One of the top concerns for companies is how to reach new customers and drive sales without wiping out the entire budget.
At one point or another, businesses must make a choice about how they’ll sell goods and services—in-house sales team or distributed channel sales partners?
Direct selling means companies sell directly to the customer without using a middleman, whereas, channel sales means that a company relies on third-party sales teams to handle the sales process.
The right channel strategy can help you reach new markets and maximize profitability—however, there are a few things you should know before diving in head-first.
In this article, we’ll define channel sales, highlight some pros and cons, and outline what a channel sales strategy might look like.
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What is Channel Sales?
In channel sales, you rely on third-party sales reps to sell products or services on your behalf. These third-parties might include resellers, affiliates, distributors, independent retailers, brokers, or anyone else that sells your stuff but doesn’t officially work for your company.
Channel Sales vs. Direct Sales: Key Differences
Where channel sales rely on third-parties, direct sales is a sales strategy in which products or services are sold by the manufacturer directly.
Direct sales are what you might consider the “standard” sales approach. A direct sales approach means you’ll need to build, train, and manage a sales team. The main benefit of working with a direct salesforce, as opposed to outsourcing selling activities to an external partner is, you’re in control of the entire sales process.
Scaling an in-house sales team is expensive and often, quite difficult, particularly if you’re targeting new markets without an established local presence.
Benefits of Channel Sales
- Built-in trust: Channel sales help you establish a brand presence with minimal effort, because your partner has already built recognition in this space. The benefit here is, your product or service will seem more credible based on your affiliation with your channel partner.
- Cost-effective: Channel sales are typically more cost-effective than training and onboarding new sales reps in-house. Channel partners will usually have an established presence
- Low-Cost Entry into New Markets: Working with channel partners allows you to explore new markets, test out new product lines or packages, in a low-stakes selling environment. With the right partners, you won’t need to set up shop, incorporate new companies, advertise locally, or hire a whole new staff.
- Customer Success: Partnering with an outside salesforce allows you to support customers through onboarding, training, implementation, and other hands-on services, while you can stay focused on managing things closer to home.
- Scalability: Once you’ve established an effective channel sales model, you can scale up easily by bringing new partners into the fold. Additionally, you might work with partner managers who can manage multiple partnerships in a particular region to bring in more revenue without expanding your in-house team.
A Few Downsides of Channel Sales
While there are many advantages to bringing third-party sellers into the fold, channel sales aren’t without a few “cons.”
- Could Put Your Brand at Risk: Whether they’re creating off-brand content or treating customers badly, the wrong partner could make you look bad.
- Reselling Complex Products is Challenging: Do you have a scalable, repeatable sales process in place? If you’re struggling to get results with your internal sales team, chances are you’ll have trouble training your channel partners to sell your product effectively.
- Less Control: With channel sales, you won’t directly manage the sales process; which means you won’t have much control over how a third-party seller presents or sells your products. A channel manager might help reduce that risk, but keep in mind, you’ll be taking on the costs of paying that person’s salary.
- Fewer Profits: Your partners take a cut of your profits, meaning you’ll make less on each deal.
How to Develop a Channel Sales Strategy
Before you start recruiting partners, you’ll need to come up with a strategy.
This will help you establish which channel sales model you’ll use, what each partner brings to the table, goals, and KPIs, and how you’ll support your distributed network from a distance.
What Are Your Channel Goals?
Who you partner with and what type of partnership you pursue depends on your objectives.
- What do you want to accomplish here?
- Why do you want to build out a partner program?
- Do you want to increase sales with your existing customer base, break into new markets, or replace your existing team with a fully outsourced sales team?
For example, here at Drift, we use a few different channel sales models including a Certified Partner Program where our partners sell Drift alongside their own solutions (so here, the goal is driving sales) and an influencer marketing program where participants can earn rewards for bringing us new business (while here, it’s reaching new markets).
Ask yourself the following questions to help you find the right partner to help you reach those goals:
- Do they have the resources to invest in the partnership?
- Will this partnership help them reach their goals?
- Are they an expert in your industry?
- Who do they serve? Do they have access to a market/audience you’d like to reach?
- Do they share the same set of values?
What Can You Offer Channel Partners?
One of the key challenges in managing channel sales is that it’s hard to motivate sellers when they don’t technically work for your company.
The other thing to think about is that you’re not going to be the only vendor that this partner works with–meaning, they probably don’t need you to be successful.
As such, you’ll need to be able to explain why potential partners should work with you. Make sure you do some research and learn more about their expertise and their target customer.
From there, you can craft a proposal that gets into how your solution can help them sell more products and services.
Put together a one-pager for each partner you’d like to approach that includes the following information:
- A set of objectives
- A breakdown of the target market
- Proposed strategies and tactics
- What resources you plan on investing in this partnership
- A realistic look at the ROI
After establishing a “why” for potential partners, you’ll want to get down to business and talk about compensation and incentives.
