Partners in Sales

When top management decides on a partnering approach with customers and prospects, sales managers may find themselves asking one simple question: “Now how am I going to implement this new strategy?” Granted, the partnership model can be effective over the long haul, but nothing is simple and there are rules to follow. Since the effects on sales can be massive and complex, managers and reps will have to make major adjustments throughout the chain of events that result in closed deals. Here are some types of partnerships and some ways of managing within the different frameworks.

One form of partnership is common and relatively straightforward, dealing with channel partners who do not have their own products to sell. More interesting, but also more difficult, are those partnerships formed with companies that are selling their own products, as well.

Steve Grossman, leader of sales consulting at Mercer Human Resources, distinguishes two extremes of sales partnering. In the first, each customer sees only one company’s salesperson and may not even know there is a partnership, which operates behind the scenes like a sourcing arrangement. “This is one end of the spectrum,” Grossman explains. “One salesperson sells a combined offering. It is his product, and he stands by it. The salesperson does business as usual but must be educated and prepared to answer questions if the customer asks about the partnership.”

The more difficult case is the one in which two companies openly offer a joint product. Two reps, or one rep and technical support from the partner company, show up at a customer site. “That can confuse the customer,” Grossman observes. “Who does he go to if problems arise?”

Pharmaceutical firms often form the first, simple kind of partnership when they have complementary products. “There will be a sourcing or licensing agreement, in which company A gets another product to sell, and company B gets a path to market,” Grossman says. “For the rep, it is just another product to sell, although compensation, process, and management must be adjusted. You can call it a partnership, but it is more like renting a sales force.”

More complex strategic partnerships alter the value proposition offered by both companies. Grossman views these as unstable. “Usually strategic alliances lead to mergers, or they break up.” As precursors to mergers, strategic partnerships have a huge impact on the sales force.

Complex partnerships can be single-shot deals to bid on especially large deals, or they can be continuing relationships intended to last for years. “It is either a strategic decision or a tactical decision to partner for one deal,” says Michael Moorman, managing principal for business-to-business sales and marketing at ZS Associates. “It is never permanent.”

Causes and Cautions

Moorman says these link-ups occur for one of two reasons: the partners may want to provide a broader solution and avoid being just commodity sellers to customers, or one firm has the brand and relationships with the market while the other has the right product or service. The market may be a particular region or may be a segment in all regions, for example, small or midsize accounts.

Deep sales partnerships are similar to strategic alliances, which can also include research and joint manufacturing. For such alliances, the reason must be compelling. “You should only form a partnership when you have no better alternative,” argues David Brock, president of Partners in Excellence. Studies estimate that 60 to 70 percent of strategic alliances fail fairly soon. But the same studies show that the successful minority of alliances bring large gains in revenue and profit, which is why senior executives take big risks. 

One factor that makes partnerships especially tough is forming links across national boundaries. Edwin Rigsbee, president of Rigsbee Enterprises, recently advised two banks that were forming a partnership in Kuala Lumpur, Malaysia. “The number one challenge was getting the right mind-share of salespeople,” Rigsbee observes. “Number two was the culture clash of organizations, and number three was the culture clash of different nationalities or ethnic groups.”

Choices and Challenges

Firms usually have a short list of potential partners. Possibilities can be screened by simple criteria: Which firms have the right capabilities, interest, and ability to bring value to a partnership? Are both firms aligned in their general missions? Do they have common standards for quality, customer service, and delivery?

But these are not easy questions to answer. Partnerships often arise when two CEOs meet and decide to do business together, but execs do not follow up with departments, including sales, that will have to execute the partnership. “There are a whole bunch of issues, including surrendering control,” Brock emphasizes. “North American business culture has a lot of control freaks.”

“You must ask what is in it for the partner, not just for you,” Moorman stresses. There has to be a business case on both sides – for example, to increase profits or spur growth – to warrant serious negotiation. And partners must be able to manage the inevitable business conflicts.

Moorman says negotiators should model the results for both partners. Partners must review how the partnership fits their business strategies and quantify benefits and risks. This forces partners to set clear expectations of volume, revenue, and profit and to specify the efforts they will commit to, including sales efforts.

“You generally set minimum thresholds for revenue and specify numbers and types of salespeople, which accounts to focus on, and how you will share wins,” Moorman explains. Partners usually want to be compensated for performance. For a branding partner, that means payment for sales relative to market potential. “For partners with complementary products, payments are trickier,” Moorman acknowledges.

Brock says many partnerships fail, not because numbers and strategy are wrong, but due to soft factors, such as apparent violations of trust or lack of integrity. One way to prevent that is to ask a partner, “What could we do, deliberately or accidentally, that would tick you off?” That helps define boundaries up front.

Partners should also agree on a “sunset” point, when the partnership will end. Strategies and priorities change even in successful partnerships. “You want to set a point for a reality check,” Brock says. “Do we continue, end, or expand it?” Three to five years is reasonable for most partnerships. Agreements including joint research can be five years, those without research can be shorter.

Execution and the Sales Force

Almost always, one partner takes the sales lead. In global partnerships, this is the partner with customer relationships. The other partner may complement sales with supporting specialists. Partnerships selling complementary products have more complicated choices. “The one with the cake takes the lead before the one with the frosting,” Moorman says. “But it may be different for different accounts.”

Partnerships hold a number of traps for the sales force. Sales compensation must always be adjusted to align with joint objectives. “It’s very easy for reps to ignore the partnership and sell their own stuff,” Moorman says. “Selling partnership deals means harder work and more risk.”

For example, the partner company may not perform well. This can be detrimental to acquiring major accounts for years to come. “Partnerships are frequently formed for major accounts, and the rep has only a few of these major accounts to risk,” Moorman notes.

But there are upside possibilities for reps, as well. The partnership is being formed to increase revenue and close bigger deals. If the company makes more money, reps should, too.

“In sales, you have to realign roles and responsibilities, metrics and compensation,” Brock summarizes. “This should be obvious, but most partnerships do not do it.” In some cultures it is not considered polite to bring up compensation or other potentially “ugly issues” up front. That is a recipe for trouble down the road.

Retraining of reps depends on the sharing of sales responsibility. Reps who will sell the partner’s product on their own must be thoroughly trained on its virtues. Reps who will be supported in these sales just need familiarity training.

All this depends on early decisions about which partner owns each customer, which manages customer satisfaction, and which solves customer problems. “The sales rep’s first questions are, ‘Who am I supposed to work for and what do I do?’” Brock notes. Partners should aim to maximize clarity and minimize finger-pointing. 

Partnership terms also dictate the need for training in data sharing, team selling, account planning, and call planning. Sales automation and CRM systems will need to be coordinated, and partners must coordinate project management systems if these are affected. They must agree on consistent definitions and timing for recognizing revenue.

Avoiding Failure

Partnerships fail for a variety of reasons. Motivation for true partnership sales may be lacking. Both organizations may not be fully committed to making the partnership work, or the partners may not have accurately assessed the customer’s desires. Some large organizations do want a single point of contact, to shed risk, cost, and accountability, but some do not.

Partnerships must be profitable enough to recoup the up-front costs of making them work. One solution is to amortize these costs over multiple one-deal partnerships, building trust and mutual knowledge as the partners ramp up to a long-term agreement.

In the worst case, one partner may learn enough about the other partner’s business to become a serious competitor. Moorman warns, “In fact, the company may want the partnership just for that.”