Broaden Your Horizons: Establishing Profitable and Enduring International Partnerships
618 Words | last updated in September 2023
Building international partnerships demands a Goldilocks approach. Not too few, not too many, but just the right number and type of partners are key to your success in the region. Whether they are suppliers, distributors, professional service providers, or ecosystem players with complementary offerings, partnerships are critical to international success. This article will concentrate on distribution partnerships in an indirect channel strategy.
Don’t Obsess Over the Brand
The right distribution partnerships can dramatically affect your international trajectory. Good ones provide you with invaluable local knowledge and market your products profitably in the region.
However, brand recognition is not the appropriate metric to gauge potential partners. Well-known, large-scale companies can underperform expectations, while lesser-known niche players may account for the bulk of your sales, especially early on.
Large distributors often share similar traits. They typically seek additional services to upsell to their existing customers. However, partnerships with them demand alignment, flexibility, and substantial support to be successful. The first two factors are often elusive with mature corporations, and the second one can be a significant expense for your company.
Their sales teams will require constant nurturing. Their salespeople will focus their efforts on selling the products that allow them to meet their sales quotas with minimal effort. And they probably will not have a comprehensive technical understanding of your product. Thus, it’s vital to provide them with a simple yet compelling use case for your product that can be easily sold by them, coupled with relentless support to keep it top of mind.
For complex use cases, lesser-known value-added retailers (VARs) are essential. These are smaller, entrepreneurial entities that are more likely to invest the time to deeply understand your product. Despite their size, they are better positioned to pursue larger enterprise-level sales opportunities. Their technical knowledge allows them to respond more persuasively to the demands enterprise sales prospects make.
Take a Balanced Approach to Partnership Development
Aim to initially focus on 3 to 7 distributors per country. This range provides enough variety to assess different distributors’ competencies without being overwhelmed by too many options. It’s also important to adopt a policy of fairness and non-exclusivity. It’s impossible to predict which of your distributors will be the most successful. In all likelihood, 80% of your sales will come from 20% of your distributors. But where that 20% comes from is anyone’s guess. Avoid the trap of playing fortune teller or overcommitting to one distributor.
Cultivating trust with your initial group of distributors is a balancing act. You need to reassure them that they will receive exceptional support and you won’t play favorites. In other words, you cannot offer them preferential treatment. You can let them know that, in all likelihood, one of them will outperform the rest combined. But you are—and always will be—fully committed to helping all of them succeed independent of past performance.
By all means, avoid the-more-the-merrier trap. Having too many distributors results in stretching your resources thin and demotivates the distributors. You need to make each distributor feel special and not tell your business developers to sign up as many as possible to give the illusion of progress.
Adopting a Goldilocks approach to establishing international distribution partnerships is imperative to launching and growing your global footprint profitably. Understand the inherent strengths and weaknesses of different distributors, and focus on 3 to 7 partners for each major international market. Minimize the extent to which the market segments they target overlap. And take care to match their technical sales capabilities to the use cases they will pursue. This approach will ensure sufficient variety to drive success, efficiently allocate your resources, and keep your distributors motivated.
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