Channel sales can help you grow your business in three ways: by providing new opportunities to reach customers or users, improving brand awareness and strengthening your online presence. For customers who don’t want to buy directly from the vendor, a solution is to sell your product through consultants or resellers.
To sell products on marketplaces to consumers looking for discounts and packaged deals, it may be possible to use third-party providers.
Channel sales programs help you find new locations for business expansion. A complementary sales strategy helps a company to potentially reach customers who were previously excluded from the market and would then be able to create direct-to-consumer sales. A company should focus on their target demographics, along with the demographics that the company can't reach directly.
In this guide, we’ll break down everything you need to know about adopting a channel sales model as well as tips on how to find the best partners to work with.
What Is The Definition Of A Channel?
Channels utilize partners like referral partners, affiliate partners, wholesalers, distributors, managed service providers, marketplaces or value-added resellers. This is a contrast to selling products directly with your company's sales team.
EzzyCRM's VP of Channels Sales and Partnerships explains that, with a channel sales strategy, the company can grow their business by generating new revenue streams through a variety of sources.
Tying your channel to profit-making activity can be highly beneficial, but there is no "autopilot setting" in this case. You have to work closely with your partners in order to make sure they are achieving the most success with their plans and strategies.
Other teams inside your company may sell a product differently and require different marketing. You need to enable your partners and reps by giving them training, tools, and assets to successfully sell your products.
A company that is interested in exploring new income and revenue streams can do so by pursuing an indirect sales strategy, or simply developing its direct sales team. The best way to ensure success is making sure you have a consistent, reliable system of generating traffic coming into your site.
What Are The Benefits Of Implementing Channel Sales?
If you are hesitating about allowing a middleman to sell your product or service, you’re not alone. It is difficult to relinquish control and there's always the risk of losing brand authority (and damaging the customer experience) if a partner misrepresents your brand.
With so many benefits, a channel sales model could be beneficial to many companies. These are a few of the reasons why some organizations have adopted this strategy (we'll explore the disadvantages in the section that follows).
How to conquer large-scaled territories with limited internal resources
If you have a network of referral partners, you can quickly grow your business with new customers and it is easier to get your products in front of them.
However, in other cases, channel sales programs may not be faster to set up than direct sales programs. For example, value-added resellers can take six months to a year to onboard fully, and most channel sales partners will need frequent training as your product develops.
A right channel sales strategy can help you quickly grow your company, as seen with Alex Rampbell, General Partner of Andreessen Horowitz, who notes that it took him 2 years to go from 0 to 10k clients. He says this strategy helped him attract smaller clients that had a deep need for his product or service but were difficult to find and thus sell to.
Partnering with efficient channels can provide you with a large number of potential clients and introduce you to those who would otherwise be difficult to reach. Once you amass a number of long-tail clients through channel sales, these customers could become the bulk of your total income.
While there are longer onboarding initiatives, the process is less time consuming. However, there’s still more to know about how to effectively do that later on.
Look To Open New Markets And Expand Globally
If you’re an American company looking to expand into an EU region, you probably want to work with someone who is established in their region.
Working with a local partner in a new region can provide invaluable insights into the target market and business culture. By taking advantage of the situation, you can gain knowledge about the right niche to expand your brand reach, acquire leads and customers.
Introducing Your New Product To Customers
Whether it's going global or bringing in targeted audiences, partners can help.
Retailers often use in-person retailers or e-commerce sites to expand their reach. 70% of shoppers are interested in going to physical stores, as well as online shopping platforms. Many bricks and mortar stores have had to close due to the COVID-19 pandemic, making it more lucrative for retail stores to get their items featured on e-commerce platforms like Shopify in order to reach a wider audience and generate increased revenue.
Many businesses buy through resellers or managed service providers, which means it can be hard to find potential clients who might want your product. Marketers can reach these buyers with a channel sales approach by approaching the store or service provider their customers use themselves.
Reduce Costs Of Distributing, Shipping And Hosting
It often takes a lot of time and effort dealing with distribution and shipping costs. Partner with other companies that have an established infrastructure and supply chain in your target market to offload these expenses.
For example, stores that sell from a lot of the same products such as TJ Maxx, Home Good, and Marshall’s are all owned by TJX Cos. The entire point of their business is to buy products and merchandise from vendors or suppliers and sell them in stores such as TJ Maxx or online at big name companies like Home Good and Marshall’s. This is a great way for vendors to reach a larger customer base and get their product out to people in the US who shop at these popular locations.
