Exclusive Partner Deals
At some point during their lifetimes, many companies on the market start feeling the need to build a channel program in order to strengthen their demand and supply chain, or even enter new markets and reach out to a broader audience. That’s why almost all company heads have had to ask themselves the inevitable question: are they willing to sign an exclusive deal with a partner?
This can happen to you when your business is trying to gain access to new markets, or simply when one of your channel partners senses an opportunity for executing unique sales that are linked to your products or services. So if you find yourself in a similar position, it’s always smart to think about it before you’re even presented with the abovementioned question. As a rule of thumb, it would be best for you to try to discuss signing exclusive deals at the very start, while you’re still in the process of building up your partner program.
Exclusive partner agreements can go a long way since they reassure the bond between the two companies. This is because exclusive partner deals give both sides a sense of security that neither of them will collaborate with each other’s competitors for at least a certain time. In other words, one side has the chance to focus on a new market with no pressure from competitive resellers, and the other side benefits from the dedicated ally that will help them enter a new marketplace, construct a sales pipeline and skyrocket their success in a short timeframe.
Now, this all might seem like a piece of cake, but in reality, it comes with its pros and cons. This article will focus on the good and the bad sides of signing exclusive partners deals, on all the things your company should focus on and think about before signing the deal, and we will dive a little bit into business history all in order to help you make the right decisions.
Why You Should Consider Offering Exclusive Partner Deals to Channel Partners
Channel partners are organizations or individuals that resell the products and services on behalf of some other company that is originally selling these items. Channel partners often sign exclusive deals mainly because they see potential in the companies they sign for, and they want to maximize their profits which can be achieved through such deals.
This kind of partnership can go a long way for both sides because a good channel partner can help with increasing the number of sales of your company. Naturally, this will make your revenue increase as well. This is especially the case when you cooperate with channel partners that have already developed wider networks of customers and client bases.
Your channel partner will get many benefits from your cooperation as well. They get the chance to broaden the spectrum of products and services they offer and even gain new customers that are interested in the new items they’ll be reselling. Aside from that, having a broader spectrum of products and services at their disposal can help them make better offers to their customers.
It’s important to mention that both sides of a channel partnership can even benefit from each other’s experience. For instance, a successful, developed channel partner can provide you with technical assistance, marketing campaigns, funding, product usage training, etc.
If a company makes a partnership with a more famous brand, this can also turn out to be a great marketing move for it. People will show greater respect for companies that collaborate with big brands and will be willing to spend and invest more money in them.
Exclusivity: What Does It Mean?
When trying to understand exclusivity, it’s important to start from the definitions. Try to define the word ‘exclusive’ in any way you can. Mainly, it means giving your partner the freedom to solo access a market as defined by geography, vertical niche, use case, customer segment, company type, or product specialty.
When thinking about the pros that exclusivity offers, much comes to mind. First and foremost, you can get exclusive agreements with knowledgeable partners that will be dedicated to making your products and services more successful. Apart from that, this can also give you immediate access to a set of new customers, boost your local presence in regions you’re not very active in, and give you a network of trusted allies you can rely upon in a vertical market or region that you haven’t explored.
However, there are also few cons that you need to consider before signing an exclusive deal with our partners. For example, when you sign an exclusive deal with a channel partner, your sales agenda becomes the priority of the partner instead of your own. You need to think about whether this is a positive or negative outcome for your strategy. You should also consider that when signing an exclusive deal, your possibilities to do sales will be limited by the customer base of your channel partner, and tightly connected to their experience in sales. If, for instance, your company sells sophisticated and technical products and services, customers might construct their opinion of your company solely on the basis of your partner’s competence.
Aside from all the pros and cons related to exclusive partnerships, you should also ask yourself a few tough questions, such as: can you commit to exclusivity with a partner that also does business with your competitors (or has done so in the past)? Would you feel comfortable with it? What will you do if a valued exclusive partner decides to focus on an area in which you have other partners? Would you expand your exclusivity? How would you respond?
Historical Examples
If we dive into business history we can find many examples of excellent, but also failed exclusive deal attempts. There are examples where companies became giants that rapidly won the markets and eliminated their competitors, but there are also cases where companies went bankrupt by making the wrong decisions.
Just to name a few, Apple signed a contract to make AT&T (the communications giant) its exclusive partner for the iPhone of the time. This deal turned out to be groundbreaking and made a fortune for both companies. But Steve Jobs’ deal before that was not so successful. Namely, in the 80s, Jobs gave exclusive rights for selling the NeXT computer to a company known as Businessland. This turned out to be a misstep and doomed the product and the company altogether.
Implications
We already mentioned that very often we can’t avoid the question of exclusivity. While building our channel program, you should establish a strong network of partners, and they will often be very interested in signing exclusive deals with you but —most of the time —they will be looking for exclusivity to strengthen their own positions.
