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Channel Partners Vs. Distributors – How the Two Relate

Making the best choice for your business.

Curious what the key differences are between a software distributor and channel partner? It’s important to understand that a distributor is a type of channel partner. The main differentiator is that they communicate with other partners rather than with end-users. If successful, they act on your behalf to grow program participants and manage the relationships. Many popular SaaS companies leverage distributors to achieve rapid growth, but this strategy is not without potential downsides. 

Learn whether distributors make sense to use with your channel program and what software we recommend to help support the relationship. 

 

 

The Upsides of Using Distributors 

•  Enables fast, scalable growth. A well-designed partner portal mitigates a lot of the day-to-day maintenance that comes with managing partners. However, channel managers should still provide partners with individualized attention, whether it’s during recruitment, training, or regular check-ins. 

As the “middle man” between a company and its partners, distributors can take on these responsibilities instead of the in-house channel manager. This makes it possible for a company to handle significantly more partners without having to grow internal personnel. 

•  Quick access to new markets. Potential partners don’t eagerly join forces with companies with which they’re unfamiliar. However, if you have a well-established distributor serve as the intermediary, they may give your channel program extra consideration. You can leverage a distributor’s existing connections in a new country or industry to quickly gain credibility and partners.

 

•  Option to bundle products for an increasingly competitive offering. Like with other channel partners, distributors can bundle your software with theirs to create a package greater than the sum of its parts. However, the distributor is uniquely positioned to offer this competitive bundling to other partners to amplify its sales potential rather than limiting its customer reach. 

 

The Downsides of Using Distributors 

•  Less control and visibility over partner relationships. Delegating channel partner management is bound to have both positives and drawbacks. The distributor model requires you to put significant trust in your “middleman” to positively represent your brand and correctly guide individual partners. Similarly, you count upon them to provide accurate information. 

With this in mind, it’s vital that you consider your distributors carefully and don’t rush the relationship. Does their brand messaging gel well with yours? Does their communication style? Most industries are tight-knit communities so, if you ask around, you’re likely to find someone who can provide a first-person account of collaborating with the company. 

•  You are more reliant upon their continuing engagement than a traditional partner’s. Partners regularly come-and-go from channel partners; if you have hundreds or thousands, individual engagements won’t significantly sway the bottom line. However, because distributors control multiple partner relationships, a decision to withdraw from your program can have larger consequences. 

 

•  Distributors’ compensation can lower profit margins per sale. While channel partner commission structures can manifest themselves in different ways, distributors clearly need some incentive. Whether this comes as a share of the generated revenue, product discounts, or MDFs, you will need to make some financial concessions. 

 

Manage Distributors With the Right Channel Partner Portal 

Specific capabilities within a channel portal can help offset some of the above-mentioned downsides of using a distributor to manage partner relationships. The following features can help maintain brand consistency despite your limited involvement: 

•  Systemized training and playbooks. The distributor may be the point person for the partner relationship, but that doesn’t mean that you can’t strongly influence the partners’ onboarding and learning. Create a thorough training curriculum and tie the in-portal completion of quizzes to incentives. 

•  Co-branding capabilities. The right portal software empowers partners to put their logo right alongside yours while adhering to predetermined settings based on access-levels and the document conditions. 

 

Partner portals also assist with gaining key insights, even if relationships are managed through distributors. The centralization of deal registration, marketing spending, and sales content let you track overall performance and link upper-funnel materials to conversions. For example, Allbond’s Channel Insights enables you to collect dozens of different key performance metrics across the broader ecosystem, including:

•  Channel partner engagement and success grouped by distributor. Do one distributors’ channel partners engage with training significantly less than most? Use this information to assess the potential issues with the distributors’ onboarding of program participants. 

•  Partner engagement and conversion-assists for specific content. Determine which materials provide the most value and incorporate key takeaways into future strategies. 

•  Active pipeline value. You don’t have to rely solely upon your distributors to forecast profits. You can evaluate the pipeline as a whole or drill down into individual participants’ progress. 

 

Are You Ready for Distributors? Not Every Partner Program Is

The right distributors can raise your profile like gas on a fire. But it only works if you have a solid foundation in regards to training, branding, and supporting software. 

If you’re still in the early stages of building your partner program, hold off on courting distributors at this current time. Just like Product Development uses focus groups and UX conducts A/B site testing, it’s better to start small and collect data to strengthen your processes. This early investment in your program will help you attract a higher caliber of distributors in the long-run.

 

Whether you’re seeking to recruit software distributors or traditional partners, we recommend reading 5 Ways to Attract Channel Partners to help you fine-tune your plan. 

Daniel Graff-Radford