TJX Cos, Inc. not only uses channel partners to source their products, but it also leverages its channel partners to ship those products to mostly their own retail stores means that they can save lots of money and time by not creating and maintaining their own distribution network.
Build Your Company's Reputation And Recognition
There are also the digital equivalents, such as Amazon Web Services and Samsung AppStack, which offer software and apps from channel partners. These digital channel partners benefit in a number of ways:
- They have wider range of audience
- Save on Online Administration Costs
- They get backed by well-known companies by building SEO backlinks
If you want to be seen as a big player in your industry, forging partnerships with established brands can give your company an aura of legitimacy.
For example, a company would benefit from having their product featured at Best Buy or NewEgg.com, which is a quality site for comparing products. Users browsing these sites recognize the validity of the other products listed there and can feel confident that purchasing any product on the list will be worth their time.
Forester predicts that $14 billion will be invested in business-to-business marketplaces in 2023.
Performance Training To The Sales Rep To Empower Strength
So much of managing a sales team means making sure that your reps are actually able to do their job effectively. A channel sales strategy takes some pressure off your in-house team and sales operations.
Since we can rely on AI to provide valuable content, you can use your reps’ time and energy for more important tasks like nurturing customers closer to the end of the customer journey. When they are stretched too thin, one of your most valuable assets is lost.
Offer services for complicated products
The value-added services are vital for software-based businesses, especially those that provide consulting and professional services.
The best companies will engage their customers in using the tools and highlighting common challenges that users may run into.
Get free templates for tracking sales
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What challenges are faced by channel sales?
There is still an opportunity for anyone entering the company channel market, but there are still some challenges to consider.
Take less control of your overall business
However, having your company's reputation tied to a third party can be stressful. You don't want them slipping up and making any mistakes, so you need to be worried about the consequences of their actions.
With intermediary commissions, you might not see your company’s bottom line increase as much as expected. You can boost your company’s gross margins through marketing, but only if you effectively manage the sales process and share revenue with partners.
Sharing revenue results in fewer profits
On-going customer support and account management will reduce your costs over time. Also keep in mind that only 75% of your revenue from direct customers can go to their own channel partners, whereas 100% of revenue from indirect partners goes straight into your pocket.
Reduced time spent directly with customers
It may seem obvious to make sure your customers are aware of what products you offer, but that talk time with your customer is important in learning how they react to your product or understand their needs. When you don’t get face-time with your customers and end users, it means less time actually talking to them. Channel sales partners are often unwilling to allow a vendor’s salespeople to contact their customers directly.
As a vendor, you can partner with your influencers to get valuable feedback on your product and help them navigate suggestions until they’re ready for release.
To avoid these downsides, you must approach channel sales in a way that suits your needs. For instance, you control the sales partners and the revenue share with them.
In short, adoption of the newest sales channel doesn't mean giving up control over your business.
Though, of course, this does add extra costs.
This section presents pros and cons of using channel sales. You can see that the pros outweigh the cons.
Learn About Different Types Of Channel Models
There are plenty of ways to market to consumers, depending on what your company's finances and product need. For example, some options include paid ad campaigns, a blog, social media advertising and giveaways.
- Referral Partners
- Managed service providers
- Distributors
- Value-added resellers
- Marketplaces
- Agents
- Retailers
- Dealers
- Influencers
Businesses find partners from the individual and enterprise companies alike on platforms such as EzzyCRM through its partner program.
Individuals and companies are often referred customers. Partnerships between vendors and referral partners exist for both SaaS and digital goods where referrals are the trigger for a sale done by the vendor. Partners get paid when a sale is closed. The vendor retains ownership ownership of the customer.
Affiliate programs allow companies to boost their revenue and acquire social capital at the same time. For example, ConvertKit is an affiliate program that has more than 10,000 brand advocates.
Another means of distribution to explore is to use resellers, who purchase your product from you directly, and keep the profits.
This is not to be confused with value-added resellers, which are often seen in SaaS, such as software. A value-added reseller (VAR) adds features or services to an existing product and then resells it (usually to end-users) as an integrated product or complete “turn-key” solution.
This practice is common in the electronics and IT industry, where for example a VAR might bundle a software application with hardware they provide.
The value can come from professional services including partnering, customization, consulting, training, and implementation. Although value is added by developing an application designed for the customer's needs, it is then sold as a new package.
Companies can choose to either sell products through a distributor or marketplaces, while also choosing to sell online themselves. Whichever option suits you best is a decision that depends on your business model and personal preferences.
