny in lean times as supplier relationships do. But partners are also indispensable conduits to commerce, so they're treated with care. "They have independent agendas, so what you have over the indirect channel is this black box," says Drew Williams, VP of marketing at PRM vendor ChannelWave. "On the direct side, information flows fairly well through customer relationship management (CRM), sales force automation (SFA) and call center software, because you can dictate the software and make your reps use it."
Likewise, on the supply side, businesses can choose and leverage relationships with visibility to many suppliers. "And then," says Williams, "you have this rogue bunch of belligerent folks over on the indirect channel who just cross their arms 99 percent of the time and say, 'You can't do enough for me.' And the enterprise says, 'You're right, it would cost me a fortune. I can't put enough people on the phones, I can't get back to you quick enough."
The challenge then, is to coax indirect channel partners to participate through automation of processes that benefit both sides. According to Scott Creighton, VP and GM of Siebel PRM, companies should first segment their partners and target them for development. "We used to treat all partners the same, just as we did customers. We're not going to do that anymore. The gold partners who are driving my revenue will get the most leads and marketing funds. The others, we develop."
The Customer Lifecycle
Segmenting partners means understanding their roles and relevance in the pre-sales, sales and post-sales lifecycle. Tom Mescall, SVP of Marketing at PRM vendor Comergent describes this in three questions. "How do you continually work with partners on new products, promotions and leads? How do you help them transact more efficiently with you, the enterprise, and transact more efficiently with the end customer? After the sale, how do you service the customer?
The greatest demand for PRM currently lies in the pre-sales stage, and often boils down to a pair of thorny issues: Lead management and cooperative marketing (co-op). "Lead management is by far the biggest issue there," says AMR Research analyst Louis Columbus. "People are looking to slam-dunk on their income statement and drive incremental revenue."
Scott Simon, who works at consultancy Akibia, says PRM works best when manufacturing and channel salespersons talk directly to one another, but there's an inherent conflict of interest. "Companies that try to implement these automated systems get into the failings of SFA implementations. You know, Big Brother is watching you. When I go into a customer who is thinking about PRM, they want to push leads out to partners, and if nothing happens in 30 days, yank them back and give them to somebody else. And I don't think that sits well with partners."
One way to address this is through PRM solutions that comb back end systems for insights into customer and sales behavior. For instance, says ChannelWave's Williams, partners are selling single units of a product where there is a market for units of 10. "Analytics tell me the margins are better and that my partners could make more money." A database targets sellers of one unit with a email campaign offering statistics on what other partners are selling and where. It also offers 24/7 training, a price discount for selling units of 10, and marketing funds for a campaign. "The partner tries it, sells more or perhaps raises his margins," says Williams. "Then we go around the cycle again, capture, analyze, optimize."
Software can also address the "black hole" of cooperative marketing. Based on sales, branded manufacturers routinely pay for a percentage of marketing that features their product. Likewise, in high tech, resellers may request a partial subsidy for a Webinar, or a booth at a trade show. But companies want to know where the money has gone and the fate of leads associated to it. Manufacturers worry that their partners cheat; resellers sit for weeks out-of-pocket waiting for reimbursement.
PRM automation "can expedite posting of funds, put in a request for a program, approve the program, request dollars," says Yankee Group analyst Sheryl Kingstone. "You run the campaign and prove ROI has come because you won't get the dollars back until you have shown the leads generated from it. There's more control." Also, cutting reimbursement time from two weeks to one effectively doubles revenue turns to the channel. "Any application that speeds the churn of cash between you and your channel, that's where PRM really makes sense," says Columbus. "As long as you can infuse cash, you'll be better off because they'll be paid and loyal. And the channel will have more cash to invest in your business."
The notion of "churn" is what Forrester Research analyst Laurie Orlov calls "shared commerce," or "finding the money." And it extends all the way through to sales and post-sales channel partners. Appliance maker Maytag, for example, alienated dealers with a direct-to-consumer website offering, and turned to Comergent for a solution. "One of the issues Maytag had prior to its deal with Comergent," says Orlov, "is that leads would be generated on the Maytag website, but by the time the customer got to Sears, the Sears rep could sell them Kenmore." Now, the Maytag site refers customers to retailer websites, or local dealers by search or zip code and delivers them with a shopping cart and an order. "Maytag is assured of the revenue that the lead generated in the first place." Orlov says sharing commerce and service with selling and service partners helps make PRM "mission critical and impossible to pull out."
Finding Your Solution
The mix of traditional and click-and-mortar channels is made more confusing because so many software vendors are collapsing into, or widening their footprint to include PRM. Among them, venture-backed, indirect-channel focused vendors like ChannelWave, Partnerware, Allegis and OnDemand are finding competition from specialists and generalists alike. Sell side transaction and channel management companies like Comergent, Click Commerce and Haht Commerce are working from the commerce side; Entigo brings a warranty, service and returns bent; and Siebel and Oracle are extending the CRM point of view.
Whether PRM is a subset or adjunct to customer relationship management (CRM) is arguable. Siebel will contend that routing prospects from CRM through indirect channels means closing the loop with partners in order to understand ROI and define marketing strategy. Orlov agrees that PRM can be considered a "stepchild" of CRM because CRM should be all about what the end customer purchases, regardless of channel. But every solution in the market, including Siebel's, is sold or available as standalone. That indicates a distinction.
"CRM really organized processes within an organization to better service the customer from a selling or post-sales perspective," says Comergent's Mescall. "The PRM perspective is a little more complex. There you're trying to automate a lot of the external business processes with channel partners and end customers."
Choosing a solution will relate to a company's market size, its vertical focus, and also the most compelling parts of channel design and the customer lifecycle. Siebel's Creighton says, for example, in telecommunications the pain point is order management; in energy, the focus is on service. Some common ground, says Williams, is a quick check off list. "It has to address something that's mission critical; it has to provide incentives or rewards; and it has to be easy to use. Those three things are critical because the software is only going to be as good as your ability to get people to use it. Partners are different from everybody else in the world."