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Channel Sales—also referred to as indirect sales—utilizes partners to promote products and handle customer relationships on behalf of another entity. Many B2B technology companies large and small find great success using this methodology, including Microsoft, Hubspot, and SalesForce.
As said by Charles Meyers, CEO of Equinix, “We had our top four alliance partners in this quarter account for 10% of the total bookings, and that’s not 10% of the channel book, but that’s 10% of the total bookings.”
To help you determine if a channel program can benefit your organization, below are six benefits of using partners within your greater sales strategy.
The Benefits of Using Channel Partners
Quickly Leverage Partners’ Existing Connections and Market Presence
As every sales professional knows, it takes work and patience to establish inroads into a new market. Whether a new product caters to unbroached industries or you want to broaden your geographic reach, your direct sales team will essentially start from scratch.
The right channel partners can give you the much-needed footholds. You can leverage their existing customer base and relevant thought leadership to make strong first impressions. Plus, they can provide valuable insights into marketing regulations, local taxes, targeted messaging approaches, and audience personas.
In a nutshell, channel partners can provide a shortcut to profitability when tapping into new markets. They benefit your overall brand awareness amongst fresh audiences, secondarily assisting your direct sales as well.
One example of a company that benefits from its international channel partners is Amazon Web Services (AWS). Despite their Seattle headquarters, 70% of their channel partners are outside the US. When speaking of the tactics that led to nearly 100% in 2021, Director of Partners Antonio Alonso Lopez noted, “We are encouraging our sales teams to interlock, day-to-day with partners. We are connecting our sales teams in the field and sell together with them.” This tactic enables AWS to merge Direct Sales’ expertise with the local presence of channel partners for the ultimate win-win.
Another company that recognized the importance of channel partners is Weyland Tech. As they shared with investors, “Total service revenue, which comprises recurring user subscription fees, increased by 53% . . . growth was due to greater customer adoption of our CreateApp Platform-as-a-Service . . . it is actually being sold into our existing international markets, and it’s largely driven by our channel partners.”
Harness Partners’ Strong Brand Reputation to Boost Sales
A partner doesn’t need to serve a vastly different market than your own to reinforce your reputation. Their promotion of your products serves as a general recommendation, something that can prove game-changing for an up-and-coming company.
This speaks to the need to be selective with the program participants you enlist. The ideal channel partner has accumulated credibility so their endorsement carries significance. The wrong channel partner is undiscerning about which products they sell, promoting your services right alongside more dubious offerings. Make sure that you aren’t guilty by association!
Achieve Scalable Growth Without Proportionately Growing Internal Teams
Channel partners enable you to achieve scalable growth with minimal internal infrastructure or upfront costs.
The program essentially outsources prospect acquisition and account management to extended team members that require no baseline salary. With the right PRM software, a channel manager can successfully support a growing number of program participants without significantly increasing spend or decreasing oversight.
Channel partners’ commissions will need to reflect the fact that they did the majority of the “heavy lifting” when acquiring a new customer. But don’t let this discourage you.
When compared to Direct Sales, the low operational costs of partner programs frequently result in lower customer acquisition costs for channel programs. Take Zoom Video Communications, for instance.
March 2020, the COVID19 pandemic jerked workers away from their office environments and onto their couches with little warning. Companies had to abruptly evaluate their technology suite to accommodate remote communication and employee management. Zoom knew that it was time for their video conferencing software to shine!
They swiftly launched a referral program for master agents with generous commission structures. In some places like China, they abandoned Direct Sales entirely in favor of partners. The rapid scaling of their sales capabilities through partners let them bypass competitors to achieve unparalleled growth. As Zoom reports:
- Over 20% of their international business bookings in the past quarter were driven by a partner ecosystem
- Channel partners in Japan attributed to approximately 40% of their Japanese business
- 70%+ of their US Federal Government business was due to channel partners
The important takeaway is that they effectively grew their partner program in mere days to handle the unforeseen sales opportunities, a feat that could not be matched through Direct Sales strategies.
