In this guide, we take a look at channel sales and its many benefits, as well as some elements to consider in your planning. We discuss how to identify when your business might be ready to develop a channel sales strategy, the various strategies and types of channel partners, as well as successful implementation, measurement and motivation for your partners.
Read on to learn more…
What is Channel Sales?
Channel sales is a sales strategy whereby a company sells a product or service through another company, to make the product or service available to the chosen market. A channel partner might therefore be a company that would sell, distribute, install and/or maintain the product(s) or service(s). Multiple partners form a channel partner network, which can be regional, national, or global.
Channel sales is an approach which offers fantastic opportunities to increase reach and distribution, and enter new markets. The success of this network is a shared success, however like all partnerships, it takes effort and resources to ensure they are effective, happy and profitable. Keeping your channel partners motivated ultimately leads to increased sales.
In the case of channel sales, end customers are the third party, to whom your channel partner will be selling your solution. End customers often need more than just a manufacturer within the buying process, especially on a larger or global scale. Extra touch points with information, use cases and feedback are required, alongside installers, distributors, integrators and consultants – all providing invaluable support in the delivery of the product or service. There is value to each partner in the sales process and end customers buy into them and the product they are selling or signposting.
The Types of Channel Partners
Each partner type represents a different kind of relationship:
Installers and resellers: Local experts who understand the regional specifications that impact the solution. The training and certification programmes that support the channel provide assurance that customers will receive a consistent and reliable service.
Integrators: Organisations that integrate solutions with other technology to address the customers’ complex issues.
Consultants: Usually a solution or market expert, a consultant can influence the sale by providing expertise and insight into the customer’s solution to ensure it is designed for the purpose and will meet expectations.
Distributors or retailers: Those focused on the logistics of stocking and distributing solutions around the globe.
The Type of Channels
Engagement with the different channel partner types will depend on the route-to-market that suits your product. This could be a one-level channel, two-level channel, or multi-level channel.
One-level channels: In these channels, the product moves from the manufacturer to the partner, an installer or distributor for instance, who sells it to the customer. The one-level channel is a simple approach to help you reach more customers, thereby increasing your profits.
Two-level channels: This type of channel deals with products moving from a manufacturer to the distributor, who sells them to an installer or integrator. The installer then sells the product to its customers. A distributor will buy a product in bulk, repackage it into smaller packages and sell them to an installer who then sells the goods to customers.
Multi-level channels: This channel involves multiple channel partner types before the customer acquires the product(s). This sales channel becomes necessary when the demand for a product or service is high or complex, and the customers are not in one geographical location.
Each channel type may have a part to play in the sale to the end customer, but each will have slightly different needs and engagement with you to effectively support sales.
What are the Benefits of Channel Sales?
Adopting a channel sales model has many significant benefits for your business. Partners are often key to a company’s growth and are an important part of its selling ecosystem.
The benefits of selling through partners are far-reaching and can include lower distribution costs, greater market coverage and a faster time to market – as well as the opportunity to access a partner’s established local presence, investment, expertise and customer base. Partners can also add a host of services and solutions along with the products to bring additional value to their end users.
Established reputation and awareness
Often channel partners are already established within your chosen area. This means they have local contacts and customer awareness, which is a great resource to tap into, as you won’t be trying to break into new areas from scratch. End customers may already be aware of your chosen partner’s presence and there is often a level of trust and authority within the area, offering a great initial endorsement for your products.
Increased investment and demand
Working with channel partners increases the market investment in your products. If the channel partner has a positive outlook on the product, with your support and motivators, they will maximise the product’s awareness and sales across their established customer base. Often research and feedback will take place prior to the partnership being established, and therefore there will already be an appetite for the product.
With an established partner also comes lower distribution costs. This can be due to distribution channels already being in existence and up and running, offering similar or complementary products, meaning costs can be shared.
Improved coverage and sales
Ultimately, with channel sales partners, you can increase the coverage and ground in which your products are sold and distributed, which will have a knock-on effect on sales. Improving coverage of sales also enables your business to build loyal partnerships with those who are representing your business, as well as the end-user.
