15
minute read

Do partner commissions attract or retain digital agency solutions partners?

We surveyed hundreds of agencies to determine the facts around what truly incentivizes digital service providers to partner.

First, who am I?

In 2006, I founded my first digital agency called Right 2 Revenue with the intention of creating full transparency marketing programs to help his clients learn to operate the strategies without him. Eventually, the agency morphed into a directory called Automated.af which helped match marketing automation experts to businesses who needed them. In operating this marketplace, Alex discovered how few of these saas platforms in the automations actually enabled the agency experts to sell services on top of their solutions. This was the genesis of the research which inevitably became Partnerhub.

 Now, who are we talking about?

"Partners" are: Those you work with and support to create opportunities for mutual business growth. MSP's, Digital Agencies, Service providers, consultants

"Affiliates" are: Individuals or companies who send traffic to your links in return for a fee. Affiliates, influencers, Marketplaces

To find out what incentives actually incentivize partners, let's review some data:

I asked my network on LinkedIn and it was very clear. View that poll here.

  •  75% would still prefer if the partner stopped paying commission.
  • Only 24% "need" commissions.

And, we ask all of the Parnerhub agency users as they fill out their profile: What is the main reason you chose to “partner” with your primary tech partner?

  • 43% = Agencies partner for 2 reasons: Their strategy and your product.
  • 3rd was referrals
  • 4th was commissions

If that wasn't enough, here is what a $20M AGR agency's earns in commissions in a year:

  • 142 commission payments 
  • From 14 partners 
  • Over 10 months 
  • $49 average payout 
  • Commissions = < 1% of GR This agency does $20M+ /year in GR.

To help make sense of all this, let’s understand the mentality of a successful digital agency team member. This is the managed service providers’ thought process when considering "partnering":

  1. Interest from clients in product category/use case.
  2. Alignment with their stack and services.
  3. The product quality.
  4. Potential for new business and referrals.
  5. Trust - are their clients protected.
  6. Support and training.

Here’s what some had to say about commissions as an incentive to partner:  

"We don’t take referral commissions. We pass it onto our clients. How can our clients trust our recommendations if we’re getting paid for it? Feels like a conflict of interest.” - Samir Balwani, Chief Executive Officer at QRY

"No need for commissions as they would go back to the company, not the partnership. Put the money back into the partnership, watch both companies grow." - Christopher Rothstein, Strategic CX Partnerships for Gorilla Group

"Brian thought that 20% commission (for the life of the customer) wasn't enough. He insisted it should be 30%. I suggested that we should NOT offer commission at all."- Peter Caputa, CEO at Databox

“Nope, commissions are a nice to have not a must have. Referrals to a tech partner are motived by the clients’ needs - given the best in class solution they offer. It’s more important that the partner take great care of our clients with above and beyond customer service and rather than a commission, a discount on pricing for the client is also a much better use of any potential funds.”

A better question we should be asking ourselves:

How can we re-purpose the would-be commissions $$ to create a better program?

50% and here's why it's crucial to think differently...

  • Communication failures 
  • No referrals 
  • Red tape 
  • Lack of integrations 
  • Too salesy

Better uses for that money:

  • Spiffing their salespeople.
  •  Creating magnanimous events. 
  • Funding the creation of a course. 
  • Market-Development Funds. 
  • Sponsoring content.

Instead of focusing on referral commissions, focus here instead:

Communication

Mishandling partner client referrals, going around partners, not being available for support.

Simplicity

Contracts, forcing unnecessary hurdles, portals on portals on portals.

Reciprocity

Reciprocity means if I send you business, you send me business. You don't have to refer, but you have to create opportunities for partners.

Integrations

Lack of integrations and poor / one-directional integrations will also drive partners away.

For the CMO's, CPO's, & CEO's:

Databox

Templates created with partners to drive traffic to partners.

Airtable

The Airtable Universe for power users to show off their builds.

Webflow

Designed by partner sites to be purchased by customers.

Smith.ai

Bringing experts into content regularly and deliberately for co-marketing.

HubSpot

This agency created a PRM on top of HubSpot Operations Hub.

Lastly; partnerships, like relationships, will fail when:

  • Cowboy mentality: “They'll come to us.” This doesn't work today. We are all way too connected. Influence / ecosystem is everything.

Finally, some hard truths about Channel:

1.Commissions will not be a factor in a digital agency's decision to send their clients to your product.

2. Marketing and Product have more to do with Partnerships success than the partnerships team.

3. If your CEO does not believe the company is reliant on partnerships to be the category leader, you probably won't succeed in partnerships.

Research

https://go.forrester.com/blogs/what-i-see-coming-for-the-channel-in-2020/

https://www.linkedin.com/feed/update/urn:li:activity:6912424358267244545/

https://www.partnerprograms.io/resources-for-tech-companies/the-state-of-agency-tech-partnerships-report

https://www.forrester.com/blogs/channel-software-tech-stack-2021/

Alex Glenn

CEO

Founder and CEO of Partnerhub. Proud father. And proud of what our team has built!