Your channel program offers partners 25% margin on all deals. It's simple, easy to explain, and completely fails to drive the behaviors you need.
High-performing partners earn the same margin as partners who generate zero revenue. Partners who bring strategic accounts get the same economics as partners who cherry-pick easy deals. Partners who invest in certifications and training get no financial benefit.
Your pricing structure treats all partners equally, which means it rewards nobody for performance.
This is the flat margin trap. Most companies choose simple margin structures because they're administratively easy. But simple doesn't motivate behavior. Strategic pricing structures do.
After designing channel pricing programs that scaled from startup through IPO while maintaining healthy unit economics, I've learned: margin structure is one of your most powerful tools for driving partner behavior. You just have to use it strategically.
Here's how.
Why Flat Margins Fail
Flat margin structures create predictable problems:
Problem 1: No incentive for performance
Partner who closes $1M gets same margin percentage as partner who closes $10K. Why work harder if economics don't improve?
Problem 2: No incentive for capability building
Partner who invests in certifications, training, and capability development earns same margin as partner who does bare minimum. Why invest?
Problem 3: No deal registration protection
If partners get same margin regardless of when they register deals, they'll wait until last minute. No early pipeline visibility for you.
Problem 4: High performers subsidize low performers
Your support costs for enabling new partners come from margins you pay high performers. High performers get worse economics than they deserve.
Problem 5: No competitive leverage
Competitors offer tiered margins based on performance. Your flat structure makes you less attractive to high-performing partners.
Flat margins optimize for simplicity, not results.
The Channel Pricing Strategy Framework
Design pricing structures that align partner incentives with your business goals.
Goal 1: Drive partner performance → Tier margins by volume
Partners who sell more earn higher margins.
Example structure:
- Base tier: 20% margin (0-$100K annual revenue)
- Growth tier: 25% margin ($100K-$500K annual revenue)
- Premier tier: 30% margin ($500K+ annual revenue)
Higher volume = higher margins. Partners motivated to grow.
Goal 2: Encourage early deal registration → Bonus for registration
Partners who register deals early get margin premium.
Example structure:
- Base margin: 25%
- Registered deals: +5% margin (30% total)
- Registration requirement: 30+ days before close
Partners register earlier, you get pipeline visibility, partner gets better economics.
Goal 3: Build partner capability → Reward certifications
Partners who invest in capability get better margins.
Example structure:
- Uncertified: 20% margin
- Sales certified: 25% margin
- Technical certified: 27% margin
- Advanced certified: 30% margin
Links economic benefit directly to capability investment.
Goal 4: Target specific markets → Market development incentives
Higher margins for strategic markets you're targeting.
Example structure:
- Base margin: 25%
- Target verticals (Healthcare, FinServ): +5% margin
- Target geographies (EMEA expansion): +5% margin
- Target account tiers (Enterprise): +5% margin
Use margin to steer partner focus toward strategic priorities.
Goal 5: Accelerate new partner ramps → First deal bonuses
Higher margin on first deals to motivate initial momentum.
Example structure:
- First deal: 35% margin
- Deals 2-5: 30% margin
- Deals 6+: Standard tier-based margin
Creates incentive to get started and build momentum.
The Margin Structure Models
Different structures optimize for different outcomes:
Model 1: Simple tier structure
Three tiers based on trailing 12-month revenue.
Pros:
- Easy to understand and administer
- Clear path to higher margins
- Motivates volume growth
Cons:
- Doesn't account for deal quality or strategic fit
- New partners start at lowest margin
- No incentive for capability development
Best for: Straightforward channel programs focused on volume growth.
Model 2: Performance-based structure
Margins determined by multiple performance factors.
Margin calculation:
- Base margin: 20%
- Volume bonus: +0-10% based on revenue tier
- Win rate bonus: +2% if >60% win rate
- Deal registration: +3% for early registration
- Certification: +2% if certified
- Customer satisfaction: +3% if NPS >70
Pros:
- Rewards multiple positive behaviors
- Aligns partner incentives with your priorities
- Differentiates based on quality, not just volume
Cons:
- More complex to calculate and explain
- Requires tracking multiple metrics
- Can be gamed if not designed carefully
Best for: Mature channel programs with sophisticated partners and strong data infrastructure.
Model 3: Deal-specific margin structure
Different margins for different deal types.
Example:
- New logo deals: 30% margin
- Upsell/cross-sell: 20% margin
- Renewals: 10% margin
- Services: 40% margin
Pros:
- Incentivizes specific deal types you want to drive
- Reflects different cost-to-serve economics
- Partners focus on highest-margin opportunities
Cons:
- Can create perverse incentives (partners avoid low-margin renewals)
- Requires clear deal type definitions
- May conflict with customer experience goals
Best for: Channel programs where different deal types have very different strategic value or cost structures.
Model 4: Hybrid structure (recommended)
Combines tier-based baseline with performance bonuses.
