Channel conflict tends to evolve over time, stemming from partnerships that lack clear guidelines. At the root of a do-nothing strategy is often a lack of understanding of the underlying causes of channel conflict, and a series of strategies and processes in place to resolve each. This brief categorizes these causes into our SiriusDecisions Channel Conflict Model, and share specifics on each.

1. © Copyright SiriusDecisions. All Rights Protected and Reserved. 1
C A T E G O R Y : C H A N N E L S T R A T E G Y
When it comes to channel sales, one can argue
that wherever there are potential buyers inter-
ested in purchasing a company’s solutions and a
number of resellers vying to make the sale,
something must be going right. But what hap-
pens when a new customer demands local sup-
port but his or her organization did not make its
purchase from a local dealer? Or what if a
reseller sacrificed product price in order to sell
their unique services?
In the end, letting partners sort channel
conflict out themselves is not acceptable. At the
root of a do-nothing strategy is often a lack of
understanding of the underlying causes of chan-
nel conflict, and a series of strategies and
processes in place to resolve each. In this brief,
we categorize these causes into our
SiriusDecisions Channel Conflict Model (page
two), and share specifics on each.
SIX ROOT CAUSES, ONE MODEL
Channel conflict tends to be organic in nature,
developing over time as partner networks and
offerings expand, and new acquisitions are
made. As such, it’s very difficult to completely
prevent; instead, organizations must remain vig-
ilant in six core categories as conditions change,
and adapt old processes and approaches to new
realities. These categories include:
• Partner agreements. Partner agreements
whose sole focus is to protect intellectual
capital but do nothing to define primary
targets, sales and marketing commitments
– as well as what processes have been put
in place to arbitrate conflict situations –
actually lay the groundwork for future con-
flict. To reduce the conflict that these doc-
uments have inadvertently caused, changes
can be made which include reseller agree-
ments, letters of understanding, or sales
and marketing addenda.
• Coverage plan. Partner-initiated business
that is lost to direct sales or infighting
between partners often results from an
overlap in coverage. Unclear or poorly com-
municated selling guidelines that leave
resellers unaware of which target accounts
or territories are off-limits is verboten, as is
a lack of setting the “bar” that dictates
where direct selling ends and indirect
begins. Often, changes need to be made to
existing coverage model plans, a process
that involves both direct and indirect sales
leadership.
• Compensation. Determining whether a
territory sales rep and channel manager
should both be compensated when a part-
ner closes a deal is often debated by sales
leaders. Channel programs that pit internal
sales resources against each other often fail
because of inadequate compensation rules;
conversely, businesses also suffer when
both parties are rewarded and the cost of
sales doubles. Within the channel, compen-
sation offered in the form of commissions
or marketing development funds also can
be designed to reward partners who play
by the rules; for example, partners who sell
into a target vertical market to registered
leads would get more margin or commis-
sions than partners who do not.
Compensation changes often must be
made for direct sales to incent them to
work with partners, to channel managers
to emphasize the partners they should
spend their time with, and to partners
themselves in terms of the discounts they
receive when they follow guidelines.
• Deal registration. Deal registration refers
to the logging of deals by a partner or ven-
dor into a tracking system that often
A Model for Managing Channel Conflict
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2. © Copyright SiriusDecisions. All Rights Protected and Reserved. 2
includes approvals as well as the ability to update deal activity.
When this occurs in nearly real time, it helps to avoid collisions that
will otherwise occur between partners, or between partners and
direct sales. Systems that address the registration, approval and
notification of channel opportunities come in many varieties,
including software-as-a-service delivered CRM add-ons to specific
portals that allow partners to post deals in order to secure maxi-
mum margin from the vendor.
• Online selling. Online selling includes any transactions conducted
through a vendor’s Website that otherwise would have been pur-
chased from a partner. Vendors often forget their channel when
designing sites that offer buyers the ability to configure or purchase
similar offerings currently being sold through their partner base,
and by doing so, cut the partner out altogether. As a result, partner
agreements and compensation may have to be reworked to reflect
a new go-to-market strategy.
• Grey market selling. This category refers to the establishment of
unauthorized channels that bypass a vendor’s reselling guidelines to
sell products to customers. Over time, it is natural for buyers to look
for lower-cost alternatives that may include unauthorized products
intended to be sold in one market being offered illegally in anoth-
er. This is especially true with customers outside the United States
who bypass local dealers and purchase products not meant for
export from unauthorized U.S. grey market distributors. This
dynamic pulls the rug out from under resellers who have invested
their resources throughout the sales cycle, only to lose the business
to an online or unauthorized channel. Gaining visibility into sell-
through reports and dealer pipelines allows vendors to gauge how
and where their products are being sold, and whether or not they
should make adjustments to prevent unauthorized sales.
Each of these categories has its own intricacies, and applies differently to
organizations depending on their size, complexity and maturity of their
channel relationships. We will tear into each at a much more granular
level in future briefs.
THE SIRIUS DECISION
Reputations in the channel are difficult to establish; on the flip side, they
can be destroyed over a single deal, often resulting in dissatisfied part-
ners who look to your competitors to form new alliances. We have cer-
tainly seen cases where vendor recruiting efforts have focused purely on
looking for disgruntled resellers who have had a falling out with a com-
petitor. What better place is
there to find industry-savvy
partners trained on similar
products? Organizations
that do not balance their
channel programs with their
direct efforts must realize
that they are not just violat-
ing the agreements they
have made; they are poten-
tially sabotaging their own
markets.
C A T E G O R Y : C H A N N E L S T R A T E G Y
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Early-stage vendors often fail to define parameters that mitigate channel conflict; this often
becomes less of an issue as channels mature and stronger practices are established
Partners are most apt to collide in early-stage organizations; this conflict often expands to
the direct force as organizations evolve, but should ease as rules are put into place
New organizations tend to take a wait-and-see attitude before adjusting partner margins;
once this is solved, direct vs. channel compensation issues must be addressed
Deal registration issues tend to grow as the channel becomes more established, larger
numbers of partners are added and greater numbers of deals are channel-sourced
Most organizations consider Internet-based sales after they have established the channel;
the earlier the potential conflict is considered, the better
Early in the channel process, vendors must l earn the do’s and don’ts of selling with local
partners; this may ease over time, but is then replaced by a new problem: piracy
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OOnnlliinnee SSeelllliinngg
GGrreeyy MMaarrkkeett SSeelllliinngg
: Low : Medium : High
OObbsseerrvvaattiioonnss
Early-stage vendors often fail to define parameters that mitigate channel conflict; this often
becomes less of an issue as channels mature and stronger practices are established
Partners are most apt to collide in early-stage organizations; this conflict often expands to
the direct force as organizations evolve, but should ease as rules are put into place
New organizations tend to take a wait-and-see attitude before adjusting partner margins;
once this is solved, direct vs. channel compensation issues must be addressed
Deal registration issues tend to grow as the channel becomes more established, larger
numbers of partners are added and greater numbers of deals are channel-sourced
Most organizations consider Internet-based sales after they have established the channel;
the earlier the potential conflict is considered, the better
Early in the channel process, vendors must l earn the do’s and don’ts of selling with local
partners; this may ease over time, but is then replaced by a new problem: piracy