How to Support Your Channel Sales Team
Research from Aberdeen Group found that organizations that effectively enable their channel partners have 10% higher quota attainment, convert 12% more leads, and have 28% shorter sales cycles than those that treat their channel partners as an afterthought.
Beyond compensation, potential channel partners are going to want to know how you’ll support them from afar. What types of training, sales collateral, marketing materials, and support will you offer?
Here are a few things you can do to ensure that your sales teams have everything they need to become “experts” at selling your product.
Create Great Resources
Your channel sales partner needs to be crystal clear on what they’re selling. Make sure you build an asset library that contains everything from training materials and brand guidelines to how to troubleshoot when something goes wrong.
Additionally, you’ll want to be careful to not overwhelm your audience with too much information at a time–break it up into digestible pieces, emphasizing the most important parts, one idea at a time.
Ideally, you’ll want to provide your sellers with easy access to communications tools, sales collateral, examples of things like emails and ad copy, training materials, and more.
This is where a sales enablement platform comes in handy, as organizations can set controls over sales assets, ensuring that outsourced sellers don’t create ad-hoc content that undermines your style guide.
Make it Easy for New Sellers to Get Started
Show prospective partners all of the steps they need to get started, making sure to remove as much friction as possible.
One way you might approach this is by putting together an onboarding package that makes it easy for sellers to get up to speed and deliver training to their own team of reps.
- Document your onboarding process and share this information with your channel partners.
- Create training content around products, features, unique value proposition, etc.
- Establish a set of milestones that represent success–this will help remote channel managers determine if sellers are on the right track.
Alternatively, if your channel partner program follows an affiliate or influencer model, you might instead create a self-service partner portal where new partners can find everything they need to know about your product or service and how to sell it to their clients.
You might even do something like Microsoft has done here and create a video that shows new partners how to navigate the portal.
Build Real Relationships with Channel Partners
Channel sales is all about relationships. Make an effort to keep the lines of communication open, particularly early on.
It helps to kick off your relationship by hopping on a call to discuss the challenges and opportunities ahead.
Start by asking the following questions:
- What will our biggest challenges be?
- What can we do to stand out in this market?
- Do we have access to the skills and information needed to pull this off?
Long term, make sure you’re checking in with partners and collecting feedback regularly. Partner surveys, one-on-one interviews, questionnaires, etc. can all help you evaluate your relationships and make improvements.
How to Develop a More Effective Relationship with Your Channel Partners
Working with a channel sales partner is unlike working with your internal salesforce—while it’s up to you to train partners and provide them with resources, these aren’t your employees.
Here, we’ll share some tips for developing better relationships with your channel partners that deliver big returns for both parties.
Embrace a More ‘Social’ Approach
Social media is a great resource for learning from experts in your industry.
Sure, customers engage and ask questions, but so do partners and distributors. Invite your partners to closed LinkedIn or Facebook groups to encourage information sharing and a sense of community. Participating in online discussions gives sellers a chance to share their unique expertise and pose questions to other solutions providers.
Centralize Onboarding & Educational Materials
Avoid overwhelming your partners by emailing them resources one document at a time or forcing them to download a whole bunch of new apps.
Portals or other types of enablement tools are a great way to share information with partners, while also ensuring that all resources live in one on-demand central hub. This will save them time otherwise spent hunting down resources, while also allowing you to track their engagement with the resources you provide.
Give Partners Marketing Materials
In addition to a strong onboarding program, you’ll want to give them the tools needed to create and promote your products. While larger distributors might have a dedicated marketing team of their own, smaller partner organizations might not have the internal resources to market on your behalf effectively.
From the partner side, access to marketing resources they can customize to fit their target audience helps them boost confidence and credibility.
How to Measure Your Channel Sales Program
Finally, you’ll need to establish a system for measuring your efforts–from close rates and revenue to satisfaction and engagement.
Here are some of the metrics your business should be measuring:
- Number of partners
- Average deal size
- Length of the sales cycle
- Revenue by region
- Partner satisfaction
- Influencer revenue and growth rates
- Engagement with training content/partner programs
- Number of times partners log into the partner portal
- Retention rates for channel partners vs. direct sales
- Cross-sell and upsell rates for channel partners vs. direct sales
- Customer satisfaction by partner
- Margins by channel
By tracking these metrics, you’ll be able to determine the effectiveness of your program on a holistic level, as well as how each partner contributes to the overall success of your program.
Choosing between channel sales or a more traditional model depends on several factors—from what you sell to who your target audience is. The main consideration is whether or not channel sales makes sense financially—can you afford to lose a percentage of each sale to your channel partners?
If you have the cash flow to support this strategy, channel sales can help you break into new markets and scale up fast. Just make sure you find the right partners.
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