7 Steps HubSpot Used to Scale Its Channel Sales Program

As of June 2014, HubSpot’s reseller program has produced over 40% of its customers. VP of Sales Pete Caputa shares the company’s playbook for making that happen.

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How HubSpot’s Channel Sales Program Came to Be

In 2011, Inc. Magazine published a profile of HubSpot CEO Brian Halligan that highlighted our company’s propensity to “fire” employees from their day jobs so they could grow out of their roles and graduate into more entrepreneurial, innovative positions. That magazine article happened to showcase my graduation from sales rep to the creator of HubSpot’s reseller program — a strategy that produced approximately 42% of our customers as of June 30, 2014 and 33% of our revenue for the six months ended June 30, 2014.

Today, I get interview requests on a near-weekly basis from channel managers who want to know how I (and, more specifically, HubSpot) did it. When I’m short on time, my answer to that question is that we leveraged inbound marketing to attract a large number of high quality, highly motivated value added resellers. But like anything worth doing, building HubSpot’s program wasn’t actually that easy.

In fact, we put a lot of thought into who we wanted to target, how we’d engage them, and what role they would play in our partner program. From there, we of course relied on inbound marketing to help us generate organic interest in our program, but that was just one piece of the puzzle. To be successful long-term, we also needed to develop strategies that addressed the challenges of onboarding, training, coaching, and incentivizing our resellers. Frankly, it wasn’t always the smoothest experience and we made some mistakes.

But while there were some lessons we had to learn the hard way, the process we used to build our reseller program has proven to be a pretty successful one. If your software company is trying to build a similar reseller or partner program, I would highly recommend deploying the playbook we continue to use at Hubspot.

Step 1: Think Marketing (Not Sales) When Recruiting Resellers

Most companies who sell through resellers make a list of the top partners in their industry and then hound, beg, and bribe them until they agree to add their products to the lineup. We didn’t do that. Instead, we relied on inbound marketing.

When I convinced Brian that it was worth looking into selling through marketing agencies, I remember him giving me very specific instructions at the end of that meeting. “Fine,” Brian said. “Just hit your number and don’t cause any disruption. And, by the way, you’re going to work for Mike Volpe now.”

Get first-hand insights behind HubSpot’s rapid growth

mike-volpe

Q&A with HubSpot CMO Mike Volpe

Back then, Mike was the VP of Marketing, but he’s since been elevated to CMO. At the time, that seemed like an odd transition, particularly considering I had been working for a rock-star sales manager (Dan Tyre) who had built large and successful reseller organizations before. But it didn’t take long for me to see why Brian and Mike believed building a reseller program was all about marketing, not sales.

From day one, we started hosting a lot of educational webinars that were directed specifically at marketing agencies and consultants. When they were over, I just sat back and watched the interest in our program fly in. I never had to call anyone who didn’t contact us first, and some of our earliest and most successful partners — like PR 20/20, LyntonWeb, and Kuno Creative, who are now running multi-million dollar agencies — came out of those webinars. In short, we used inbound marketing to bring the market to us, rather than leverage old-school sales tactics to build an old-school VAR program.

Step 2: Solve Your Resellers’ Challenges First, Then Focus on Their Clients’ Challenges

Back in the day, we used to route every lead generated via our website to our sales reps. We had one lead rotator and, no matter what the lead, we’d rotate it to the sales rep who was next in line. As a result, marketing agencies and consultants would end up in everyone’s funnels.

What we discovered, however, was that these marketing consultants would tell our salespeople they had ‘X’ number of clients and would love to learn how the software could help those clients. Naturally, our salespeople would get “happy ears” and spend hours giving demos to marketing consultants who had little intention or ability to introduce and sell our product to their clients or prospects. Ultimately, we decided to stop rotating these leads to sales reps and instead funneled them into a queue. And rather than call them, we began promoting [the aforementioned] webinars to them.

Over time, we found that the messages that resonated most with resellers revolved around how they could fix issues in their own business, as opposed to talking about our software and their client’s needs. We certainly talk about those things, but we first focus on the prospective partner’s business. As it turned out (and this is still true today), most small and mid-sized marketing agencies and consultants need training on how to run their own business — selling consultatively, offering the right services, packaging and pricing, delivering services, managing client reporting, etc.

So, we began offering that training to our prospective partners, and we modified our sales process to identify those types of needs. By doing that, we’ve now helped thousands of agencies increase recurring revenue, lower cost of delivery, and improve client retention.

While resellers must believe your software will help their clients, they must first believe that you can help them first.