These benefits are far-reaching and even for smaller sales teams, can offer efficient team management, whilst keeping overheads down and offering increased efficiency with maximised customer service across the board. In addition, comes built-in trust and rapid testing and experimentation.
Related resource: The Benefits of Channel Partner Engagement
What are the Potential Drawbacks of Channel Sales?
Despite the many benefits, there can be several challenges when it comes to channel sales.
Channel partners play a key role in a company’s growth by selling products, components and services to end customers. Channel partner training is just one of the essential components to maximise the partnership. There are several other key elements to ensure you can manage the process effectively.
Lack of resources
No matter the size of your partner network, implementing and managing an effective partner programme takes a wide skill set across content creation, programme management, training delivery, e-commerce, analytics and reporting.
Selecting the right partner can be difficult and the consequences of “hiring” the wrong partner can be significant in terms of lost revenue, high support costs as well as a damaged brand image. Before selecting a new partner, it is important to consider your overall business objectives and strategic plans. Understanding the partners’ goals and business drivers will allow you to develop a mutual plan that will address the partner’s goals, motivate the partners and keep them engaged.
Loss of brand identity
By working with partners, you are entrusting them to sell and promote your products in the same way that you would. It is their responsibility to represent your brand and product(s). In the event of them not properly understanding, or not having the proper training in place, it can have a negative impact on your brand identity and reputation.
High support costs associated with a lack of knowledge
When selecting your partners, it is likely that these resellers/retailers will not have the same level of knowledge and expertise of your company and its products as you do – so you need to invest in them. However, once trained, and by having a network of highly-trained partners, support costs for the vendor are lowered and end users get localised support they can be confident in.
The same applies for installers. If there is a lack of training given to the installers and an installation goes wrong, it can lead to additional support costs (and resources) to ensure the issue is rectified.
Issues communicating product updates, features and benefits
Without channel training and marketing programmes, delivering new product updates and company communication can be time-consuming and difficult to control. A partner could then be mis-selling products, as well as potentially missing sales, as they are not aware of how a product resolves the end customer’s pain points.
Delivering updates quickly and efficiently also instils confidence in your brand. If a partner is confident that they have all of the information they need, this can also lead to a better sales experience and ultimately, higher sales.
Concerns about persistent outsider mentalities
It is important that your partners are considered as part of your team. If they feel like an outsider, it makes building a strong, long-lasting partnership difficult and can lead to issues and conflict further down the line.
Established and consistent programmes such as training can also help to avoid this feeling for your partners. It will help to:
- Immerse the partner in your brand.
- Make them feel like part of the team.
- Offer additional touch points between the two parties.
- Instil confidence.
Vendors need to closely align their goals with those of the partner, and keep the communication channels open, otherwise shared successes will not be enjoyed by both parties.
Conflicting selling strategies
Another potential drawback is how different selling strategies work together. If you are not careful, your direct and indirect sales can come into conflict, and as a result, can damage trust and a relationship that has been built up over time.
To try and avoid this, make sure everyone in the organisation understands why the channel is there, what they’re doing and how to support it – sometimes that means saying no, which is always a difficult thing.
Related resource: The Challenges of Channel Partner Training
Channel Sales Strategies
When putting together a strategy for your channel sales, it’s important to understand that different end customers have different dynamics and needs. The market is made up of many different types of customers, and knowing who these are and what they need, will ensure you are ahead of the game.
End users who see a specific benefit from a company’s products from an applications and technology perspective will usually work to specify the product they need or want. Focusing on this customer group is what enables a manufacturer to bring value to its partners, showing control and strength in the market. In this customer segment, partners usually play a “fulfilment” role. However, if positioned well, partners can help maintain the product specifications with the end users and increase the value of the products and solutions – often through training and certification playing a key role here in customer confidence and positioning.
Another group of customers are ones that partners have an influence over. These are customers that are often brought to the manufacturer by partners who have successfully delivered a value proposition that the customer sees as valuable. The partner’s sales and product training and certification enable the partner to position themselves with customers and have the knowledge to find appropriate solutions to the customer’s needs.
