How to Minimize Indirect Sales Channel Conflict

Notice the title isn’t “How to Prevent Indirect Sales Channel Conflict.”  That’s because, unfortunately, conflict within a partner program is pretty much unavoidable. But accepting that on the front end makes it a lot easier to mitigate the negative effects. So the question then becomes, “How will you manage and minimize conflict within your channel program?”

For starters, understand that the most prevalent source of conflict within the sales channel is having a direct sales force that doesn’t work with or support the channel. Sales and marketing should both be clear that part of their job is to ensure the success of the partner relationship program.  To this end, many organizations find it beneficial to hire a sales force specifically focused on selling into the channel and to build a channel management support department.  For more on the human resource qualities needed for a channel program, review our recent blog post on hiring for the channel manager position.

And of course, recruit partners strategically—more is not necessarily better; understanding where the need is geographically and by industry is step one. New partners should have contacts that dovetail with current partners—not compete with them.

Establishing clear rules of engagement with partners is also important. Those rules need to take into account the realities of the relationship, including the fact that each side—vendor and partner—has its own agenda. Vendors want the channel to shoulder vendor cost of sales, while partners want vendors to provide a service that minimizes partner cost of sales. Structure a relationship that takes both sides’ needs into account.

As an example of a way to minimize channel conflict, I can tell you about a successful program I worked on years ago. My company had just signed a Fortune 500 computer manufacturer who was selling third party tools, and working basically off no margin. We knew they could undercut our partners to the point that they couldn’t resell the solution. So understanding that, we built into our program a way to support our partners in competition with the manufacturer.  We let them know that we would support them through the sales cycle if they registered the opportunity—however, we obviously couldn’t tell an end user where and how they needed to purchase. So we made it clear that if they lost a registered deal to the manufacturer, we would pay them what they normally would have received in their margin.

We made this plan very visible to the partners, which established a level of trust and a lot of comfort with reselling our solution. Our partners knew that if they did lose a deal to the manufacturer, their effort would not go unrewarded.  And the manufacturer also understood we were working with our partners this way.

Since the manufacturer is not going to sell the solutions—they’re just going to physically take the paper—we knew they wouldn’t provide the real work that a normal reseller would. Plus, there were so many opportunities for people to sell that there wasn’t a lot of overlap.   So we only had to pay the margin on a lost deal twice in the time that we had the program. Avoiding channel conflict this way was very well regarded and won the VP of Channel Management an award.

The main purpose of the program was to show our channel partners that we knew there would be conflict and that we know how the world works. There are partners I worked with on this deal who years later still remember this program. They weren’t even partners who benefited from it, but they felt the comfort level.