Step 3: Don’t Sell a Product — Sell a Platform

HubSpot’s broad capabilities have allowed HubSpot to become the platform that our partners leverage to deliver their services and make their clients successful. When Brian Halligan and Dharmesh Shah conceived HubSpot, their mission was to make Internet marketing simpler by providing an integrated software platform that included most of the functionality businesses needed to attract more traffic and capture more leads.

Over the years, we’ve expanded that mission to include helping companies convert leads to sales via email marketing and marketing automation, tools to manage sales pursuits like CRM and sales enablement tools, and closed loop sales and marketing analytics that provide insight into how to improve sales and marketing results over time. Further, as soon as we launched HubSpot APIs, other software companies and developers began creating even more opportunities for our resellers, enabling them to offer things like integrated webinar and live event registration, blog content sourcing, content curation, website chat, ad retargeting, ecommerce shopping cart and CRM integration capabilities and many more. HubSpot is not just a product; it’s a complete sales and marketing platform.

These types of expanded software offerings enable agencies to offer additional services to their clients more efficiently, and ultimately deliver more value to clients at a lower cost. The breadth of the platform is a compelling reason to not just resell our product, but to standardize on our platform. According to the State of the Marketing Services report, 81% of agencies resell some kind of software. Also according to the report, the ones who provide a more complete marketing software solution are able to command longer, larger retainers and have steadily grown their firms. We’ve seen this firsthand over and over again.

Step 4: Keep the Barriers to Entry Low

Most companies that sell through resellers require their new partners to invest a significant amount of time and money upfront. At HubSpot, we took a different approach. We require no additional investment beyond what a standard customer would pay. While most of our resellers choose to purchase a subscription for themselves and receive training through our partner onboarding process, there’s no additional cost to become a reseller. Sales support is provided for all qualified sales opportunities and there’s no limit to customer support calls, as long as they have at least one subscription.

Keeping the entry price low has allowed us to recruit one-person marketing consultants and small agencies as resellers. And while it’s true that each of those individual resellers won’t bring in a lot of new business on their own, collectively they have an enormous impact.

As a result, we’ve been able to help lots of small marketing agencies help their clients, and build a thriving and profitable small agency for themselves. We’ve also helped lots of small firms scale into mid-sized agencies and grow revenue by millions annually. Since there are hundreds of thousands of marketing agencies globally — who each serve very few clients — the right strategy was to keep barriers to entry low. Then, do as much one-to-many training and coaching as possible, and reward the partners who excel.

Step 5: Prove that the Economics Work in Channel Sales

In a world where you can pull your market to you (thanks, inbound marketing!) and technology makes it easy to sell even large solutions to large companies, there is less need for channel sales. The best reason to start a channel sales program is that the economics work for your business. Of course, this took some time to prove.

After hiring 20 channel account managers and validating that our customer economics worked at scale, we established support processes across the whole company. Now that we have a team of 100-plus people exclusively supporting our partners across sales, service, marketing, ops, training, and development, we no longer question the economics of the program; it’s woven into the fabric of the company. At this point, Brian Halligan — and the rest of our executive team — asks: “What can we do to make our partners more successful?”

Step 6: Send Qualified Referrals, Not “Leads”

Historically, companies decide to sell their products or services through distributors, agents, or resellers because those partners have better access to the market. That’s not true at HubSpot. Our reach (which includes millions of people via our many online channels), dwarfs the collective reach of our entire reseller network.

But there’s also another reason software companies leverage channel models: To help their customers become more successful.

At HubSpot, our goal is to create a company built to last, but we focus most of our efforts on selling software as a service — our services and support infrastructure in-house are entirely focused on customer success versus drastically increasing our revenue from services. To that end, there is a huge opportunity to match interested customers with best in class partners for services and create a marketplace that works well for both parties.

That approach led us to launch the HubSpot Marketing Services Marketplace, where our direct customers can search, evaluate, inquire, and hire a certified HubSpot partner — a marketing agency that is best suited to help them do inbound marketing. We’ve sent millions of dollars of services revenue to our partners in the process, but we view that as mutually beneficial deferment. While that revenue has obviously helped our agency partners fund their growth, it’s also helping our direct customers become more successful too, leading to strong customer and partner retention. It creates a very virtuous cycle that benefits our partners, our customers, and HubSpot.

Step 7: Focus on the End Client’s Success

A simple shift in focus that dramatically reduced churn

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Transforming Customer Support into Customer Success

When companies strike partnerships, many people forget the core purpose of that partnership — to help mutual clients be more successful. When prospective partners ask about commissions, lead sharing, or white labeling in the first conversation, it’s a pretty good sign that the relationship isn’t going to work. All of these things are benefits for partners, not clients.