There are various strategies to maximise your channel sales – some of which include:
Companies often use a Pull–Push Sales Strategy. “Pull” is the sales strategy to deliver a real competitive advantage to, through and with partners. It is externally customer focused, drives demand and creates awareness, recognition and specification.
“Push” is the partner strategy to build, maintain and deliver channel loyalty and commitment. This strategy includes targeted sales and marketing programmes, extensive solutions, tools and training, joint marketing and incentive programmes, and channel-ready sales and marketing tools.
Limited channel strategy
If your organisation is manufacturing or selling high-end or top-of-the-range products, look at a limited channel sales strategy. To ensure growth, seek loyal channel partners who are going to help build the brand image with you and become an extension of your team. Avoid falling into the trap of flooding the market and saturation. If you become successful, your competitors will want to work with your partners too. It then becomes a case of how to keep those valuable partners onboard and fully engaged.
Channel Sales in Action
When customers tie specific benefits to your product’s features, they usually specify which of your products they want. In this case, your sales team may play the lead role and the channel partners may support the specification effort or play a ‘fulfilment’ role – the “pull” strategy.
The impact on partners when dealing with specified (pull) solutions means the partner needs a highly trained and certified team, strong brand support and vendor presence, and innovative and differentiated solutions, with protection from competition.
So, what do you need to offer in return?
- Installed base of customers
- Sales teams in all major markets
- Brand differentiation
- Strong certification training programmes
Another type of sale is when your partners are able to influence a customer by selling their value proposition to them and have the flexibility to install any solution or alternatives – the “push” strategy. Here, the business becomes more price sensitive. However, despite the price sensitivity, there are differentiators that your partners can offer through product features, accreditation and training, their services and the packaging of multiple solutions.
When responding to bids (push), partners need a generally accepted brand, a strong supply chain with broadly available products, competitive prices and reliable quality and performance.
And in return, you need to offer:
- Recognised quality
- General availability
- Competitive price and service
- Readily available sales and product training
Which Businesses Should Consider Channel Sales
It is important to know how you can build your partner’s revenue – this is the foundation of the partnership. It may be that you are adding diversity to their portfolio or filling a niche gap in their catalogue, or you are adding value on top of the products they already offer. You may also offer an attractive discount or incentive on the sales that they make.
Ultimately, any business can consider channel sales as its preferred sales strategy. When looking at the B2C sector, it is probably more widely referred to as retail rather than channel sales. The businesses that operate the channel strategies discussed in this document are more likely to be in the B2B sector. Suitable sectors would be tech, whether that’s FinTech, EcoTech, Pharma or electronics. Those that are most successful are the businesses that start out with channel sales, due to the fact the organisation isn’t creating a conflict across any other means of sales.
How Do You Know if the Business is Ready for Channel Sales?
If the business has been built on a channel sales strategy, it’s relativity straightforward since the success is coming from the channel. If you are thinking about channel sales but don’t know whether now is the right time to take the plunge, particularly if the organisation is rapidly expanding and can no longer cover the business needs within direct sales, it is time to think about opening the organisation up to a channel sales network.
How to Create a Successful Channel Sales Programme
To set up a successful channel sales partnership, there needs to be a level of understanding within an organisation of what it takes to do it right from the start, along with buy-in from the management to support with some investment. It’s important to note and share with management that it’s not the same as direct sales and therefore it needs a different approach. It can bring huge benefits, but if it isn’t executed properly with the correct investment and programmes put in place, it can quickly fall apart.
Even once established, it is important to continually strive to attract and retain partners and strengthen existing relationships to further engage, deepen and lengthen the relationships.
The Six Areas of Channel Development
Recruit: This focuses on attracting the most beneficial partners to the organisation
It is important that your business provides a compelling solution to attract a potential partner, in order to find the best possible relationships and maximises their time and resources effectively. Clearly defining and communicating the types of relationships you are looking to create, and the training required for each, ensures potential partners self-select to work with you. By being open about the levels and categories of partnerships available, you ensure that potential partners can easily identify where they fit into the overall programme. Of course, the prospect partner still must fit the target profile and complete the training in order for you to accept them or not.
