It's little wonder that as businesses expand and revenue targets increase, companies turn towards an indirect sales model for moving their goods and services. In the Internet age, there are no boundaries for consumers to be exposed to your line of products, but without local representation it may limit your ability to actually serve them. Channel sales simply makes sense in a digital on-demand world.
Eventually the decision to build out an indirect sales channel of distributors, resellers, VARs, or dealers becomes an easy one. After all, well-implemented channel sales models have three clear benefits over most direct-sales models:
A startup business can often spend years just trying to lay the groundwork and start establishing themselves in key markets. On the other hand, with the right partner onboard, an indirect sales group can jump into a major market almost overnight.
Likewise, since channel partners already exist and are covering their own infrastructure, those are costs the vendor isn't paying. Partners also generally have their own sales groups, customer profiles, and potentially even marketing teams, which all further reduce ongoing operating costs for the vendor... as well as freeing them to focus on developing and producing a better product.
Growing a new operation is never truly easy, but going the indirect sales route ultimately requires significantly less effort. After all, successfully "selling" yourself to a single partner once can then bring in hundreds or thousands of new customers. It's the "more bang for your buck" approach.
But Is It More Effective?
Channel partnerships are not a "magic bullet" solution, and entering into indirect sales will mean facing some challenges which a direct-sales organization doesn't deal with. The overall success of the venture will largely depend on your Channel Manager's ability to anticipate - plan for! - and deal with those challenges when they arise.
Based on our own experiences watching and consulting on sales channel initiatives, we have identified four major challenges that will eventually need to be addressed - some sooner than others.
1 - Aligning business goals between you and your partners.
You want to sell product, and they want to sell product. What's the problem?
Well, goals can sometimes become misaligned between vendors and partners. The biggest cause of this usually revolves around profit-sharing. All parties involved need to be able to make enough healthy profit to continue to grow, and channels who feel they're getting short changed probably won't push your product very hard.
The obvious solution, of course, is raising their percentages or adding in more sales staff bonuses. However, if this doesn't work for your cash flow scenarios, look for other ways to cut their costs instead: Streamlining processes, reducing paperwork, or providing materials (such as marketing content) which the sales channel would otherwise pay for themselves. Anything that reduces their costs makes your product more attractive.
2 - Partners Offering Competing Products
Most channel sales partners aren't sole and exclusive providers. They're working with multiple vendors, and some of those may be in competition with you.
The best strategy here is to make yourself as attractive and easy-to-work-with as possible. Percentages are nice, but there is still more to sales than just money. Reps who always have a good experience working with you, and processes designed to make their lives as simple as possible, will inspire them to recommend your products more often.
Also, pay attention to their sales staff and the feedback they are getting from the end-user. Making a product which closely matches their customers' needs will spark more sales since, ultimately, they're looking for products that are best fits for their own local customers.
3 - They Don't Work for You
While having indirect channel sales partners can sometimes feel like having an outsourced sales department, there's one big difference: they're 100% independently managed, and your direct control over them is limited. Plus, of course, they're free to stop selling your services if there is too much conflict.
So, try to leverage what power you do have. Develop incentive programs that keep them motivated to close more deals and stay up to date on product training and market trends. Keep in touch with their execs, and try to have your opinion heard if they're contemplating major changes. Massage whatever relationships you have built up.
(And keep in mind, you're usually just as free to go with other sales channel partners as well.)
4 - The Changing Nature of Buyer Behavior
With the rise of the Internet, most buyers are increasingly comfortable doing their own research. They no longer rely on long consultations with sales partners like they used to, and local channels cannot be the sole source of leads.
Buyers are just as likely to be looking at your materials first, before even investigating local sales options.
So, it's vital for an indirect-sales vendor to have their own inbound content marketing, and utilize processes which collect and funnel leads towards their partners. It's even better if you and your partners can collaborate on marketing initiatives.
There are plenty of challenges facing channel sales partnerships, but LogicBay can make them easier. Contact us today to learn more about our Partner Relationship Management software and services.