With three-quarters of world trade flowing through channels, partnerships and alliances rather than via direct purchasing, the need to approach the medium as efficiently and effectively as possible has never been more important for advertisers and agencies.
In a recent study we conducted with Forrester Consulting into the partnership journeys of direct-to-consumer (DTC) businesses, we found that around a third (29%) of DTC decision-makers estimated 20% YoY revenue growth in 2019 from their partnership channel sales.
But the bad news for any fledgling DTC businesses reading this and being blinded by dollar signs is that, according to our research, it is high-maturity partnership programmes that are likely to benefit most from this business model. Research shows again and again that companies with well-developed partnership programmes grow faster and outperform their low-maturity peers on a number of key business metrics.
Those new to partnerships, or in the early stages of progressing their business model beyond traditional affiliates, will not have the data-led experience to know which activities should be ramped up – and down – at each stage of the partnership life cycle.
Mix it up for more effective results
Thanks to our work with Forrester Consulting, brands and their agencies can now learn how to improve their partnership program, whether it’s adapting the partner mix, working out which idea to prioritise or even maturing their program from the middle ground in which they find themselves.
By looking at the experiences of some of the 454 partnership practitioners we surveyed, across all key verticals, other DTCs can ascertain exactly what makes for high-performance referral partnerships.
Leaders at the most mature companies we spoke to target partnerships that most closely connect with their target audience and align with their messaging and values. Less mature companies rely on trial and error, but learn from their failures and fail “fast and cheap.” But at the outset it’s less a case of the individual you partner with and more about the type of partnership you seek out.
DTC partnerships: it’s a numbers game
One major trend that stood out in our 2020 study, compared to the 2019, was the ways in which different businesses use partnerships: high-maturity DTCs veer towards an average of 38 traditional affiliates, compared to around 27 dealer or agent partnerships. However low maturity companies use an average of 49 traditional affiliates and only eight dealer or agent partnerships.
Traditional affiliates are defined as companies that specialise in driving traffic to owned channels, typically receiving a commission for leads and/or sales generated from that traffic, including coupons, cashbacks, deals, rewards, loyalty, and comparison sites.
Finding the right partner mix is perhaps the most critical element of the partnership journey, and one that needs reassessing at every phase. Different types of partners drive different types of results. Influencers, affiliates, and ambassadors can help brands reach their specific target audience but it must be at the most appropriate time. Partners that influence the buyer early in the journey may not influence renewals, retention, and expansion later in the cycle.
An holistic view will win the day
When designing a partner ecosystem, channel managers must look at the entire buyer’s journey for each stage. Understanding the journey, including buyers’ behaviours and psychology, is crucial in determining whether their current channel partners will be the right ones going forward.
As we have seen, traditional affiliates are the most used partnership type across all maturity groups, but we see significant differences across maturity groups with managed service providers or integrators – who are category specialists that gain additional revenue by selling complimentary services. High-maturity companies only use an average of seven service providers/MSPs/integrators, compared to 14 for average maturity companies and four for low-maturity companies.
Those brands looking to move from low to average maturity must begin by diversifying their
partner mix, with the aim of introducing a broader variety of partner types beyond just traditional affiliates. Once they have tested the waters with new partners they can refine their mix based on buyer type, geography, product, and market vertical. High maturity companies in our study still use numerous traditional affiliates and dealers/agents, but they also meet desired outcomes by using non-traditional affiliates and strategic partners.
Partnership decision makers undertake a long journey when building strong, future-proof partnership programs, so it is in the planning that the most work needs to be undertaken.
The planning phase is not only crucial but, according to our study, it is one of the most challenging phases of the process for all companies, no matter their maturity.
Planning includes forecasting, understanding routes to market, coverage mapping, and a business’s capacity plan and targets. Knowing if the organisation has channel capacity, or staff and budget in place to have a successful partnership, and being fully on board with the objectives of the relationship, is the key to making the plan a success.
Prioritise planning and the rest will follow
Defining a go-to-market strategy is the most important tactic for high-maturity businesses in the planning phase, with 58% of respondents ranking it in their top three most important planning tactics. This is the time businesses must ensure their partners understand their growth targets by buyer type, geography, product, and market vertical.
Taking a few key steps during planning can significantly improve a company’s maturity level. A business at low maturity must begin by defining their go-to-market strategy, ensuring it includes a clear definition of the end goals and has identified the desired targets for any partnership – after all, success cannot be measured if the success metrics that matter have not been defined. Those who fall in the average maturity group must focus on building coverage maps and capacity planning, knowing where their customers are and whether they are being reached at the right time and on the right channels. Building persona maps and profiles to gain deep customer understanding.
This is by no means the sum total of the to do list for any company aiming to improve their maturity level, but will provide them with a solid starting point.
Partnerships can drive critical benefits such as increasing revenue, brand awareness, and customer retention. They can also drive customer influence early in the buying journey. To propel revenue growth, companies must carefully choose their partners based on desired business outcomes and target audience.
By preparing the ground in a carefully considered way, implementing the findings from studies such as our work with Forrester, companies will find themselves gliding up the rankings with all the effectiveness and efficiency that their high-maturity peers are already enjoying.