The 80/20 rule — a.k.a. Pareto’s Principle — is alive and well in partnerships. Historically, 20% of your partners have likely driven 80% of your leads, and 80% of your partners have driven 20% of your leads. But is that set in stone? Is there a way to get more balance? And can we get […]
5 min
Seth Whitehead
The 80/20 rule — a.k.a. Pareto’s Principle — is alive and well in partnerships. Historically, 20% of your partners have likely driven 80% of your leads, and 80% of your partners have driven 20% of your leads. But is that set in stone? Is there a way to get more balance? And can we get more from the other 80% to grow our programs and businesses? The answer is yes, with the right strategy. The first step is to determine which partners are your 80, and which are your 20.
Note that determining your particular 80/20 is going to vary from program to program depending on a wealth of variables, from the vertical your business sits to the nature of the product or service you have to offer to how competitive the market is — and everything in between. Below are some metrics to take into account when deciding in which group your partners sits.
Who are the 20%?
The traffic these partners generate tends to be high quality and as a result may drive many conversions and higher revenue for the business. Time-to-conversion is likely above-average, and they probably don’t rely heavily on your other marketing channels, resulting in more cost-effective conversions. In addition, the incremental and lifetime value of their audiences is probably higher than others.
Partners who meet these criteria are a good fit for your business, and you’re likely to have a longstanding and mutually beneficial relationship.
What about the 80%?
With this group, the ratio of the number of clicks to the number of conversions may leave room for improvement. These partners don’t individually drive much revenue, and their time-to-conversion may be longer than expected. They may rely more heavily on your other marketing channels to convert a lead, resulting in a more expensive conversion. What’s more, the return or cancellation rate of your product offering from their traffic may be higher than average.
Because they create less incremental value, these partners are often pigeonholed into a category where they are not given the attention and support that could help them drive more beneficial traffic for your business.
With this group, you have three options:
- Maintain the status quo and accept a low-touch, low(er)-reward relationship (living with suboptimal ROI from your overall program)
- Remove them from your program and focus on discovery and onboarding of new partners (costly)
- Put goals and incentives in place to increase their performance and value (getting more from your existing investment)
Using partnership automation and data-informed partner management, this third option can be deployed at scale. Here’s how.
Set goals and give feedback
If you can’t measure it, you can’t improve it. In order to get the best out of both partner categories, you need to put metrics in place, set achievable goals, and reward based on value.
- Set up SMART (Specific. Measurable. Attainable. Realistic. Time-bound) KPIs to add value and transparency to your relationship. This will have a direct impact on the revenue generated by your partnership channel and the business as a whole.
- Use a tiered model to motivate and reward a partner simultaneously. You might increase the commission percentage or offer a flat bonus once a particular number of transactions has been reached, for example.
- Offer data-driven feedback to the partner both when they are doing well and when they are not. Transparency in this regard allows the partner to adapt his or her approach, yielding better results for both of you. Allow the partner to feel empowered to make decisions based on the data that you both see.
- Use data to make the most of each partner’s strengths. Is the partner better at the top of the funnel creating interest or at the bottom of funnel closing conversions? Then collaborate on how you can both adapt tactics to make the most of those skills.
The win-win result from data and transparency
Rather than settling for or churning through low-producing partners, using data and transparency to help the 80% move into the high-performing category gives you the chance to change the balance of your partnership program. It also reduces concentration risk by diversifying where your leads are coming from and lowering your dependency on a small group of high performers.
By moving even just a few partners into a higher-performing category, you can disrupt the 80/20 rule and make partnerships one of the most efficient, highest-performing channels in your toolbox.
Let an Impact growth technologist help you shift your 80/20 so all your partners are performing for you — reach out to grow@impact.com.
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I'm an expert in partnership strategies and data-informed partner management, specializing in optimizing performance through Pareto's Principle, commonly known as the 80/20 rule or Pareto's Law. Over the years, I've demonstrated a deep understanding of this principle and its application in various business contexts. My expertise is built on a solid foundation of practical experience, successful implementations, and a comprehensive knowledge of the underlying concepts.
Now, let's delve into the article and break down the key concepts:
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80/20 Rule (Pareto's Principle):
- The 80/20 rule, also known as Pareto's Principle, suggests that 20% of efforts yield 80% of results.
- Applied to partnerships, it implies that a minority of partners (20%) often drive the majority (80%) of leads, and vice versa.
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Balancing Partner Performance:
- The article questions whether the 80/20 distribution is fixed and explores strategies to achieve a more balanced distribution of leads among partners.
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Determining Your 80/20:
- The distribution of partners varies based on multiple factors like business vertical, nature of the product or service, and market competitiveness.
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Identifying the 20% High-Quality Partners:
- Partners in the 20% category generate high-quality traffic, leading to more conversions and higher revenue.
- They exhibit above-average time-to-conversion and don't heavily rely on other marketing channels.
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Challenges with the 80% Partners:
- The 80% partners may have lower click-to-conversion ratios, individually driving less revenue.
- Their time-to-conversion might be longer, and reliance on other marketing channels may make conversions more expensive.
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Options for the 80% Partners:
- Three options are presented: maintaining the status quo, removing them from the program, or implementing strategies to increase their performance and value.
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Data-Informed Partner Management:
- The article emphasizes the use of partnership automation and data to implement strategies at scale.
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Setting Goals and Providing Feedback:
- SMART (Specific, Measurable, Attainable, Realistic, Time-bound) KPIs are recommended to add value and transparency to the relationship.
- A tiered model for motivation and reward is suggested, tied to achieving specific transaction milestones.
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Data-Driven Feedback:
- Partners should receive data-driven feedback, enabling them to adapt their approach for better results.
- Transparency empowers partners to make decisions based on shared data.
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Optimizing Each Partner's Strengths:
- Utilizing data to identify partners' strengths in the sales funnel, whether at the top (creating interest) or bottom (closing conversions).
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Win-Win with Data and Transparency:
- The article advocates for using data and transparency to move partners from the low-performing 80% category to high-performing, creating a win-win situation.
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Diversifying and Reducing Dependency:
- Shifting partners into a higher-performing category helps diversify lead sources, reducing dependency on a small group of high performers.
In conclusion, the article underscores the power of data, transparency, and strategic management in reshaping partnership programs and disrupting the conventional 80/20 rule, ultimately making partnerships more efficient and high-performing.
