Imagine that you’re the co-founder and CEO of a startup that developed an app that makes it easier for nonprofits to fundraise. Your team really believes in your product and, so far, your customers do, too. The only challenge is that your current revenue growth isn’t quite where it needs to be, and you only have so many sales representatives to take you there. You could invest more money in your sales and marketing teams, and even hire more reps, but you have to balance that investment against your profit margins.
The good news is there’s a far simpler — and more affordable — solution to this challenge: channel sales.
What Are Channel Sales?
There are two primary sales models: direct sales and channel sales. As its name implies, direct sales refers to when a company sells its products or services directly to the client. Channel sales, on the other hand, refers to when a company brings in a third party to handle sales on its behalf; the most common partner channels include resellers, distributors, wholesalers, and consultants.
Channel sales is ideal for software as a service (SaaS) companies that might not have sufficient resources to grow their sales but do have a sizable network of existing clients and industry contacts that they can leverage to generate additional business. In addition to being an efficient and affordable alternative to direct sales, channel sales also gives you the opportunity to bring your products and services to an entirely new (at least, to you) audience, and the endorsement of established businesses lends credibility to your brand.
That said, channel sales comes with its own set of challenges. First and foremost, channel sales requires you to place a great deal of trust in your channel partners, which can pose a risk to your brand if they aren’t thoroughly vetted. Adopting a channel partner sales strategy can also lead to competition between your existing sales team and channel partners, causing unnecessary conflict. Add to that the fact that most channel partners will expect a cut from any deals brought in or closed, which can cause a dent in your profits. Fortunately, these challenges can be addressed — and potentially eliminated — through the development of a solid partner channel strategy.
Partner Channel Strategy: How to Get Started
Before you start to draw up the blueprints for your channel partner marketing plan, you should first consider whether your business is ready for channel sales. If your product is relatively new to market or your current sales process is, as of yet, undefined, you might want to hold off on adopting a channel sales initiative until you’ve had the chance to mature; an underdeveloped product or sales process can complicate any partnership and cause unnecessary stress for all parties involved. By that same token, an overly complex sales process can also vex partners, so be sure to keep things simple.
Once you’ve decided that the channel sales model is right for your business, and that you’re prepared to take on the associated challenges, the next step is to start assembling your partner channel network. Most partner channel networks tend to spring up and grow organically — that is, they tend to stem from existing relationships within your business ecosystem. There are three ways to structure your channel sales partnerships:
Referral: Your Partner sells for you
Ex.: Company A sells to Company B on Company C’s behalf
Reseller: You sell through your partner.
Ex.: Company A gives Company B a product discount to share with its clients. Company B then offers this document to Company C.
Implementation: You and your partner sell together.
Ex.: Company A partners with Company B to implement Company C’s product.
You might decide that any one of these types of partnerships makes the most sense for your business, or even some combination of the three.
It’s important to note that, regardless of which type of partnership(s) you choose, not all partnerships are made alike. If the goal is to one day have each of your partners operate and sell your products autonomously — and trust us, it is — you’ll first need to ensure that your prospective partner’s approach to selling aligns well with your own for the sake of synchronicity. After all, if you agree on the basics, you’re more likely to agree on the bigger picture items, too. Establish basic criteria for evaluating prospective partners, such as:
- Does their product complement ours? Does it fill a gap in our product, or vice versa?
- Can they help us target a niche market that would be otherwise inaccessible?
- Are our sales processes compatible? If not, is there a middle ground between our divergent processes?
- How do they define success? How do they measure it? Do our goals closely align?
- What level of commitment (in regard to both time and resources) can they make? Does it align with the level of commitment we need?
- Do they already resell other solutions? If so, could our partnership potentially create a conflict of interests?
- Are they certified? (This is especially relevant to implementation partnerships.)
Just as important as vetting prospective partners is making sure that you also bring something of value to the table. Sure, you could trade on your company and the reputation of your products, but free training, free software licenses, or a percentage of profits are all more compelling incentives for prospective partners.
So, You Found a Partner — What’s Next?
