When you’re starting to build out a channel program for your business, it’s crucial to understand each part of the process. There’s no such thing as a bad question at this stage. For example, many channel newbies may wonder about Partner Relationship Management (PRM) systems and how they come into play.

According to Channel Mechanics, a PRM is:

a combination of software, methodologies, best practices, templates, and workflows that manage and automate the business processes and relationships between companies and their channel partners. Some refer to PRM as Channel Management or Channel Automation software.

One of the first questions a potential buyer of a PRM wants to know is, “How much is this going to cost?” This is a complicated question to answer, but we’re going to do our best to answer it with some guidelines for how to think about the ultimate costs.

Four Pricing Considerations When Selecting a PRM

Channel programs come in all shapes and sizes, so your approach to managing your partner community may be very different from another supplier’s approach. This isn’t a “one size fits all” buying decision. Most channel programs start out small with only a handful of partners and an expectation of growth. Almost any type of program can be effectively managed on your website, spreadsheets and your CRM when you only have a few partners. There’s no need to think about investing in a PRM if your existing website and a little manual effort will get the job done.

A rule of thumb is to start thinking about a commercial PRM when you have more partners than a single screen on a spreadsheet, usually about 20 partners. Once you get past a handful of relationships, partner management starts to become more complex. To do a good job of it, you’ll need a system to automate a lot of the work.

PRM Considerations

  1. What type of channel program are you managing? Is it a reseller program or a referral program or a services network? Who will generate the leads – you or your partners? This will determine if you need marketing automation, lead distribution, and/or lead registration. Will your partners be transacting and therefore need assistance with pricing and deal registration, or will they be referring the opportunities to your sales team? This will establish your need for price books and deal registration and perhaps special pricing and configuration support.
  2. What is the scale of your program? Is it tens of partners or hundreds or thousands? Perhaps more importantly, what do you anticipate it will be in the next four years? Investing in a PRM is a big decision, and you want to ensure that whatever system you choose will support your needs today and into the future. Typical enterprise software replacement cycles are between 4 and 7 years, so your planning ought to go out at least that far. You don’t want to make a cost-based decision today that will run out of steam and force you into a costly replacement decision just when your program starts to grow.
  3. What is the geographic scope of your program? Will your program need to support multiple languages and/or multiple currencies? Will you manage geographic regions with separate teams, and will they have different partner requirements and tiering? Will the goods and services be different in different geos? Will you need to segment your content and marketing materials by geo? All of these considerations will go into evaluating alternatives. Even a small channel program can face these complexities and cause your evaluation to focus on PRM platforms that would otherwise be aimed at much larger organizations.
  4. What is the engagement level of your partners and the scale of business they will be transacting with you? Some programs have lots of partners that rarely interact with their suppliers – sometimes called the “long tail.” Some programs have lots of partners that are active, but the value of their activity is low – perhaps small referrals. The average selling price for your offering, and the average contribution from your channel partners will influence your level of investment in your PRM and the sophistication of your platform needs. Most programs generate 80+% of their revenue from about 20% of their partners. These are the active engaged partners with the scale to move the needle. The other 80% of the community is hit or miss. Are you buying a PRM mostly for the 20%, or are you intending to use your new platform to more efficiently engage the 80% or both? The implication of the answer to this question will impact how you want to approach the licensing fees from your PRM vendor.

Outside of pricing considerations, you’ll need to think about the different types of PRMs that are available to you. Stay tuned for our next piece on the range of PRMs in existence. Gathering a holistic view on Partner Relationship Management tools will help you land upon the best system for your unique needs.