Partner Monetization Strategies: Which is Right for You?

In my last post we discussed what ecosystems actually mean to software companies, why we need them, and whether you should be looking at participating in one or orchestrating one.

As your partnerships mature, so too will how you capture value: at the outset, it can be as simple as fulfilling a customer need or improving NPS (Net Promoter Score). As relationships become stronger, you may see more tangible benefits such as collecting referral or revenue share fees. In exchange for these financial benefits you will need to have “more skin in the game,” offering up business and technical resources to deepen the partnership.

This blog will illustrate the spectrum of partnership models and how value capture works at each stage. It will also detail the organizational resources required as you build out your partner program, and help determine which model is right for you. 

Partnership models run on a spectrum based on how involved you plan to be

I see the world of partnerships running along a continuum reflecting an organization’s level of involvement. As illustrated in the figure below, one end of the spectrum can be described as low-touch while the other is considered high-touch.

I’m going to break down the details of each model running under the assumption that you are the ecosystem participant. Recall: in my last blog we defined this as when your product is being integrated with, or anchored to, someone else’s. Thus, as a participant, you are sending your customers their way.

No formal relationship
It may seem counterintuitive to consider a technology provider with whom you have no formal relationship to be a partner but hear me out: for many software companies, the first step in identifying ecosystem partners is examining the existing software solutions and platforms customers have already integrated their product with. This group effectively represents a group of technology partners with whom you do not have formal relationships today, but these partners are still creating value for your customers.

While there is no direct financial benefit to your organization, it’s critical to not overlook this group’s relevance to your business. By giving visibility to these partners, even in the absence of a formal relationship, your other customers have the opportunity to see how an integration could also benefit them as they use your product. Keep in mind the no formal relationship model may be appropriate for more niche partners that may never hold broad appeal for your customer base.

Affiliate partners
B2B affiliate partners are a growing category and can take many shapes including editorial content partners, social media influencers, review sites like G2, and more.

There is no one-size-fits-all approach. Canva does a great job of leveraging social media influencers but they may not make sense for your business.

Regardless of the partner category, affiliate partnerships are usually quick to get off the ground. You can register to become an affiliate partner on the provider’s site and may or may not go through a vetting process. Business you drive to these partners is tracked online through a unique partner source code that’s embedded in the referring link used to send customers to the partner’s site or store. The partner will then pay out a revenue share should your customer make a purchase.

This is an ideal model when you intend to take a hands-off approach and is the first step towards building a new revenue stream: you’re sending them business, why not monetize what you can?

Referral partners
Referral partners are the next step up on the partnership model spectrum. The intent here is the same as with affiliate partners: you are sending the partner business in exchange for some form of compensation. In some cases, you may choose to forego monetization and instead request that preferential rates be offered to your customers for purchasing the partner’s product. Typically, this is how you’ll refer business to other technology partners whereas the affiliate model is more popular with other partner types (eg. content creators).

In a referral model business, you’ll likely go through some vetting process with the opportunity to negotiate partnership terms. This model is ideal for partners who deliver high value and have high appeal across your customer base. Co-marketing activities bring more visibility to the solution; strong customer interest and adoption will push the partnership to the high-touch end of the spectrum.   

Resell & Integration partners
At the far end of the spectrum, you’ll find the partnerships that require the most investment on your part, resell and integration models. There is more vetting, more negotiation, and if all goes well, more revenue to be shared. In these scenarios, you are no longer sending business to partners in the traditional sense, you are fulfilling it yourself. You are either reselling their solution (eg. a SaaS product), selling an integration you’ve built between your products, or both!

This model should be reserved for your most promising partners as it requires you to undertake the most risk and allocate a variety of resources to make the partnership successful. Indeed, in these models, you will become the Merchant of Record behind the sale, processing customer payments.

Partnership models have real implications on the level of resourcing and organizational support needed to succeed

I’ve already alluded to some of the differences in these models but let’s flesh out the resourcing requirements more clearly.

Partnership relationship manager
In the early days of any ecosystem this responsibility is often absorbed by existing roles, including, Business Development, Product Marketing, or Product Management. As your ecosystem grows and you look to formalize these partnerships, a dedicated Partnership Manager is required. The Partnership Manager will be responsible for doing outreach to potential partners, running business alignment exercises, identifying sales motions, establishing joint processes, and negotiating commercial terms of the partnership. They will be involved not just in identifying new partners, but also nurturing and maintaining those relationships over time, be it through quarterly business reviews, presence at conferences, and so on.

Product Managers & Engineering teams
Once you’ve identified strategic partners with whom you want to build an integration, you’ll need to ready technical resources. Your Product Managers and Engineering teams will be involved in designing the integration then building it. From there, processes should be outlined around triaging incoming support queries and routing customers through escalation paths. Additionally, keep an eye on roadmap items that may affect your integration and plan with partners accordingly. If an API is going to be deprecated, has your product team committed to evolving your integration to incorporate the new API instead? Will your partner’s technical team have work to do on their end and do they have capacity for that?

Technical Writers
You already have robust documentation for customers, but does it make sense to your partners? By definition, I’m talking about developer documentation as partners will be tapping into your APIs when working on a joint integration. New developer tools such as an API Explorer, visibility into API usage and health metrics may eventually be required to help users solution a design, build, and monitor it.

Determining which model is right for you

Over time and as your ecosystem strategy evolves, you will likely find yourself tapping into multiple models concurrently. Some partners will never make it past the no formal partnership stage whereas others will become obvious contenders for a resell model. Consider the investment required behind an integration before moving forward. It simply isn’t scalable to enter into resell relationships with all referral partners. Typically, organizations with the most successful partner ecosystems choose a handful of select partners to nurture and push along the partnership spectrum.

Tips for determining your ideal partnership model right now

1. Knowledge of your partner’s product
   Your front-line needs to be equipped with an answer-first on how your partner solutions can help customers. But the level of detail they need to master varies greatly from one end of the spectrum to the other. Simply showcasing your partner products in a marketplace might be appropriate for affiliate products. However, your referral, and resell products may warrant additional enablement and training so customer-facing teams can speak to these, often more complex, solutions. Are you account-facing teams in a position to support this additional knowledge?
2. What co-marketing activities can you support?
   How do you expect customers will discover your partner solutions? Marketing is key to driving demand and helping nudge customers along on their buying journey. Partners may also expect this support from you in order to build a pipeline that will eventually yield business. Building and promoting webinars, guest blog posts, sponsorship, and speaking opportunities are all considered standard fare when it comes to partnerships. Does your marketing team have capacity for these additional activities that don’t result in direct demand for your business?
3. How will you make customer introductions?
   If your marketing machine is working well then the outcome is some interested customers asking about your partners. How you transfer these ‘leads’ to partners is a function not just of the nature of your partnership but also your own customer experience strategy. Are you a high-touch, white glove organization working with enterprise customers? If yes, then warm introductions may be warranted. For other situations, a lighter touch may suffice. If this is the case, offering customers a lead generation form that can be routed directly to partners without your intervention is ideal. Do you have the right tools and processes to support both of these scenarios?

Partnerships are a long game

Partnerships are meant to deliver value to your customers and organization and that value can take many shapes. A critical first step is determining what value means to you. One thing that’s certain is that partnerships are a long game, especially if the goal is to build a revenue stream.

Up Next: Creating a Path to Monetization

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