Introduction
Technology Client Was Challenged by Fragmented Go-to-Market Strategies
With a go-to-market strategy focused exclusively on channel partners in the past, a Technology client was not seeing the results they had hoped for. Because of that, the client had gone back and forth over the years between being a channel-first company and a direct vendor, resulting in a fragmented go-to-market approach with roles that weren’t designed to execute well in the channel world and partner relationships that had been frayed by the vacillation.
When the decision was made to become a truly channel-first organization, the client sought Alexander Group’s assistance in understanding the most attractive types of partners, creating an ideal partner profile, segmenting existing partners, designing roles, sizing headcount and developing a partner program.
The client had been seeing ARR shrink over the past few years for multiple reasons: poor product fit with certain customer segments, a lack of new customer acquisition and declining deal values. The primary goal was to stabilize and grow ARR long-term at more attractive unit economics, increasing LTV/CAC from sub-1.0 to positive unit economics and attaining positive ARR growth through churn mitigation and new customer acquisition.
Project Approach
Detailed Analysis of Route-to-Market to Guide Future Recommendations
Alexander Group began with a quantitative assessment of existing routes to market, analyzing the performance and unit economics of each respective route. In the route-to-market analysis, the ARR and organic growth across each route-to-market was analyzed, uncovering that, while the client had made an intentional decision to move to primarily two-tier distribution, minimal new ARR was being acquired through distribution partners.
Alexander Group then modeled the LTV/CAC of the various routes-to-market, showing that direct bookings were dilutive as they had a below 1 LTV/CAC ratio, which channel routes-to-market were overall accretive and necessary based on deal-level economics.
“Voice of the partner” was also collected to gather the more than 140 partners’ perspective on working with the technology client and other comparable vendors. Partner feedback indicated that the technology client was the easiest to do business with. This indicated that the client needed to continue their reliability, flexibility and frictionless processes to maintain and grow existing partners. Partners indicated that the client had the most deficient integration capabilities.
Existing customers were also surveyed as part of the process. Larger customers shared that they preferred to purchase direct to drive a more seamless sales process. However, larger companies were more likely to purchase through partners citing their ability to provide vendor/solution guidance.
Comprehensive benchmarking was conducted around growth, retention, productivity and investments. Benchmarking output indicated low seller productivity, low sales expense and an efficient sales and marketing organization.
Key Findings
New Strategies Had Little Payoff
Alexander Group reviewed the client’s data to uncover surprising insights that helped shape future state recommendations. Despite being a “Distribution First Business,” less than 3% of the client’s ARR flowed through their distributor channel. This indicated a lack of success in their latest strategy, and the client wasn’t aware of how little new ARR was being run through distribution partners. Additionally, the install base of direct customers was significantly higher than the client expected despite attempts to move to a more channel-first motion.
However, there were additional opportunities to be captured through a more targeted partner strategy and program.
Analyses revealed that the highest churn was from the direct route-to-market and low-value partners. This suggested that high-value partners were effective in driving retention. Furthermore, the lowest deal size was from the direct route-to-market, revealing an unsustainable high cost to serve. It was becoming more important to encourage partners to engage and transaction without direct involvement.
Recommendations and Outcomes
Driving New Customer Acquisition and Increasing Deal Sizes
Based on Alexander Group’s analysis of the client’s routes-to-market, the following measures were recommended:
Within the first fiscal year, the expected impacts of these recommendations indicated that ARR decline would stabilize while simultaneously improving the LTV/CAC through improvements in new customer acquisition and increasing the average deal sizes through the most attractive routes to market.
Leverage Industry-Leading Expertise to Refine GTM Strategies
For companies that aren’t hitting desired growth metrics, assessing go-to-market strategies can uncover weaknesses and opportunities for success. Contact Alexander Group to learn more about how our experts can guide you toward success.
About Alexander Group
Alexander Group understands your revenue growth challenges. Since 1985, we’ve served more than 3,000 companies across the globe. This experience gives us not only a highly sophisticated set of best practices to grow revenue—we also have a rich repository of unique industry data that informs all our recommendations. Aligning product, marketing, operations and finance efforts behind a successful sales organization takes insight and hard work. We help the world’s leading organizations build the right revenue vision, transform their organizations and deliver results.
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