Importance of Partner Relationship Management in Business

The importance of Partner Relationship Management in Business is discussed in this blog.The distribution channel is the most important instrument for leveraging the efforts of marketing for any business. This runs not only for goods but also for a company’s core services. One needs to engage many partners in order to increase the footprint and also increase one’s portfolio. In today’s time, when every aspect of a company’s workflow can be augmented via outsourcing, managing partners efficiently is crucial to one’s business’ success.

A proper communication between the channel partners not only ensures that the goods are distributed at the right place but also at the right time with the committed quality of service. Each member of the distribution process workflow needs to build a relationship for a smooth functioning of the entire system. A business strategy to improve communication between channel partners is what is packaged as Partner Relationship Management. It is a system of strategies and methodologies to better manage the partners through the introduction of reliable systems, procedures, and processes while interacting with them with clear-cut contracts and applicable metrics agreeable to both parties.

There are new and bigger challenges that exist for organizations in the current competitive business world namely, technological advancement, globalization, change in customer’s pattern/behavior, demand uncertainty, diversity in market trends and so on. These challenges have made companies focus on their core strengths and outsource the sub-processes to experts in the field. It is a win-win situation that enables cost optimization and also ensures higher quality and flexibility. Due to this, the concept of partner relationship management has emerged and evolved as a key line of business between enterprises and their channel partners.

The relationship between the channel partners and the main service (or goods) providers which is also called the channel relationship is based on the connection and interaction between the parties involved to create values and enhance the level of benefits between parties involved. Efficiency in the use of distribution channels by cost reduction can result in maintaining inventories and improving the lead time to deliver the end services to the final consumers. The entire system should work seamlessly where the end-users are not aware of the path businesses take to deliver. To utilize this effectively, there must be a sound system of information exchange, high commitment, and proper coordination of business processes between channel partners. The main enterprise needs to have a strong channel relationship with the increased number of distributors to regulate the process. This is what PRM brings about.

The relationship building process is a step by step approach that ensures all parties are committed to the common goals that align with their individual business targets. This normally consists of three stages viz. explore and select the channel partner, maintain and expand the relationship with a channel partner, and periodically evaluate the relationship status. 

Let us see each of these three stages in brief:

• Explore and select channel partner

This is the pre-relationship stage where the main enterprise must have an internal commitment and support of its team to have a case to involve an outside entity. The business owner for the sub-process here looks for the partner who can perform successfully, efficiently, and profitably. To select the channel partner, there should be some specific selection criteria. The concerns such as marketing and logistics capabilities, firm infrastructure and relationship intensity are the major dimensions for selecting channel partner. Those partners who share the main vision and align themselves to the goals of the company will score high here. At the same, time, concerns for data security and IPR issues must be clear at this stage. The more transparent the selection process is, better are the chances to have a buy-in with the selected partner at this initial stage.

• Maintain and expand relationships with a channel partner

The second stage of relationship building is maintaining and expanding it. After the first selection process, the relationship with the channel partner needs to be maintained. For this, the partners need to work for each other’s benefits. They should encourage each other to overcome the challenges and appreciate the good work done. Credit and acknowledgement are hygiene factors that solicit better cooperation over and above the monetary benefits. Joint team building and competency building exercises should be carried out if possible across the interface with members from each side and the results should be shared with the other team members. This could include joint workshops, informal and formal outings and joint planning, to name a few.

• Evaluate relationship status

Evaluating progress by measuring the performance is the next stage of the relationship building process. The relationship with the channel partners needs to be monitored transparently at both ends and evaluated on a regular basis. Any deviations should be proactively discussed and resolved before they become major hurdles. The evaluation criteria should be well-defined in the contract which becomes the single point of reference for both sides. The evaluation could be based on the outcome of the relationship with respect to profitability, timely delivery, quality product, reputation, complete coverage of the market, and so on.

Few researchers talk about an even elaborated five-stage development process that includes selecting partners, defining the purpose of the relationship, setting boundaries on relationships, creating values in relationships, and maintaining relationships. Whatever be the number of steps, the end-goal of PRM is clear. All in all, distribution and partner management is an important channel because if the product is not reaching the right customer at the right time, there is no use of fancy business processes. Therefore, building and maintaining a strong relationship with business partners is important for the smooth flow of product from the creator to the customer.

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