Tips On How To Implement A Channel Sales Strategy
If you’re going to implement a channel sales strategy with partners, put some research and planning into it. If you want to expand your sales channels, you’ll need a process that can be replicated for each one in the future.
- Avoid pitfalls
- Assure yourself that you are in the right stage
It’s important to consider whether or not you have the bandwidth to pursue partner sales right now. If so, it’s essential that you reflect on your resources and goals before jumping into a new opportunity.
To avoid getting over your head and potentially disrupting your current sales process, it’s important that businesses not set a minimum target revenue or goal. New data shows there is no chance of success unless you commit to an enormous effort.
As a quick test to see how well your business aligns with a channel sale, take a look at these basic requirements.
Your sales team can copy the process to accelerate growth
You understand how to sell your product to your target audience; the marketing and awareness are high enough for someone else to sell it, too.
With a comprehensive marketing channel strategy and with sales enablement resources, partners can easily reach more people and keep their brand clear.
If you don't meet the criteria for channel sales it's not the end of the world; there are still other options that may work for you. Don't forget about partnerships or even finding a target audience to sell your product or service to.
With our reporting features, you can see how well your company is doing and when it’s best for you to expand. EzzyCRM can prove useful for assuring the growth of your company during different times.
Depending on your needs, you might feel like there is so much demand that you can find a partner anywhere. However, this might require some digging.
There's no one way to find love, but in order for a partnership to function properly, you should be looking for someone who fits your criteria. Whether that is someone you've always wanted to date or would like to introduce to your friends and family, the Partner Profile can help you make the process of finding your perfect mate quicker and more efficient.
Avoiding pitfalls to building a better audience
Businesses and bloggers should collaborate to generate content that is useful for their readership. If you have subject matter expertise or you work in a related industry, you can provide a service to your organization while getting paid. This will help create mutually beneficial relationships between businesses and bloggers, generating long-term revenue streams.
If you work in a different industry then job hunting is their main focus.
Alex Rampbell started his company at zero by finding channel partners to help join the business. He was able to get to 10,000 clients with this method and says that finding the networking partner that compliments your services is the most important part.
When you're unsure about what to do, start brainstorming with partners and get advice from people that you trust. Just like when making a prospect list, it's important to know what role you want your partner to play and how their relationship should look.
It’s important to be prepared to discuss what your expectations are with prospective partners. This can include things like how much are you willing to pay or how much time will they be dedicating to each task.
Promoting partnership offers and revealing up-front incentives such as commission, revenue share, and discounts can prompt partners to take your offer more seriously.
Partnering with an education-rich company like Google can be very enticing. You have to know about your product, possibly through webinars or tutorials, and figure out what it does for your customers. Resources such as webinars, tutorials, testimonials, and product specifications can be a big help here.
It’s also a good idea to set up different tiers with your partners. This will enable you to sell them on more complex opportunities and reward them for hitting certain numbers. Each tier has its own requirements, such as sales and technical certifications, sales and marketing training, and product training.
Business tools such as personas, references, scripts, and any past competitive analysis are incredibly valuable in helping partners sell on your behalf. They should have access to sales data, pricing information, and demographics when selling to your clients.
Hiring A Channel Sales Manager
For those companies that have an interest in selling through a partner channel, having a person dedicated to managing these relationships makes economic sense.
Managing partners allows you to keep track of their performance and provide them with the resources they need to be successful. Channel sales managers are typically responsible for this, but they also help guide partners.
How To Write A Job Description For An Employee In A Channel Sales Department
Don't wait for prospecting opportunities, find them yourself. Collaborating with partners, you can develop some business plans that outline key business objectives, tactics, and KPIs that are used to measure results.
Controlling the sales processes to ensure that all members of the team are hitting their appropriate sales quotas and evenly overseeing their development alongside the Head of Channels and Growth, is a consistent way for this individual to manage their responsibilities.
With a focus on transitioning our value proposition, we educate our channel partners on topics including best practices, technology solutions, platform roadmap, and changes to partnerships and programs.
Identify, motivate and influence all partner channels from sellers, operations, and client support to executive leadership.
Understand what the target audience is and how our competitors’ value proposition compares with it. Then use this information to discuss why partners should invest their selling efforts in us.
Is Your Channel Sales Future-Ready?
If you already have an established sales process and are looking to scale faster, don’t hesitate to start looking for partners to target different markets or demographics sooner rather than later.
Make sure you are familiar with the process of how your company performs every step of the way, and that when you implement a large-scale plan, it will be done seamlessly.