Channel Voices
Channel Voices is The Podcast for Future Channel Leaders, where we learn the ins and outs of partner ecosystems through casual conversations with channel professionals from a variety of industries, partner types and geographies.
Channel Voices
From Reseller Margins To Consumption Growth | Channel Chewsday
This Channel Chewsday, we unpack how channel partners can replace shrinking resale margins with recurring revenue and usage-based incentives that reward real customer outcomes. We share models, incentives, systems, and culture shifts that turn adoption and retention into predictable growth.
• Margin decline across product and software licensing
• Shift to subscriptions, cloud, and API consumption
• Mechanics of tiered and volume-based pricing
• Services as a margin engine for partners
• Outcome-based partner recognition over status tiers
• Incentives tied to adoption, retention, and upsell
• Data, billing, and PRM needed for accuracy
• Cultural shift to customer success and enablement
• Benefits of predictable revenue and higher NRR
As always, if you've got a question, a story, or an idea for a future episode, drop me a line, and we'd love to feature your insights next week.
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Channel Chewsday Champions Chat Choosing Cheeky Channel Challenges to Chew Through Cheerfully. There's a little tongue twister for you. Happy Channel Chewsday. It's Maciej. And today I'm digging into a topic that was inspired by the question left by Adam Ulfers in the episode Trust Recurring Revenue and the New Channel Reality and Margaret Adams' answer in the episode How AI will reshape partner ecosystems and keep human trust at the core. The question was around partners, especially traditional resellers, moving to recurring revenue models. If you've felt the pinch from declining product margins or ever wondered how to thrive with recurring revenue, you're not alone. So grab your coffee and settle in because for the next few minutes I'll ramble on usage-based incentives and hopefully inspire you how to pivot from the old transactional sales playbook to a more sustainable and scalable model. Let's start by setting the scene. For years, the bread and butter for channel partners was the buy, sell, repeat cycle. You sell a product, maybe some software, take your margin and move to the next deal. But for some time now, we've been seeing consistent margin declines in product and software licensing. Solution providers are feeling it hard, and vendors cutting margins are risking partner loyalty and sometimes their own channel ecosystem. Instead, vendors and partners are switching gears. Recurring revenue and consumption-based incentives are becoming the new normal. Recurring models, think subscriptions, cloud services, APIs, they reward partners for the lifetime value they help generate and not just the initial transaction. This aligns vendor and partner interests, shifts focus from one-off deals to long-term customer success, and unlocks more reliable, predictable growth. Now, let's talk mechanics. In a consumption-based model, the customer pays for what they actually use, whether it's minutes, bandwidth, API calls, data processing, or software seeds. Channel partners are incentivized when these metrics go up, so the model encourages ongoing support and value addition. There are a few flavors here. Tiered consumption, so pricing is based on usage thresholds. When customers exceed on tier, they move to the next, often unlocking better rates. It's seamless scaling. Volume-based consumption the more you use, the cheaper it gets per unit. This rewards customers for deeper engagement and partners for driving real adoption and stickiness. Twilio is a standout example. They offer volume-based discounts as usage grows, deepening customer loyalty and incentivizing partners to create repeatable, scalable revenue. Here's the best part. Margins aren't just about the sale anymore, they're about the value you add. Partners can differentiate by offering managed services, consulting and strategic integrations alongside the consumption core. Think about this. Training partners to deliver services and letting them retain 100% of the margin on those services is becoming a key competitive edge. It's not just reselling, it's layering in expertise, onboarding, ongoing support, and optimization for clients. Many successful programs are now shifting away from rigid gold, silver, bronze tiers and instead recognizing partners for business outcomes, such as accelerating adoption, raising retention, and capturing data-driven improvements in customer experience. So what does a good incentive look like in this world? Savvy vendors are crafting offers that reward partners for growing customer engagement, not just new sign-ups, supporting milestone usage thresholds like helping a customer hit their first 1000 API calls or hours of cloud compute, upselling higher usage plans or additional service tiers, driving in-app education, integrations or participation in referral programs. Importantly, incentives are now calibrated to real customer value. It's not just about a discount for making the sale, but about partner impact on actual consumption and customer lifetime value. Channel Chiefs say this is forcing programs to become much more dynamic, shifting promotions, measuring value through outcomes, and connecting every dollar spent to retention, upsell, and growth. But let's be real, moving to a consumption model isn't always smooth sailing. You need robust data, billing platforms and PRMs must accurately track usage, align incentives and forecast revenue so everyone knows where they stand. Partners must become experts in guiding customers through consumption journeys, not just initial adoption. Training, onboarding and ongoing coaching matter more. For some legacy partners it means a cultural shift away from transactional thinking now customer success is the goal, not just the contract. Programs should avoid being too flexible with requirements, recognize partners for the real value they bring, allowing them to play to their strengths, whether that's technical, vertical, or geographic. Adopting consumption-based models positions channel partners for more predictable, compounding revenue streams, increased customer retention fueled by ongoing value delivery, greater insights into customer behavior, enabling smarter upselling and improved net retention, enhanced partner loyalty, reward long-haul performance, not just quick wins. With the right incentives, technology and mindset, partners and vendors can both win big. Even as their transactional margins continue to fade, the future belongs to operators who think long-term and measurable value every step of the way and know how to turn data into both customer and partner advantage. That wraps up today's chew on driving margins with consumption-based models. If you're looking to boost your channel program's profitability, focus on ongoing value, smarter incentives, and tracking the metrics that matter. As always, if you've got a question, a story, or an idea for a future episode, drop me a line, and I'd love to feature your insights next week. Thanks for listening to me ramble, and don't forget to subscribe to Channel Voices. Thanks, and see you next week.