So, we decided to build a system that rewards partners when they make our clients successful. To do this, we measure our partners’ performance based on their client’s success using our software. To reward partners when they deliver client success, we set up multiple rewards. Rewards can include invitations to exclusive events or more marketing and sales support through our tier program. In general, our team members will simply do more for high-performing partners because we’re all rewarded when our mutual customers are successful.

The Right Mindset for SaaS Channel Sales

Our partners do an incredible job of helping us acquire and retain customers, and we in turn try to do everything we can to make them successful. It’s a highly collaborative relationship that’s been forged over time, but it was built on the seven key principles above.

Of course, HubSpot isn’t the only software company to ever succeed in building a productive reseller program. In fact, as we scaled our program, we reviewed and took inspiration from businesses like Microsoft, Red Hat, Solidworks, and Autodesk, all of which generate a significant portion of their revenue from resellers. At the same time, there aren’t many examples of SaaS business that have accomplished the same thing, especially in the SMB market, and even fewer have turned a traditional services industry (like marketing agencies) into resellers of software products.

There’s a good reason for that: Reseller programs in a SaaS environment require a different mindset.

For the business, partner success has to come before company success. And for the partners, end user or customer success rather than the partners’ financial interests — has to be the priority. As a result, both the business and the partner must deliver more value up front than most companies are used to, and then work hard to get paid back.

That’s not exactly a model most businesses are comfortable with. Then again, in an era where customer centricity and customer success are such hot topics, maybe more businesses should begin to think that way. As our experience building a reseller program has shown, that “customer first” philosophy certainly has its perks.

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VP Sales

  • Pete, Great article! nnnWe are staring a reseller program at Expertory.com and it can be a daunting task. We will definitely use your advice. nnnCan you recommend any other worthwhile reads on the subject?

    • Peter Caputa

      I honestly haven’t read much about channel sales. I’ve found most of publications on the subject to be pretty old school and very focused on the IT reseller market. I’ve certainly learned from how other programs do lead registration, commissions, manage performance of existing partners, etc. But, I can’t say I’ve read a lot of things that have helped. nnnIf you find anything good, let me know. nnnI will say that I’ve advised a lot of companies NOT to do channel sales. I think inbound/online marketing is usually a much easier path directly to the market, especially at first. The other day I suggested that a company simply do co-marketing to accelerate direct sales. Channel sales was the right thing for HS for a bunch of reasons (some listed above), but it’s not always right for many companies.

      • Thanks Peter! I understand your point in regards to channel sales and the co-marketing route.

  • FormsFormsForms

    Hi Pete: Thanks for the great article. I know this may be an operational questions but here it goes: do you offer discounted services to the platform for partners or is it solely on their ability to build services around your platform. We want customers to build thriving businesses and are constantly faced with why would they buy from us rather than directly from you. We see it as a services play where users make money however, we see a broad range of partners that want a percentage of the monthly license revenue as well. Just curious how you structured your programs. Thanks again for such a great article.

    • Peter Caputa

      We provide 20% commission to our partners. However, that is not a reason for a customer to buy from our partners instead of direct from us. There are many reasons why companies buy from partners; but the big one is that our partners excel at executing inbound marketing for their clients. They have more experience doing the work than client’s have in-house, they are more creative, more efficient etc. Most of our partners charge a few thousand dollars per month in retainer fees. In order to build an equivalent team in-house with the same skills and experience, it’d cost 10s of thousands of dollars per month. nnWe also have a lead registration system where partners can register leads they are actively working. Currently, they can register up to 500 leads. Currently, registration lasts for 12 months and they can re-register a lead if they are actively working the lead after 12 months, as long as they are under the 500 limit. If a lead is registered, our direct sales team can not work the lead. That is how we ensure that there is one sales process for each lead; and how we avoid channel sales conflict. nnHope that helps. Let me know if you have further questions.

      • Ryan

        Thank you so much for the feedback. Much appreciated. We struggle with the role of commissions and channel conflict so your insight is very timely. Thanks for taking the time!

  • Geoff Roberts

    Great article, Pete. I work at Buildium, another Boston-based SaaS company (we’re Hubspot customers). We sell to a very niche (SMB) market made up primarily of residential property managers. Simply put, there aren’t nearly as many property management consultancies out there as there are marketing agencies (it sounds like these make up the vast majority of your resellers). What advice or criteria would you have for us in terms of how we might evaluate whether or not a reseller program even makes sense in our space?