Vendors often measure, profile and segment their partners based on sales performance. But rarely do they dig deeper to look beyond the numbers to what is driving the business. This paper looks at the concept of measuring channel trust and how it impacts on a partner’s performance and attitudes to the vendor.
The research for this paper was conducted by Professor Louis Stern at the Kellogg School of Management, Xerox Europe and then published by VIA International, a London based channel consulting company and alliance partner of Channel Dynamics.
What is channel trust?
The bedrock of any of any long term relationship is the notion of trust.
If you asked any channel professional, they will intuitively be able to name the handful of partners they get on with and have a trusting relationship with, and typically they will also be the top performers.
But what comes first – the trust or the performance? Channel Dynamics would argue that without the basic principles of channel trust in place you cannot expect partner or channel performance. In fact it is often a disruption in the level of trust that can be linked to declining performance of a once high performing partner. Trust in this context can be explained as a combination of competence, honesty and benevolence.
Competence means being able to deliver what you say you will do. Honesty means making people believe that when you say you will do something, then it will happen. But competence and honesty are not enough.
For instance you might believe Mike Tyson if says he is capable of hitting you and that he intends to do it, but you wouldn’t trust him. The critical third component of trust is the concept of Benevolence. Before you can have trust, you must believe that you supplier or partner is working in your best interests as well as their own. To start to build trust you also need a framework of justice, and there are two types of justice, distributive and procedural. The first – distributive justice – is about who gets what slice of the cake; in a channel context, this could include margins. Both sides have to believe it is fair.
The second – procedural justice – is about how you behave in the relationship, especially in disagreements. This is about how each party co-operates with one and other on a day to day basis to make the relationship sustainable. You may think that the size of the slice of the cake would be the most important element, but Stern’s research shows that it is how you treat your partners, procedural justice, that really matters.
Applying trust theory to the channel
So what does this all mean for a channel professional?
Xerox Europe surveyed over 1,000 resellers to profile their attitudes to Xerox as a supplier, and what that meant in terms of performance. Key findings were that there was a high correlation (75%) between channel satisfaction (defined as the degree of trust, commitment, conflict and co-operation) and the reseller’s willingness to develop sales.
Another factor worth noting was that the reseller’s satisfaction was significantly dependent upon their perception of the relationship. The quality of the brand, product or the competence of the Xerox to deliver, support and market the product was less important. If resellers trust the vendor and see depth in the relationship they will be far more forgiving of minor issues such as late deliveries, and be more supportive of a weaker brand.
Does your channel trust you? How good are you at building trust?
Take our Channel Trust Questionnaire and score your company against the key trust principles. Try to get your colleagues to answer it as well. The results should serve as a useful basis for a discussion of account management. You can also use the questionnaire to canvass the opinions of your partners.
If you achieved a low score, chances are you are having problems with implementing and aligning your channel initiative, resulting in a lower lever of trust, which in turn manifests as lower performance. What three specific things could you do to improve matters?
In summary, if you want to have higher performance from your channel partners, you need to have a high level of satisfaction. And that can only come if you have a solid foundation of channel trust.
In order to remember that channel trust is more than a word, and is made up of a number of actions, use the following acronym:
Truth – long term relationships will only prosper when truth is at the forefront
Responsibility – if you say you will do it, do it when you say you will
Upkeep – continue to build the required skills both internally & externally
Security – partners will only invest if they believe they have a stable relationship
Teamwork – everyone in the organisation needs to be aware of the consequences of their actions
Best Practice for building Channel Trust
Start at the beginning. Ensure your partners and your offering (including financial returns, partner responsibilities and opportunities) are aligned to the market you wish them to address, and you are not trying to force “square pegs”…..
Listen to your channel and deal with any outstanding issues that may hamper any further progress. Conduct reviews quarterly with as many of your top partners as possible and follow up on the agreed actions
Implement a clearly defined escalation process, including consequences for breaches, to deal with channel conflict or bureaucratic lack of care
Have a channel plan and stick to it. If you have to change policies, resources, programs or margins, think through the channel consequences and provide ample warning and an explanation of why
Not all partners are the same, so don’t treat them as if they are just there to make up the numbers. Take the time to understand their strengths and drivers as businesses and people
Finally, if you think channel trust may be an issue for your organisation, call us to see how we can help you assess the level of trust in your channel, and what you can do to turn it around.