Here, it’s your task to actually find out if the deal will benefit both sides or just your channel partners. In some cases, giving up on the initiative for an exclusive partnership deal is also a valid move. However, you should ask yourself many questions to better understand the situation, and not fall into the trap of accepting or refusing an offer that can yield lots of profits for all parties involved.
Organization
Is the partner properly organized from both an engineering and a sales perspective, to be able to meet the expected demand in the given market? This is a very important question that doesn’t only affect the exclusive partners, but any channel partner that your company plans to work with.
Dedication
Will the partner include enough personnel in your product line? The answer to this question represents the seriousness of the channel partner and their willingness to work with you. You wouldn’t want to work with a partner that doesn’t put emphasis on your products or services.
Technological Overlap
Does your technology complement the existing practices of your partner, or can it anyhow help them enter a new market? This can seriously uncover the willingness of your partners to collaborate with you. If your technologies already complement the practices of the partner in question, they will be eager to sign the exclusive deal, because they will not need to make any serious adjustments to their practices. If this is not the case, they might hesitate. And if your technology can help them enter new markets, they need to be interested and ready to take the step forward and invest in expanding their business.
Experience
What’s your partner’s history in your main working area? Has your partner worked with companies that created similar products and services before? If the answer is yes, that means the partner has already built a customer base that will be interested in your solutions and the business will likely flow smoothly. On the other hand, if the answer is no, that means that your partner will have to adjust and work towards marketing your products and services to build a new customer base that will be willing to invest in these solutions you offer. Although the latter is a slower process, it doesn’t necessarily mean it’s a bad one.
Customer Base
What customer base does the partner boast? What part of your TAM do they have access to? If your partner has an existing customer base interested in your products and services it’s a win-win situation and both sides will greatly benefit from a deal. If the partner takes up a big part of your TAM, you need to focus on signing that deal because it means that you’ll make big profits from an exclusive agreement with them.
Reciprocating
Can the partner reciprocate with exclusivity for your dedication? You should present yourself as a serious company that can work in a corporate environment to make the partner go for an exclusive deal. You also need to show your willingness to commit to the exclusivity deal and reassure your partner that you’re prepared to work together with them.
Having a Plan B
What can you do if the target objectives and metrics don’t go as planned? Will you bail out of the deal immediately, or maybe try harder and work towards achieving the goals together with your partner? Things do not always turn out as expected in the business world, so your partner might want to see if your involvement meets your projected objectives. They’ll also want to evaluate your willingness to work as a team in achieving these objectives.
Opting Out
Last but not least, can you opt-out if the deal is no longer working as expected? Needless to say, you should always consider such a move only as a last resort when nothing else works out. Everyone makes a bad deal from time to time, and this can sometimes result in a situation where no matter how hard both sides try to make it work, it just doesn’t. Maybe one partner is not investing enough effort in the deal, to the point where the other partner is in a bad spot and risks huge consecutive losses. So, how hard would it be to break the deal and go separate ways?
Be Flexible to Avoid Worst-Case Scenarios
There are a whole plethora of situations that can happen, and you always need to be prepared for your next step if things start to go the wrong way. In the worst case, the issues you may experience from a bad exclusive partnership deal can even strip your company to the bone and make you suffer unspeakable losses. However, that’s why you need to be prepared for the worst-case scenarios with workarounds, and act accordingly.
Bad stuff can always happen. For instance, your partner can do business with your competitors which can potentially push you out of the market, or they can even side with a user over some contract dispute, and these situations can leave you in a really bad place. That’s why you need to be aware that at any time, the outcome of your deal can change when:
- Disruptive innovation occurs;
- Another item becomes more attractive to customers than your existing offers;
- Another partner enters the deal and offers products with more value in order to push you out of the deal;
- The overall economic conditions are changing;
- And more.
Whenever these situations occur, you need to be able to change your plans and move on. The business world is a very unstable place, so you always need to be prepared for a change.
In Conclusion
Many companies develop a need to build a channel program and build partnerships with other companies in order to maximize their profits. Most channel partners you’ll be dealing with will often be inclined to ask for exclusive deals, which means having the sole right to work with your products and services, without the pressure of having to deal with competitors.
Exclusive partnership deals can often be very beneficial for the relationship of both sides as well as their profits. However, it can also turn out to be a bad decision in some situations.
When considering offering an exclusive deal to a partner, you need to know how to make the right decision. You need to find out what kind of channel partners you can work with and what are their intentions.
Bear in mind that, in these situations, your main concern will be to make sure that the exclusive partner deal you’re signing has the potential to benefit both sides, and not only your channel partner. There are a few questions you need to ask yourself before making the final decision on offering any channel partner an exclusive deal, mostly related to how technically prepared your partner is for such a deal, do they have enough staff, how organized they are, how much your technology complements their existing practices, what their history in your field of expertise is, how developed their existing customer base is, whether they’re ready to offer you exclusivity in return for your commitment, what you can do if the target objectives and metrics don’t go as planned, and whether you easily exit your exclusive partner deal if it’s no longer working as expected.