Further Round-Out Your Offering for a Competitive Edge
Need another reason why you should use channel partners? How about the fact that their offering combined with yours could outshine the competition.
Partners’ products can address gaps within your own or integrate to augment your capabilities. Prospects generally prefer to use one software solution that satisfies multiple needs rather than multiple, disconnected platforms. Collaborating with partners to create comprehensive packages can simplify customers’ ongoing expenses, data collection, and internal processes.
The result? The joint-offering is more attractive than the sum of its parts.
Share Marketing Costs to Improve Reach
As mentioned above, channel partners collect a percentage of the profits from every new deal they register. Therefore, it’s common for them to contribute to a percentage of the marketing costs, as well.
To take it one step further, partners will sometimes approach channel managers with their own co-marketing initiatives rather than vice versa. Establish a marketing development fund budget and approval process in which you partially finance their marketing team to promote your products.
It’s a win-win: partners feel empowered and you spend less on Marketing personnel and advertising spending. Suddenly, your budget can achieve new reach.
Less Upfront Costs Means Less Risk
A metric decision-makers repeatedly face is the return on an investment, affectionately known as ROI. The greater the upfront investment, the greater the risk of failing to make a profit or break even.
As previously established, channel partners require reduced internal staff and marketing spending, and they can accelerate the ramp up time of sales campaigns. As a result, risk-mitigating benefits of the program include:
• If a new audience responds poorly to a product or related messaging, you’ll have invested less time and money than if you utilized Direct Sales.
• If a promotion doesn’t deliver expected results, you share the related cost with partners.
• If a prospect falls through, you didn’t waste your own time on the fruitless lead.
Bonus: Your Competitors Probably Have Channel Partners
As evident by the many real-world examples above, an increasing number of B2B companies are nurturing their channel partner programs and seeing increased sales and improved international presence. The more traction you let competitors gain in building a loyal following amongst both partners and users, the harder it will be to later sway them to your product.
Why use channel partners? Chances are, these companies will be participating in a program regardless and selling software solutions. Why not have them promote yours over a competitors’?
Are there Reasons Why You Shouldn’t Create a Partner Program
No sales approach is without a downside, including the use of channel partners. The primary complaint is the lack of control a company has over how its products are sold and its brand portrayed. However, there are steps you can take to mitigate this.
• Balance process uniformity and custom sales approaches. The more procedures and supporting materials you have in place, the less ambiguity partners will experience. Yet, if you apply a rigid, one-size-fits-all methodology to your sales approach, your messaging won’t resonate with some audiences.
The solution: segment your partners and customers, and create unique playbooks for each. By equipping sales partners with the right script for specific types of prospects, you eliminate their need to go off-script.
Sophisticated PRM tools like Allbound will let you customize partners’ access to only the learnings that apply to their industry, experience-level, geography, and role. Similarly, the tool can suggest specific playbooks to partners based on information they provide about registered deals.
• The right tools lets partners operate independently but within predetermined boundaries. Co-branding materials is one scenario in which many partners inadvertently misrepresent the other organization. Without the proper tools in place, partners are left with two options:
• Request that the channel manager co-brand materials on their behalf. This email will be one of many that their point of contact receives throughout the day. By the time the partner manager fulfills the request, a prospect’s interest in the product may have dwindled.
• Co-brand materials on their own. Enter photoshop! Logos may be sloppily slapped onto materials missized or discolored. The text could be changed to misrepresent your offering. The document itself could be considered off-limits for co-branding, but you have no way to stop their good intentions.
PRM software can prevent both of the above problems. The portal’s co-branding capabilities let the partners customize items without your direct involvement. However, you can control what they can and cannot do based on how you classified the program participant and the document itself.
Bottom Line: Channel Partners Can Benefit Your Bottom Line
Short-term, use channel partners to expedite the creation of a customer base. Long-term, your program’s framework and tools can continue to support exponential partner growth with minor internal changes. Partners can benefit your reputation, audience reach, and overall product offering.
To learn about other ways channel partners can benefit your brand, schedule a free consultation with one of our Channel Experts.