You’ve built a solid business relationship, developed an appealing incentive program, carefully evaluated the partner in question, and now you’re ready to take the next step in your partner channel strategy — but what is that next step, exactly
Typically, at this stage in the journey, it’s to draw up a partner agreement. A partner agreement is a legally binding document that defines the nature of your relationship, the expectations and responsibilities of each partner, policies and procedures to follow, compensation structure, and so on. (For a better understanding of what partner agreements are and how they work, consult with your in-house counsel or a trusted outsourced legal team.)
Once the ink is dry on your partner agreement, the next step is to ensure that your channel partner’s sales team understands how to effectively position and sell your product or service. Since you’ve thoroughly vetted your channel partner, you already know that their sales team has the necessary industry expertise, but they may require technical training to truly appreciate how your product works and marketing training to understand why your products are sold the way they are.
It’s also imperative that you establish a lead routing process; this will improve your channel partner sales strategy in two key ways:
- It improves geographical coverage by indicating where your company needs to assign sales representatives.
Ex.: Company A sources Company B as a lead on behalf of Company C but requires assistance from Company C’s sales team to close the deal; Company C responds by assigning a sales rep to Company A’s territory.
- It prevents your sales team and your partner channel’s sales team from stepping on each other’s toes by stealing leads from one another.
Ex.: Company A checks to see whether Company B has any open leads with Company C before sourcing a lead with Company C.
After that, there’s nothing more to it than continuing to build business relationships that grow your partner channel network and to optimize your existing partnerships.
Optimize Your Partner Channel Network
Once you’ve built a partner channel network, your next objective should be to maintain it and look for opportunities for improvement. To optimize your existing channel partner sales strategy, you can:
- Develop a deal registration program. Deal registration refers to the process by which a channel partner brings a sales lead to a vendor’s attention; if approved by the vendor, that channel partner gets exclusive access to the deal for a set period of time. A deal registration program can help reduce channel conflict, which can arise when multiple channel partners (or even a vendor’s own internal sales department) vie for the same deal.
- Create a marketing database. Eliminate the guesswork for channel partners by providing them with all of the tools and information they need to sell your product. From sell sheets to hosted content, a centralized repository for marketing resources gives channel partners easy, vendor-approved marketing materials that they can share with leads as collateral.
- Offer better incentives. Familiar with the quote “If you build it, they will come”? It applies to channel incentive programs. The more appealing your channel incentives, the better quality of partner you’ll attract — and the better performance you’ll see from existing partners.
- Establish a Market Development Fund (MDF). An MDF effectively provides channel partners with funding to host events or to support marketing initiatives on your company’s behalf. There are any number of ways to structure an MDF, from a pre-existing fund to which channel partners must request access to membership tier-based financial incentives.
- Solicit partner feedback. Asking channel partners for regular feedback not only gives you greater insight and visibility into your partners’ sales pipelines — it can also help you evaluate the health of each relationship and identify where there’s room for improvement.
Build a Stronger Partner Channel Strategy Through Salesforce
As a valued Salesforce partner channel, we know a thing or two about channel sales ourselves — such as that each step of partner recruitment needs to be treated like its own individual sales cycles, and that Salesforce Partner Community is one of the most powerful partner relationship management tools on the market. The seasoned, Salesforce-certified professionals at VennScience can help you build your very own Partner Community — and, as a global organization with well-established partner channels, we can offer best practices from a process perspective guaranteed to ensure your success. Talk to one of our specialists today and start growing your own partner channel network today.
Channel Sales FAQ
Q: How should I get started developing a partner channel network?
A: Most partner channel networks originate and grow organically, so focus on first creating a truly compelling channel incentive program. From there, look to companies you have existing business relationships with — odds are, at least a few of them would make excellent channel partners.
Q: What is the “nirvana” of channel sales?
A: The ultimate goal for any business using the channel sales model is for each channel partner to operate and sell their product or service autonomously.
Q: What are some of the risks of selling through a partner channel?
A: There’s always the risk of partnering with a business whose brand and messaging don’t align well with yours — especially for startups — which can reflect poorly on your brand. There’s also the chance that you and your partner disagree over the structure of the sales process, which can lead to conflict. The best way to avoid finding yourself in either of these situations is to thoroughly vet every prospective partner and to be discerning about who you choose to work with.