Has Partner Marketing Outgrown the Pareto Principle?
The Pareto Principle, named after Italian economic Vilfredo Pareto, is the concept that 80% of outcomes are driven by 20% of causes. The Pareto Principle has long been applied by B2B companies to their distribution channels, rationalizing that 80% of their revenue comes from the top 20% of their partner base. Today’s channels are increasingly complex, however, and can no longer rely on the Pareto Principle to drive partner marketing and sales strategies. Let’s look at why this is the case, and how marketing departments can develop strategies for modern channel ecosystems.
Changes in Channel Partner Marketing
The needs and expectations of channel partners are changing rapidly. Business-to-consumer business models have heavily influenced what buyers expect from companies, with speed and convenience becoming top priorities. The 2020 pandemic, by rapidly accelerating digitalization of ecommerce and workforces everywhere, made these expectations even more widespread. Partners now want subscription pricing, ecommerce, self-service options, and an array of other features that make their lives easier.
The other circumstance influencing today’s channel structure is expanding partner bases. Channels now include more partners overall, and more nontraditional partner types such as strategic alliances, technology developers, independent software and hardware vendors, managed service providers, and cloud service providers. Forrester estimates number of partners will grow by 10X in five years, and 80% will be non-transacting. Where would all these partners fit into the 80/20 Pareto distribution? Even if they’re not in the 20% directly driving your revenue, they’re influencing top partners.
The result? Brands can no longer put all their eggs in the “top partner” basket, ignoring the majority SMB, non-transacting, or undefined partners. Here are some ways channels can adjust their partner marketing techniques:
Unite with partners to serve the customer.
Move away from self-centered partner marketing messages that don’t represent the value your partners add to a channel ecosystem. Strive for a distribution channel in which you and your partners both aim for end-to-end customer solutions and don’t compete for brand recognition. Co-brand content and promotions, join with partners in charity involvement, or co-fund research that helps customers. Blend channel marketing with community management, support, and industry insights to deliver an exceptional customer and partner experience that builds loyalty and trust with both groups.
Improve the partner experience with channel software.
The right channel software can greatly streamline and simplify your channel ecosystem. Channel management, partner relationship management (PRM) and through channel marketing (TCM) platforms can help reduce manual efforts, connect channel data from disparate sources, accelerate partner workflows, and create marketing campaigns that are more granular and relevant to your partners and their customers.
Easy-to-use channel partner programs stand to make an especially big impact on your mid-tier or SMB partners, who often have limited resources in their own marketing departments. By not only improving processes and information access, but offering a better partner experience, you can improve partner relationships and drive revenue with the partners who make up your “middle majority.”
Encourage innovation and collaboration throughout your channel.
In a 2021 Forrester report, Maria Chien and Dana Schulenberg Forrester described three stages of partner marketing maturity:
Vendors encourage partners to team up and promote one another’s offerings.
Vendors formalize partner-to-partner collaboration and recognize non-transactional partners’ value.
Vendors drive a route-to-customer strategy that’s fully buyer-aligned and leverages the entire channel.
An exceptional channel tech stack, accelerated partner marketing, and an energizing community can help you foster innovation and collaboration in your channel. Not only are partners more engaged with you in this kind of channel ecosystem, it acts as an incubator for partners’ individual experience, talents and advantages. Collaboration leads to innovation, which creates unique competitive advantages and allows all channel members to benefit from one another’s strengths. A fully mature partner marketing strategy powers faster product movement through the channel and results in more satisfied customers.
In conclusion: yes, it may be high time many channel companies ditch the Pareto Principle approach to partner marketing. Growing partner bases, the influence of non-transacting partners, and evolving customer expectations make it necessary for vendors to create more aligned channel ecosystems, where technology makes things convenient and communication strengthens sales and marketing. By shifting to a collaborative channel structure, you can not only adapt to modern B2B commerce, but foster innovation and creativity that gives you a strong competitive advantage.