How to Manage Channel Partner Conflict with Neutral Sales Compensation

A Channel Partner Incentive Program can be a fantastic way to increase revenue from channel partners while also building the loyalty and trust of your partners.

Poor implementation and careless comp plans can have a negative impact, creating channel partner conflict, lost revenue opportunities, wasted resources, and dissatisfied customers.

When managing a network of hundreds or thousands of partners around the globe, we must carefully consider the impact of each new incentive, plan change or promotion on the whole network.

When you get it right, more value is created from the partner program, with fewer resources required to maintain it and fewer disputes or errors to resolve. We advise our customers follow these best practices to avoid channel partners clashing and manage unavoidable conflicts through neutral sales comp.

Don’t Create Vertical Channel Conflict

The first rule to creating a peaceful partner incentive program is ensuring you don’t create vertical conflict by competing with your partners.

Vertical channel conflict (vendor vs partner) is just as common as horizontal conflict (partner vs partner) and can be even more damaging.

The easiest way to do this is to allow partners to offer services that the parent company doesn’t provide. If any of your partners provide Professional Services or Managed Services, you may benefit from getting out of that space.

Anaplan doesn’t provide compensation management software implementations. All implementations and system integration work go to their partners. Anaplan and its partners benefit from this arrangement.

Create Clear Rules of Channel Engagement

If it is not possible to not compete with your partners, create clear rules of engagement that everyone understands and agrees to.

That means creating rules about almost every aspect of the transaction: who owns the account and why, who leads the sales, registration of deals, and pricing and pricing strategy.

Clear rules and an explanation of the rationale that can be applied to any instances that the rules don’t apply to improve partner morale as everyone is clear where they stand. The downside of so many regulations is that it creates operational complexity, requiring a lot of resources to manage if the right tools aren’t in place.

Don’t Compete on Price with Your Channel Partners

One promise it’s wise to include in your rules of engagement is to not compete on price with your channel partners. If you need to discount to win a deal, allow the partner to offer the discount and subsidize it instead—any commissions and pay flow to who owns the deal via the other rules of engagement.

As a parent vendor, you can always beat your channel partners on pricing, but why would you? Better to facilitate their discounting, ensuring your channel partners benefit from the deal and building trust and loyalty with them. The cost is the same, but one way creates a stronger, happier partner network.

Use Neutral Sales Compensation to Avoid Conflict

If it is impossible to define clear rules of engagement and ownership for your channel network, some form of neutral compensation is necessary to avoid conflicts. There are three ways to approach this:

1. Retire quotas

The first is to allow channel revenue to retire a quota (dollar for dollar, .50 on the dollar, etc.).  Include some channel revenue in the allocation or don’t.

2. Add a channel volume metric

The second way is to add a channel volume metric to the comp plan, either a dollar quota or a percentage of deals that must include a partner. This metric could be a trigger for accelerators or paid out on as a secondary or tertiary metric.

3. Pay like it was direct

The final and most costly way is to pay commissions on channel deals like it was a direct deal.  Despite the expense, this is probably the most appropriate option for an early-stage partner program looking to scale quickly.

One way to make this approach less costly is by paying a fixed % of commission based on estimating % of co-sell or time involved (different partner levels may dictate this estimate). That essentially offsets the cost of a marketing lead vs. a channel partner lead, assuming the deals were brought to the table by the channel partners.

Curtail Channel Partner Compensation Conflict

Channel partner comp conflict is an all too common and unnecessary outcome of poor planning and processes. There are some ways to manage channel conflict through neutral sales compensation, but the best approach is to avoid it altogether by creating clear rules of engagement and avoiding vertical conflict wherever possible.