As manufacturers continue to unveil subscription services, they often find themselves inadvertently straining important partnerships with their channel partners. The point of contention: Who owns the customer experience?
That’s because distributors and value-added resellers often have longstanding, fiercely protected relationships with buyers that are built on familiarity and trust. Forward-thinking manufacturers who are pushing to become more customer-centric through connected products, bundled services, and regular touchpoints with end users are driving growth for the entire channel ecosystem. But if they don’t properly manage their partnerships within the channel, manufacturers are likely to encounter negative consequences, including:
- Delayed launch. If channel partners aren’t clear about their role in the go-to-market strategy, new subscription offerings may stumble at launch and create opportunities for competitors to get in first.
- Loss of trust. Manufacturers who push out pricing constraints without context or warning will likely alienate partners, who may lose faith in the value of the partnership.
- Impeded innovation. Manufacturers rely on their channel partners for insights and data on customer satisfaction, needs, and preferences, and if they lose that visibility, they lose the ability to innovate from that information.
To avoid these pitfalls, manufacturers should take proactive steps to ensure their channel partners make a smooth transition to the as-a-service model. For manufacturers looking to win the channel experience, five key levers can mean the difference between success and failure.
1. Mutual Vision
Manufacturers do a great job of articulating their vision for subscriptions to their boards and investors, but don’t always communicate that vision as clearly to their partners or explain how it will benefit them. Because transformation to a subscription model can create operational and cultural disruption, manufacturers need to ensure that channel partners understand what success looks like for the entire ecosystem. Articulating a shared “north star” with partners (and soliciting feedback) will create purpose, reduce confusion, and drive more collaboration when the road gets bumpy.
Co-create your subscription business charter prior to launch with an advisory board of channel partners. Use this forum to craft a dedicated narrative for channel partners that builds the case for a shared vision of success.
2. Insight Sharing
Channel partners are a rich source of local, on-the-ground insights into the attitudes and behaviors of end customers. Manufacturers utilize this information to fuel product and service innovation, and as they shift to a subscription model, these insights become even more important. But insight sharing is a two-way street, and partners rely on manufacturers for a 50,000-foot view of the market and what changes or trends they are seeing. In the Subscription Economy, manufacturers have a responsibility to aggregate and synthesize the data they receive—identifying patterns around receptivity, price sensitivity, and CSAT—and then share it back out with partners. This self-perpetuating, bi-directional flow of information and best practices will create a rising tide effect for the entire ecosystem.
Create a formal communication structure that enables bi-directional communication. Data sharing from partner up to manufacturer should be simple and standardized. Manufacturers should regularly deliver insights back out to the network to help them evolve their plans and processes.
3. Product and Market Support
In the classic manufacturing model, product support is relatively straightforward when it comes to communicating things like technical specifications, order status, pricing, discounting, etc. But in the as-a-service model, manufacturers need to be able to respond quickly to questions around a new set of topics, like bundling, mid-term changes, digital services provisioning, and selling into an OPEX model. Navigating the shift from managing a transaction to managing an experience can be a challenge for channel partners, so manufacturers need to be more “on call” than ever.
Build in flexibility for packaging and payments. Channel partners need the flexibility to adopt new as-a-service models at a pace dictated by their customers. Some end customers may still desire making large upfront CAPEX payments for products, as well as paying for subscription services through an OPEX model from a different budget. Offering options for how and when a customer gets invoiced (and partners get paid) will give the channel room to adapt and flex their financial and business operations.
4. Subscription Capability Enablement
The switch from products to subscriptions requires channel partners to learn a new language around the value of what they’re selling and the metrics they impact. For many partners, subscription offers, processes, and business models will be brand new, and they may not have the internal resources needed to succeed. They may be selling to new customers with new expectations. Gaps around things like value selling, business case building, or managing a consumption-based model are sure to pop up. Some gaps are more technology-oriented, such as a lack of a modern CRM platform to help manage relationships. While manufacturers shouldn’t have to address every gap, there at least needs to be clarity around what capabilities are expected and how they are prioritized.
Launch a recertification program. Develop a list of capabilities and competencies partners need to succeed in the subscription model. Re-work your preferred partner requirements based on these new capabilities and then offer partners an opportunity to train and gain expertise, with the potential for increased margins and opportunities as their expertise grows.
5. Operational Transparency and Flexibility
Manufacturers tend to favor discretion when it comes to internal decision-making about changes they are considering or challenges they are experiencing. They don’t necessarily want outsiders, even their valued channel partners, to see how the sausage is made. But to channel partners, the rate of change stemming from manufacturers’ new subscription business models can seem disruptive, operationally and culturally. If manufacturers don’t provide channel partners early visibility into changes to product roadmaps, delivery dates, or pricing, channel partners may not have time to adjust to avoid disappointing a customer or taking a hit to their own bottom line. Offering flexibility with terms and conditions during unforeseen crises can pay dividends in partner lifetime value.
Create a forum for sharing out the transformation roadmap and answering partner questions. Err on the side of sharing more than you think you need to about delays and disruptions that are going to be felt down the value chain. Have workarounds and contingency plans in place that partners can use for their communications to employees and customers. Create space for partners and customers to ask questions and get answers quickly.
CHANNEL PARTNER SATISFACTION LEADS TO TRANSFORMATION SUCCESS
For many manufacturers, channel partners are their true customers and should be treated as such. Understanding their motivations and pain points are always important, but even more so when undergoing a major business model shift to subscriptions. Putting the right structures in place to proactively build capabilities and address challenges will go a long way toward maintaining trust and loyalty. It’s up to manufacturers to ensure that the transformation works for everyone.