Distribution, Channel & Partnerships | Summary and Q&A

TL;DR

Channel partnerships help companies expand their reach by leveraging the customer base of other businesses.

Key Insights

• 👀 Channel partnerships are crucial for companies looking to expand their reach and customer base.
• 🥺 Focusing on verticals and finding relevant channel partners can lead to more successful partnerships.
• 🪚 Leveraging channel partnerships can help companies create defensibility and barriers to entry in the market.
• 💪 It is important to choose channel partners that have a strong need for additional revenue opportunities.
• 🎯 The success of channel partnerships often depends on complementary offerings and a clear understanding of target customers.
• 🍉 Transparent pricing and avoiding price conflicts with channel partners are essential for maintaining trust and long-term partnerships.
• 👨‍💼 Channel partnerships can provide distribution, defensibility, and profitability opportunities for businesses.

Transcript

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Questions & Answers

Q: How did Trial Pay use channel partnerships to grow their business?

Trial Pay leveraged channel partnerships to show ads at the point of transaction, targeting customers who were in the buying process. They partnered with a variety of merchants to reach a wide range of customers and generate more transactions.

Q: What was the key factor in crossing the 10,000 merchant barrier for Trial Pay?

Trial Pay was able to cross the 10,000 merchant barrier by focusing on channel partnerships instead of relying on individual salespeople or traditional advertising methods. This approach allowed them to reach a larger number of merchants in a scalable manner.

Q: How did Trial Pay choose which channel partners to work with?

Trial Pay identified potential channel partners by considering their relevance to their target audience and the feasibility of the partnership. They focused on companies that were looking for additional revenue opportunities and had a large customer base that could benefit from Trial Pay's offerings.

Q: How did Trial Pay address pricing conflicts with their channel partners?

To avoid pricing conflicts, Trial Pay offered different economics to their channel partners behind the scenes, while maintaining transparent pricing for their end clients. This ensured that their channel partners were incentivized to promote Trial Pay without undercutting their own pricing.

Summary

In this video, Alex Rampell, a general partner at Andreessen Horowitz, discusses the importance of distribution channels and partnerships in growing a business. He shares his background in using channel partnerships to grow his previous company, TrialPay, and provides examples of how companies can utilize partnerships to reach customers at the point of transaction. He also explains the concept of bi-directional relevance in channel partnerships and the importance of testing and building relationships with smaller partners before approaching larger ones. Rampell emphasizes the need for complementarity and advises companies to focus on a specific vertical to build a strong foundation before expanding into other markets.

Questions & Answers

Q: How did TrialPay use channel partnerships to grow?

TrialPay used channel partnerships to reach customers at the point of transaction. Instead of relying solely on advertising during customer searches, TrialPay showed ads before or after a transaction. For example, they partnered with Blockbuster to show ads to customers buying DVD players. They also partnered with social gaming companies to monetize their games by offering ads for other products or services. Additionally, TrialPay collaborated with companies like Fandango to offer discounts on purchases after buying movie tickets. By partnering with a wide range of merchants, TrialPay was able to generate a large number of transactions and grow their business.

Q: What advice does Rampell have for companies looking to build channel partnerships?

Rampell suggests focusing on a specific vertical or industry when building channel partnerships, even if the company does not have a network effect business. This approach allows companies to target a specific market and gain traction before expanding to other verticals. He gives the example of Facebook, which started at Harvard before expanding to other universities and eventually the general public. Rampell also emphasizes the importance of finding partners that are looking for additional revenue opportunities, as they are more likely to be interested in channel partnerships. He advises starting with smaller partners to test and refine the partnership model before approaching larger ones.

Q: How did TrialPay identify potential channel partners?

TrialPay looked at the chronological stack of services leading up to the discovery of their product or service to identify potential channel partners. For example, they considered domain name providers, web hosts, commerce platforms, payment processors, and accounting software providers. They sought partnerships with companies that served as entry points or touchpoints for potential customers. By partnering with these companies, TrialPay could access their customer base and offer relevant ads or offers at the point of transaction.

Q: What is the role of sales and marketing in channel partnerships?