Engage and plan: Plan for success, together
Once you have recruited a potential partner, it is now that you move into a productive relationship by engaging your new partner(s) in every area of your organisation. This requires creating a partner-centric, partner-friendly organisation that supports partners from the outset and across all departments, including training, finance, marketing, sales, product management and operations.
You should formalise a training plan to engage a partner that clearly highlights the requirements, particularly any certification commitments. Here you should also define any “rules of engagement” – any specific expectations of your partner and the role they will be playing. For example, a description of the partner’s training requirements, any certification courses and what resources you and the partner will commit to, and by when. These rules of engagement can be incorporated into training plans – short plans that map out the training commitments of both sides.
Simplicity is key here. Unfortunately, however, many partner relationships end with a simple handshake before they even get started.
Educate: Teach your partners how you sell your product
Your partners are an extension of your team. So, it is important to allocate sufficient resources to educate and train your partners in the same way you would train a new member of staff. Learning about your products and services and how to position these effectively to a target market, helping to ensure successful sales and happy customers, is crucial to good working relationships.
Educating partners to accurately represent products and you, is a critical stage in partner development, particularly in regard to ensuring consistent delivery of outstanding customer service. Missed sales will happen but disappointing a customer will impact the long-term relationship with that customer – not just one missed sale, but potentially more.
Many companies are good at delivering initial partner training. Still, they may have trouble keeping the training new and fresh, whether it involves updating the training for new products or ensuring that new personnel within the partner organisation are sufficiently trained in a timely fashion.
Motivate: Keep your partners hungry to do a good job
Once you have successfully recruited, engaged, and educated your partners, you will have an army full of highly trained people. So how do you turn them into a dynamic sales force, motivated to pick up the phone, pound the pavement and promote your product?
Long-term motivation comes from you understanding the partners’ strategic goals and making sure that you are aligned in helping them achieve those goals. And with a well-nurtured partnership comes a strong sales relationship, leading to a natural promotion of your product over others.
Motivating your channel partners also means you maintain your competitive edge. Do consider that there’s a good chance your channel partners are supplying products from your competitors too, so providing them with support and resources, whilst offering them the opportunity to gain a better understanding of your products promotes more successful sales.
One of the best ways to motivate partners is to provide them with an opportunity they can’t resist, such as a great promotional package, marketing and training support and, of course, favourable remuneration. In addition to promoting your product or service, partners will often feel further motivated if they can see their company promoted on your website, or they can promote themselves with partner accreditations, logos, certificates, and badges.
Another great motivator is to align rewards with the training goals and incentivise both at the company and individual levels. This can come in a variety of forms, but it might be more favourable commission or fees, it might be a bonus or a gift.
A tiered partner network may also be of interest – where your business introduces, for example, a ‘Platinum Partners’ tier for your top sellers. The programme structure could involve your partners progressing through a tiered system, giving everyone in your network an incentive to want to succeed. Here, training can be linked to your tiers – for example, to become a top-tier partner, they have to have a certain level of training within their organisation. This then tells you that they’re invested in your organisation, they’re knowledgeable about your products, and they have the technical expertise to install and support your products.
Badges and certifications provide your partners with a vested interest in completing your training courses and also add a sense of achievement. Bespoke, customisable digitised certification and qualification badges can be developed for your individual learning platform, which showcases the partners’ proof of knowledge and potentially a competitive edge.
Badges can look similar to an ID badge and include the student’s photograph and the qualifications they have achieved. By using an accompanying app, students can then quickly and easily access the badge whenever it’s needed. They can also share those badges on social media like LinkedIn or Facebook to show which qualifications they’ve gained.
It’s important to keep your goals aligned and effectively communicate expectations and achievements back to your channel partners. Using techniques like partner segmentation (tiers) and certification is a powerful way of motivating your teams. Ultimately, for the best results, it pays to develop an online training programme with an experienced training provider, who can bring their experience to monetise your training and keep your courses up to date.
