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Channel vs. Direct Sales
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Direct Sales – Quick Overview of the Pros and Cons
As might be inferred from the name, Direct Sales involves a company selling its products “directly” to its customer base.
The Pros of Direct Sales
• Training and knowledge sharing may be more effective. A full-time salesperson has one job — to sell your products. They will undoubtedly take the necessary time to meet with various in-house teams and familiarize themselves with the features in order to reflect your brand accurately. The same can’t be said for all channel partners.
• Direct contact with customers. Direct Sales give businesses a straight line of communication with their end-user. Through customer interactions, your sales and marketing teams can glean direct insight into your target audience’s needs and feedback. Additionally, it is easier to manage your brand’s image and maintain a consistent customer experience under this model.
• No needs to share the profits. Though internal sales professionals will most likely receive a combination of a salary and commission, this could be less than the profits you’d share with a successful channel partner.
The Cons of Direct Sales
• Higher marketing and sales costs. Handling everything in-house comes with costs. While Channel Sales passes along some of its personnel and marketing expenses to its partners, Direct Sales bears these costs before making its first sale.
• Slower growth and upfront costs. If you have the appropriate infrastructure in place, there’s nothing preventing you from adding 100 new channel partners as soon as tomorrow. This isn’t the same for salaried sales personnel.
Channel Sales – Quick Overview of the Pros and Cons
With a channel sales strategy (also known as indirect sales), a company promots its products through a third-party partner. Examples include distributors, retailers, wholesalers, or value-added resellers (VAR).
The Pros of Channel Sales
• Less upfront investment for scalable growth. You create targeted materials, hire a partner manager, and build a partner portal, but that’s where your initial spending ends. Partners traditionally receive commission rather than salaries, meaning that individuals only “cost” you as they simultaneously increase your profits.
• The opportunity to build credibility by leveraging partners’ brand equity. The option to leverage a partner’s existing connections is particularly helpful when entering new regions or business verticals. Partners can also lend their perspective to further refine your promotional messaging.
• The option to split marketing and promotional costs. Joint-marketing efforts mean that you and partners pool your individual budgets to make an overall greater impact. This lets you stretch your marketing dollars further and take risks with less financial consequences.
The Cons of Channel Sales
• Less control over the sales process and brand representation. Simply put, you’re putting faith into an outsider to accurately present your product. If a partner chooses to go off-script or make a questionable decision, you may never know. However, your business can employ a channel manager and systemize learnings within PRM software to mitigate these risks.
• Partners receive a cut of proceeds. While channel partners can reduce up-front business costs, they take a percentage of revenue in return for selling your product.
• Higher risk of a disconnect between Sales and Marketing. Your various teams must share information and brainstorm strategies; individually, they hold unique pieces to the puzzle but no one sees the full picture on their own. Many companies struggle to bridge the gap between Marketing and their channel partners simply because of a lack of communication.
For this reason, it’s crucial that the partner manager collect key program engagement KPIs, as well as serve as a vocal advocate for channel sales within the organization.
Direct Sales vs. Channel Sales – Which One Wins?
In the battle of Direct Sales vs. Channel Sales, there’s no clear champion. Rather, consider which option helps achieve your particular goals.
• If you want early gains without substantially growing payroll costs: Channel Sales. A single partner manager can handle multiple relationships (and this number grows exponentially when you utilize a PRM tool).
• To grow rapidly or in a new direction with little risk: Channel Sales. To reiterate an important point about Channel Sales, you don’t pay individuals. Rather, you split generated profits with them. If a partner fails to deliver, they cost you nothing. Comparatively, if a sales person doesn’t meet your expectations, you wasted significant time and money in their initial ramp up.
• If you want maximum control over your brand voice: Direct Sales. A robust PRM will let you control which materials can be co-branded, as well as suggest which materials to use throughout the sales funnel. However, just because you arm partners with the right content doesn’t guarantee it’ll be correctly utilized each and every time.