Structure:
- Tier-based margin (20-30% based on annual volume)
- +Deal registration bonus (+5% for early registration)
- +Certification bonus (+2% for certified reps)
- +First deal bonus (+5% on first deal only)
- +Strategic market bonus (+3% for target verticals)
Pros:
- Balances simplicity and sophistication
- Multiple levers to drive behavior
- Progressive economics as partners mature
Cons:
- Moderate complexity
- Requires tracking multiple variables
- Needs clear communication to avoid confusion
Best for: Most B2B channel programs seeking to balance multiple objectives.
The Price vs. Margin Consideration
Should partners get discounted product pricing or margin on top of standard pricing?
Option A: Discount model
Partners buy at 25% discount, sell at list price, keep the margin.
Pros:
- Partners control pricing (can discount to close deals)
- Simple to understand (% off list)
- Partner manages customer relationship fully
Cons:
- Inconsistent pricing in market (different partners charge different prices)
- Partners may erode positioning through discounting
- Hard to maintain price positioning
Option B: Margin model
Partners sell at set prices, you pay them margin.
Pros:
- Consistent pricing in market
- You control price positioning
- Easier to enforce pricing discipline
Cons:
- Partners have less pricing flexibility
- You manage more of the transaction
- May limit partner creativity in deal structuring
Most B2B SaaS companies use margin model. Preserves pricing control and market positioning.
The Deal Registration Economics
Use deal registration to drive early pipeline visibility and qualify partner commitment.
Standard structure:
Unregistered deals:
- Standard tier-based margin (20-30%)
- No deal protection
- Standard support queue
Registered deals:
- Enhanced margin (+5%)
- 90-day deal protection
- Priority deal support
- Expedited approvals
Registration requirements:
- Submit 30+ days before expected close
- Provide opportunity details
- Show active progression every 30 days
- Meet minimum deal size threshold
Benefits:
- Partners incentivized to register early (better economics)
- You get pipeline visibility
- You can protect partners from channel conflict
- Partners get better support on qualified deals
Make registration valuable enough that partners actually do it.
The Pricing for Different Partner Types
Different partner business models need different margin structures.
VARs/Resellers:
- Focus on margin per deal
- Optimize for deal volume
- Typical margin: 25-35%
Systems Integrators:
- Lower product margin (15-20%)
- Higher services attachment (40-50%)
- Total partner revenue includes both
MSPs (Managed Service Providers):
- Recurring revenue share (15-20% ongoing)
- Lower upfront margin (10-15%)
- Focus on retention economics
ISVs/Technology Partners:
- Revenue share model (10-20% of mutual customer revenue)
- Or referral fee structure ($X per referral)
- Focus on integration value
Tailor economics to how partner makes money.
The Margin Communication Strategy
Pricing structures fail if partners don't understand them.
Communication principles:
Principle 1: Lead with simple, explain complex
Lead with simple tier structure, then explain bonuses and incentives.
Principle 2: Show examples
"If you close $200K in registered deals and you're certified, here's your margin: 25% base + 5% registration + 2% certification = 32% total."
Principle 3: Provide calculators
Online tools where partners can estimate their margin based on different scenarios.
Principle 4: Update regularly
Quarterly margin statements showing actual margins earned, bonuses unlocked, and path to next tier.
Principle 5: Highlight success stories
"Partner X earned 32% average margin last quarter by focusing on registered deals in target verticals."
Transparent communication prevents confusion and builds trust.
The Pricing Governance
Who approves pricing exceptions and how?
Establish clear rules:
Tier 1 approval (Partner manager):
- Up to 5% margin exception
- For strategic deals or partner development
- Must document reason and expected outcome
Tier 2 approval (Channel leadership):
- 5-10% margin exception
- For strategic partnerships or market development
- Requires business case
Tier 3 approval (Executive):
-
10% margin exception
- For transformational partnerships only
- Full financial modeling required
No approval:
- Customer-facing pricing changes (never allow partners to discount without approval)
- Retroactive margin adjustments (creates precedent)
- Grandfather clauses for non-performing partners
Exceptions should be rare and documented.
The Financial Modeling
Ensure channel pricing is profitable.
Key metrics to model:
Gross margin:
- Revenue from partner deals
- Minus: Partner margin paid
- Minus: Cost of goods sold
- Equals: Gross margin
Cost to serve:
- Partner enablement costs
- Support and training
- MDF and co-marketing investment
- Partner management overhead
Target: Gross margin after partner payouts should be >60% for sustainable economics.
LTV calculation:
- Partner-sourced customers often have different LTV than direct
- Model retention rates separately
- Factor in partner support requirements
If channel economics don't work at scale, adjust margins or partner model.
The Reality
Channel pricing isn't just about how much you pay partners. It's about using economic incentives to drive behaviors that benefit both partners and your business.
Flat margins are simple but don't motivate performance, capability building, or strategic behaviors. Tiered structures with performance bonuses align incentives and drive results.
Design pricing that rewards high performers, incentivizes desired behaviors, and maintains healthy unit economics. That's how channel programs become profitable growth engines.