Just like with other networks, the Last Mile connecting a Partner Network to its Partners is expensive and complicated.
All channel partner programs have infrastructure designed to manage the relationship with partners. From the simple to the sophisticated, this infrastructure accomplishes a variety of critical tasks including registering partners, enabling them with sales materials and support, delivering leads, tracking performance, managing certifications, and many other functions. These processes and systems are in effect a network of sales and marketing people and PRM/SFA databases and applications.
To function, all networks must reach their customers and a partner program network is no different. The link between the network and the customer is called the last mile, and just like with a phone network, the last mile is the most challenging because the investment required to reach a new partner is uneven, and in many cases will never pay off. Extending the phone network to the last farm on the road will never make financial sense – that is why the FCC has made the phone company provide service to everyone.
Companies have tackled the last mile problem with their channel partners in three distinct ways:
- Invest everywhere and dominate the market (Microsoft)
- Invest heavily in obviously high value partners (HP)
- Make the partner come to the network (Google, Amazon)
These differences are logical when taken in the context of gross margins. Microsoft and other software companies have the highest gross margins, so they can spend much more than everyone else. HP and the hardware companies have much lower margins, so they have to be more careful to invest only where they know it will generate additional sales. Google and Amazon and other similar businesses have many more partners, and their transaction size is much smaller – making anything other than a fully automated approach hard to justify. It is just not possible to cater to the individual needs of partners if there are millions of them.
As the technology industry evolves and these companies move into new markets, they will have to adapt to new margins and transaction sizes. This will be much easier for companies working up the list, than those working down the list. Those with skills developed in low margin and small transaction sized businesses will have to learn to invest more in the last mile – learning to spend more is enviable compared to those who have to learn to spend less.