Fortunately, one doesn’t need to choose one over the other. By carefully considering the benefits and drawbacks of each approach — along with the market, your product, and your company’s financial situation — your business can boost profits through a mix of both methods.
How Direct Sales and Channel Sales Can Help One Another
Companies should leverage the pros and cons of each approach to balance the limitations of the individual sales models. For example:
• Channel sales can make strong introductions to untapped markets for Direct Sales to later leverage. Well-established partners can elevate the vendor’s brand name through joint marketing efforts, such as co-branded materials, shared vendor booths, and co-hosted webinars. This builds brand equity amongst their audiences, helping both Channel and Direct sales achieve their goals.
• Channel Sales can help generate buzz for new products. Even your most talented Direct Sales Director will find it hard to rival the combined influence of hundreds of channel partners. When your company unveils an exciting new offering, your partners can blow their social media trumpets and talk it up amongst their customers to help make a big splash.
• Direct Sales can test playbooks and strategies to share with partners. Allbound’s Channel Insights feature lets you merge engagement data with deal registrations to quantify the effectiveness of the documents. However, this is no substitute for qualitative insights from your own team.
Direct Sales personnel can provide firsthand knowledge of how prospects reacted to materials, common follow-up questions, and the stage at which the messaging was best received. These insights can ultimately shape your channel sales playbooks so you properly equip partners.
Curious About How to Get Your Channel Program Off the Ground?
To learn more about how to establish a channel partner program to supplement your direct sales, consider reading one of the following:
• Channel Partner Recruitment Best Practices + Common Mistakes
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Ali Spiric
Latest posts by Ali Spiric (see all)
- Affiliate or Referral: How to Pick the Perfect Partnership - January 2, 2020
- 5 Ways These Remarkable Channel Leaders are Improving Their Partnerships - December 18, 2019
- eBook–How to Get Your Partners to Step Up to the Plate - November 26, 2019
A Boost to Channel Programs: Allbound’s $43 Million Growth Equity Investment from Invictus Growth Partners
When building technology stacks, Sales and Marketing actively avoid tools with capabilities that heavily overlap in order to limit spending. This leads to a very common question: can I use my existing CRM platform to manage channel partners?
The short answer? It’s not recommended to rely upon your CRM for partner relationship management (PRM). This is because it’s not equipped with specialized features that speak directly to channel partners’ needs, such as content co-branding, onboarding, and automated content curation based on group types. The lack of comprehensive yet targeted PRM functionality will force you to rely upon multiple tools in addition to your CRM, complicating processes and erecting barriers to scalable operations.
Contrastingly, a PRM is a centralized hub intended solely to help companies enable partners through a variety of features and automations triggered by user actions and customizable settings. What’s more, PRMs are increasingly essential to staying ahead of the curve, as Forrester predicts the PRM market will grow to $679M by 2023 across all industries.
Still on the fence? Consider that PRM technology is relatively new and specifically designed to address CRMs’ insufficient abilities to service partners.
In this article, we’ll help you understand key differences between CRMs vs. PRMs and how to best integrate the two platforms.
What is PRM?
Partner relationship management software provides businesses with tools to track reseller and referral sales while also giving partners support, resources, and a portal to communicate with your business. The power of PRM comes from a personalized portal for partners where they can access documents, marketing content, market development funds (MDF), opportunities, and track deals.
PRM is considered the 3rd evolution of SaaS tools, the first being CRM and then marketing automation. When the market started changing, PRM stepped up to fill in the gaps.
What do PRMs offer in comparison to CRMs?
PRM software provides businesses with tools to track reseller and referral sales while also giving partners support, resources, and a portal in which to communicate with your business. When comparing it against CRM, PRM technology’s power can best be summarized by three points:
- It centralizes most functions and content within a partner-friendly interface - Content is housed in a library with a search bar. Features like market development funds (MDF) requests, deal registration, and prospect pages are all within a single platform. This allows both partners and your management team to be more organized, as well as to identify relationships between different portal activities and subsequent conversions.
- It grants partners controlled freedom - