channel-economics

What this skill does

# Channel Economics

End-to-end financial modeling and design of go-to-market channels: direct sales economics, reseller / distributor margin structures, marketplace fees, partner tier economics, channel conflict resolution, and the TCO frameworks that compare channel options apples-to-apples.

This skill provides the financial backbone for channel strategy. For strategic partnership design (which channel to invest in, how to structure the partnership), see `business-growth/partnerships-architect`. For partner-deal-level approval mechanics, see `business-growth/deal-desk`.

---

## When to use this skill

| Situation | Skill applies |
|-----------|---------------|
| Deciding direct vs partner-led for a new product | Yes — start with **channel model decision tree** |
| Designing a partner tier structure (silver/gold/platinum) | Yes — see **partner tier economics** |
| Modeling a specific partner deal's margin / payback | Yes — `scripts/channel_margin_calculator.py` |
| Analyzing channel conflict (overlapping direct + partner deals) | Yes — see **channel conflict** + `scripts/channel_mix_optimizer.py` |
| Building a partner program rebate / SPIFF structure | Yes — see **rebate design** |
| Comparing AWS Marketplace vs direct list-price economics | Yes — `scripts/channel_margin_calculator.py --channel marketplace` |
| Negotiating a specific partner contract | Use `business-growth/contract-and-proposal-writer` for the contract; this for the economics |
| Strategic partnership design (joint go-to-market, OEM, white-label) | Use `business-growth/partnerships-architect` first |

---

## The channel model decision tree

Six core channel models. Most companies use a mix.

```
What's the product's complexity + price point?

Low complexity, low price (< $10k ACV):
├── Self-serve / PLG → no channel
├── E-commerce → direct via web
└── Marketplace (AWS / Azure / GCP / Salesforce AppExchange) → if buyer already there

Medium complexity, mid-market price ($10k - $250k ACV):
├── Inside sales / SDR-led direct → if buyer journey is well-understood
├── Reseller / VAR (Value-Added Reseller) → if local presence / language matters
├── Marketplace → if buyer prefers procurement via existing relationship
└── Embedded / OEM → if your product is a component in someone else's offering

High complexity, enterprise ($250k+ ACV):
├── Direct field sales → standard for high-touch enterprise
├── Strategic SI / Integrator (Accenture, Deloitte, etc.) → if implementation is a substantial project
├── ISV / Embedded → if you're a feature in a larger platform
└── Reseller / Distributor → for regional or vertical specialty

Operational / managed-service buyer:
└── MSP (Managed Service Provider) → if customer wants outsourced operations
```

See [references/channel-models-direct-partner-marketplace.md](references/channel-models-direct-partner-marketplace.md) for each model in depth: economic structure, typical margin splits, when each works / fails, contract patterns.

---

## Margin and TCO framework

Apples-to-apples channel comparison requires a consistent TCO model. The naive comparison ("direct gets 100%, reseller gets 70%") misses critical costs.

### True channel TCO formula

```
Channel Contribution Margin
  = Channel-attributed Revenue
  − COGS
  − Partner Discount/Commission
  − Channel-specific Sales Cost (allocated)
  − Channel-specific Marketing Cost (MDF, co-marketing)
  − Partner Enablement Cost (training, certification)
  − Channel Operations Cost (channel manager headcount)
  − Channel-specific Support Cost (T1 partner support)
```

### Side-by-side comparison

For a $100k ACV deal:

| Component | Direct | Reseller (30% off) | AWS Marketplace |
|-----------|--------|---------------------|-----------------|
| Customer payment | $100,000 | $100,000 | $100,000 |
| Reseller / marketplace fee | $0 | -$30,000 (30% discount) | -$3,000 (3% AWS fee) |
| Revenue to us | $100,000 | $70,000 | $97,000 |
| COGS (15%) | -$15,000 | -$10,500 | -$14,550 |
| Sales cost (allocated CAC) | -$25,000 | -$5,000 | -$8,000 |
| Marketing cost (MDF / listing) | -$2,000 | -$8,000 | -$5,000 |
| Partner enablement (amortized) | $0 | -$3,000 | -$1,500 |
| Channel ops (amortized) | $0 | -$2,000 | -$1,000 |
| Support cost | -$5,000 | -$3,000 | -$5,000 |
| **Net contribution** | **$53,000** | **$38,500** | **$61,950** |
| **% of ACV** | 53% | 38.5% | 62% |

The "30% discount" reseller deal is more like 14.5% margin difference once everything's counted. Marketplace can look better than direct on per-deal basis (Amazon's sales team brings the buyer) — but volume varies.

Use `scripts/channel_margin_calculator.py --deal deal.yaml --channel <type>` to model this for any deal.

See [references/margin-and-tco-frameworks.md](references/margin-and-tco-frameworks.md) for the full TCO framework, per-cost-line guidance, and how to allocate "fully-loaded" sales / marketing / ops costs.

---

## Partner tier economics

Multi-tier partner programs (Authorized → Silver → Gold → Platinum) are common. Designed badly, they reward effort that isn't valuable; designed well, they reward outcomes that drive growth.

### Standard tier structure

| Tier | Annual revenue threshold | Discount % | Other benefits | Requirements |
|------|-------------------------|------------|----------------|--------------|
| Authorized | None | 10% | Standard support | Sign partner agreement; 1 certified person |
| Silver | $100k | 15% | Co-marketing eligible (limited MDF) | $100k achieved; 3 certified people; 2 customer wins |
| Gold | $500k | 20% + 5% rebate at threshold | Dedicated channel manager; MDF; deal registration; lead sharing | $500k achieved; 5 certified; 5 wins; 80% renewal rate |
| Platinum | $2M | 25% + 7% rebate at threshold | Top-tier support; joint roadmap; preferred status; press release rights | $2M achieved; 10 certified; 10 wins; 90% renewal; participation in advisory board |

### Tier design principles

1. **Outcome-based, not effort-based.** Reward revenue + retention, not training hours or marketing event count.
2. **Achievable but stretching.** Each tier should be a 12-18 month stretch from the prior.
3. **Differentiable benefits.** Each tier needs benefits a partner actively wants (not just "more support").
4. **Renewable status.** Tiers re-evaluated annually. Partners can move down if they don't maintain.
5. **Anti-gaming protection.** Discount-stacking, registration gaming, transfer pricing — design out.

Use `scripts/partner_tier_economics.py --tiers tiers.yaml` to model tier economics: gross margin per tier, partner-side incentive, break-even revenue per partner per tier.

---

## Rebate / SPIFF design

Three common reward structures, each with trade-offs:

### Front-end discount

Partner buys from you at a discount; sells to customer at list (or close). Margin = the spread.

**Pros:** Simple. Cash flow goes to partner immediately.
**Cons:** Hard to incentivize specific behaviors. Discount is locked in regardless of performance.

### Back-end rebate

Partner pays full price (or near it); earns rebate quarterly / annually based on revenue / tier achievement.

**Pros:** Ties reward to actual achievement; behaviors can be incentivized (e.g., bonus for selling new products).
**Cons:** Cash-flow burden on partner. Complex to administer.

### MDF (Marketing Development Funds) / SPIFF

Per-deal or per-period bonuses for specific actions: bring leads, attend events, certify staff.

**Pros:** Highly targetable. Rewards specific behaviors you want.
**Cons:** Easy to game; admin overhead high; partners often expect it without producing.

### Typical mix

| Partner type | Front-end | Back-end | MDF/SPIFF |
|--------------|-----------|----------|-----------|
| Reseller (transactional) | 70-80% of total comp | 10-20% | 5-10% |
| VAR (consultative selling) | 50-60% | 20-30% | 10-20% |
| Distributor (volume play) | 80-90% | 5-15% | 5% |
| ISV / Embedded | n/a (rev share) | 100% | 0 |
| MSP | 40-60% | 20-30% | 10-30% |

---

## Channe