In the context of channel partnerships, sales and marketing teams play different roles. The marketing team is responsible for creating awareness and generating demand for the product or service. They may sponsor events and engage in top-of-the-funnel activities to attract potential customers. On the other hand, the sales team focuses on closing deals and working with clients after they have shown interest. In some cases, marketing may directly target self-service channels where potential customers can sign up without the need for a salesperson. The goal of both sales and marketing is to drive more transactions through the channel partnership.

Q: How did TrialPay maintain defensibility in the face of competition from other companies?

Download.com, a channel partner of TrialPay, helped provide defensibility by offering trial pay as a payment option to its customers. This meant that TrialPay's competitors would have to convince both Download.com and the clients to switch to their alternative solution. By having exclusive access to Download.com's customer base, TrialPay gained a competitive advantage. This defensibility allowed TrialPay to hold onto its clients and prevented competitors from easily replicating their distribution model.

Q: How did TrialPay handle pricing and economics in their channel partnerships?

TrialPay ensured transparency and fairness in pricing by not allowing channel partners to compete with each other on price. While TrialPay offered different economics to each partner based on their arrangement, the end client or customer always paid the same amount regardless of whether they came through a direct channel or a channel partner. This approach prevented channel conflict and maintained consistency in pricing.

Q: What are the three lenses for evaluating channel partnerships?

The three lenses for evaluating channel partnerships, according to Rampell, are defensibility, distribution, and profitability. Defensibility refers to the ability to build barriers to entry by securing key partners or channels. Distribution focuses on how effectively the partnership enables reaching potential customers. Profitability looks at whether the partnership is financially viable and beneficial for both parties involved. Evaluating partnerships through these lenses helps companies determine the feasibility and value of working with different channel partners.

Q: How did TrialPay expand its distribution model after proving its effectiveness?

After proving the effectiveness of its distribution model in the software vertical, TrialPay looked for opportunities to expand into other markets. They sought partnerships with companies like PayPal, as their large customer base would provide significant distribution. However, Rampell highlights the importance of starting with smaller channel partners to gain experience and knowledge before approaching larger partners. By learning from smaller partners, TrialPay improved its approach and positioning, making it easier to secure partnerships with larger companies like PayPal.

Q: How did TrialPay utilize complementary products or services in channel partnerships?

Complementary products or services that align with the company's offering are ideal poaching grounds for customer acquisition through channel partnerships, especially for new or unfamiliar concepts. Rather than targeting customers directly, companies can appeal to customers already engaged with complementary products or services. For example, TrialPay targeted customers searching for software downloads through download.com, providing them with relevant offers during the download process. By leveraging complementary products or services, companies can tap into existing customer bases and expand their reach.

Q: What challenges do companies face when relying on channel partnerships?

One challenge with channel partnerships is the potential for channel conflict, where partners may compete with each other on price or undermine each other's efforts. To mitigate this, companies should establish clear guidelines on pricing and ensure fairness among channel partners. Another challenge is maintaining consistency in messaging and sales efforts, as channel partners may not have the same level of knowledge or expertise. Companies must communicate effectively with channel partners to align messaging and ensure a consistent brand experience for customers.

Takeaways

In summary, channel partnerships are crucial for the growth and success of many companies. They allow businesses to reach customers at the point of transaction and leverage the existing customer base of their partners. Companies should focus on a specific vertical to develop a strong foundation before expanding into other markets. It is important to test and build relationships with smaller partners first to learn and refine the partnership model before approaching larger partners. Complementary products or services provide valuable marketing opportunities, and companies should prioritize defensibility, distribution, and profitability when evaluating channel partnerships. Mitigating channel conflict and maintaining consistent messaging are vital to the success of channel partnerships.

Summary & Key Takeaways

• Trial Pay used channel partnerships to grow their business by showing ads at the point of transaction, resulting in higher conversion rates.

• They partnered with various merchants, including small and large companies, to reach a wide range of customers.

• By focusing on verticals and finding relevant channel partners, Trial Pay was able to scale their business and create a more defensible position in the market.