Sell: Supporting your partners to be successful
As part of a collaborative relationship, the support begins right at the start. Providing your partners with marketing and sales support to enable a partner to promote themselves with a product or service is essential and continues with complete partner and customer support after the sale.
A collaborative training plan is only effective when it is documented and regularly reviewed. Plan components should have measurable goals, an assignment of responsibilities and timelines for actions. Consider SMART objectives to ensure your goals are realistic and specific to the training.
Monitor: Effective management of your partners
Ongoing and dedicated management of a partner training program is key to success. With proper measurement, performance and productivity can be tracked or modified, in order to get the best out of each partner.
Partner training plans are an important part of your ability to manage your partners. Gone are the days of sixteen-page plans. You should rely on a fill-in-the-blank training plan that covers the basics: target certifications, solutions specialisations, minimum student and actionable training/learning goals.
How to Measure your Channel Sales
Having an established sales channel with a selection of great partners is important but measuring success and having open communication surrounding any challenges is crucial. Working on solving any issues quickly and efficiently can be the difference between success and failure.
With a robust programme in place, with the proper evaluation and reporting, you can identify your programme’s strengths, weaknesses, opportunities, and threats with ease.
The first stage here is to establish which metrics you need for your channel sales programme. There are four categories these fit into:
- Customer Acquisition Cost (CAC) for direct vs partner sale
- The retention rates for direct sales vs partner sales
- Cross-sell and upsell rates for direct sales vs partner sales
- The total number of partners
- Partner attrition rate
- Recruitment quota attainment data
- The percentage of partners recruited by channel (for example, 45% from networking groups, 28% from proactive outreach, 17% from referrals, etc)
- The average cost of recruiting and onboarding a new partner
- The average length of time to recruit and onboard a new partner
Training & support
- The percentage of partners who are using the provided sales and marketing collateral
- The percentage of partners who attend optional events and/or ongoing training
- The average partner satisfaction score
- The percentage of partners who have attempted certification
- The percentage of partners who have completed certification
- The total number of partner deals registered
- The average value of a partner deal
- The percentage of accepted partner-submitted deals
- The percentage of closed partner-submitted deals
- The average sales cycle length
- The percentage of your partners who registered a lead in the past month
Naturally, the main measure of success is revenue, and this should be measured against specific objectives and targets set across the business – which may be different for different partners and geographical locations.
There are four areas of measurement to give a good, rounded picture of partner performance:
Financial fitness — there’s no doubt that revenue rules. If the relationship isn’t producing revenue opportunities for both parties, there’s little reason to continue it.
Strategic strength — does the partnership increase your strategy advantage by increasing customer satisfaction and loyalty? Is this specific partnership opening up new markets or customer opportunities?
Operational performance — is the partnership meeting operating metrics and milestones? This can be measured through the number of customer visits and staff members trained and certified (both in sales positioning and implementation).
Relationship health — this is the “soft” measurement of personal relationships. Measuring the relationship chemistry, trust developed the flow of communications and the ease of doing business. One of the hardest facets to measure, but the key metric of partnership potential.
Effective management of a partner programme is key to success, through a clear set of quantitative and qualitative measures. Remember, less is more in this regard, work with a few key metrics rather than a long list that might sound good on paper. Without proper measurement, performance and productivity cannot be tracked or modified. Communication is also important for any partnership, and a good, consistent line of communication with multiple touchpoints ensures your partners stay engaged.
A successful channel sales strategy is a powerful tool for connecting with new customers, expanding your team and brand awareness, and ultimately, driving sales for your business. It’s important to take the time to plan and prepare each element properly to ensure your channel sales partners are the best fit for your business, they understand your business and its products and are motivated to deliver.
We hope this guide has given you the tools and understanding needed to develop your channel sales, and has inspired you to get started. Wahoo Learning is a managed learning services provider, specialising in delivering customer and channel partner training programmes. We help organisations to solve budget and resource challenges associated with successfully training channel partners using an innovative Learning Management System and unique management and support services. If you would like to find out more, contact us today.