Partner strategies for subscription-based businesses | Part four
artner strategies bring significant opportunities to subscription businesses. The past couple of articles has highlighted their intrinsic role in the subscription concept.
The nature of partner strategies in subscription businesses is that they are complex and therefore require systems that acknowledge that from the outset. These complexities are at their most acute when it comes to financial management. There are three user stakeholders involved in business transactions – end customers, partners and your business. From the implementation of incentives, and commission payout process to revenue recognition and accounting, processes need to be streamlined and automated correctly to build up a scalable partner network.
As with customers, partnerships are about developing and maintaining long-term relationships, in which trust is an essential ingredient. Good financial management is an intrinsic part of a trusting relationship.
All of the perceived risks that go with the complex nature of partner strategies lead some firms to be hesitant about exploring them at all. However, with a user-centric approach and the right practices in place you can ensure that finances are managed in a way that enhances partner relationships, putting strategies in place to resolve any industry requirement.
At keylight we have targeted this specific area on behalf of subscription businesses, offering an out-of-the-box partner portal that is built into the core subscription engine as part of the digital omnichannel strategy.
In this article, we look at the financial challenges of strategic partnerships and the solutions to help you manage them well.
The financial implications of strategic partnerships
There are three unique areas of financial focus for subscription businesses when it comes to partner strategies:
Channel pricing and profit margins
Before defining the commission structure, it is important to consider which products are to be sold, for how much, by which partner as well as discounts that are allowed to be given out, as this will affect commission rates and the profit for your business and your channel partners. Key challenges to be aware of include:
- Strategic clarity
Customer journey and sales processes may differ depending on the product values and sales channels. Having well-designed pricing strategies in place is crucial to setting up the channels for growth.
- Remaining in control
For different regions or businesses that have complex pricing models, it is essential to define rules and conditions around products, prices and discounts. This not only helps the business to always have a grip on revenue but also simplifies the sales process for channel partners. The system in place needs to allow for easy implementation of these rules and support changes as the partner network expands.
- Resource investment
Recurring partner processes need to be automated as the network grows. While working to scale and implement new incentives, businesses often experience delays that cancel out the efficiency multi-channel sales should offer due to technology limitations.
- Increasing complexity
As the business grows through partnerships, billing, invoicing, and accounting obligations increase. Therefore, the need for appropriate systems only increases as time goes by.
With subscription partnerships, this becomes a challenge because you’re creating multiple revenue sources that involve discounts, reseller prices and commissions, these would require constant attention from your central team. The more partners you have, the more variables and the more complex the monetary management becomes. As the purpose of business partnerships is rapid growth, it isn't an option to do all of this work manually; it has to be automated.
Commission and partner incentives
Partner incentives are the backbone of long-term partnerships. As we discussed in our last article, What you need to manage subscription business partnerships, incentives are vital for keeping partners motivated to work on your behalf and remain inspired by your offering.
As with customers, maintaining that level of incentivization is an ongoing process. You need to make sure it fits into your overall business objectives, and incentives need to reflect the different types of partners that you’re working with. Key challenges to be aware of include:
- An attractive commission structure
When implementing different partner strategies into your subscription businesses, formulating a commission structure that will attract high-quality affiliates as well as fit the overall business strategy can be a detailed and strategic process.
- Setting the commission rate
Setting the right metrics to enable the success of your channel strategy is essential for each individual partnership to benefit both sides of the business.
- Tracking the commission and payouts
When the commission rates are in place, your partners need to have insights into how much, when and from which contract they will receive the partner incentives.
- Revisiting commission and incentives
Naturally, things change over time – the market, the economic environment, your own business needs, and the success of individual partnerships. With that in mind, you need the ability to periodically revisit and assess commission rates in order to keep partners motivated and rightly compensated for their efforts, ensuring the relationship doesn’t stagnate.
All of this needs appropriate systems in place that are up to the task of agility. Managing different kinds of partner relationships in different regions and markets, in parallel with homegrown or standalone solutions, leads to incomplete automation. This results in an overall unsatisfactory experience for the partner and ultimately damages business outcomes as well.
Taxation and finance automation
As your partner strategy expands across different countries, where the product is being sold and where the service entitlement is delivered varies. That adds complexity to your subscription business’s ecosystem. Key challenges to be aware of include:
- Sales tax and compliance
One of the main benefits of employing partner strategies is that you can expand to different countries and markets with minimum resources. If tax calculation remains manual within your business or channel partners, it’s prone to errors and increases the risk factors for the central business.
- Revenue and accounting automation
The complexity of a growing partner network doesn’t end after sales. If the partner’s commission metric depends on the contract value with end customers, this has to be taken into account in revenue recognition. Just as in accounting, when compensating channel partners, businesses need a streamlined workflow to reflect the monetary value of partnerships on the balance sheet.
The solution is to use an end-to-end subscription system that is compliant to fit different partner use-cases and their varied subscription offerings from day one. As your partner network grows, you want your finance teams to pick up the pace simultaneously.
Solutions for financial management in subscription business partnerships
At keylight we are aware of the opportunities that business partnerships present for subscription businesses. Our partner portal has been specifically designed to address the complexities in subscription partnerships:
Automated sales process and partner incentives
Our platform streamlines and automates partner processes from start to finish, including out of the box customer journeys, digital quote creation, approvals, checkout, contract and asset management. Our partner portal keeps track of what's accurately owed to partners in order to keep them feeling motivated to continually source more customers with higher lifetime value, bringing a steadier flow of business back to any subscription business.
From channel commerce requirements to finance operations
keylight is the only subscription system on the market offering an out-of-the-box partner portal that is built into a billing system. We remove manual paperwork, enable partner subscription management and allow the network to adapt to a variety of partner use cases and grow within a well-integrated environment.
Building a sophisticated partner network is an iterative process. Our unified user-centric data model provides a single source of information to keep businesses, partners and end customers informed with everything they need. Furthermore, it integrates with other enterprise systems seamlessly to automate sign-ups, activations and communications. That data integrity and cross-functional agility is about more than daily financial administration; it provides a platform for subscription businesses to scale successfully.
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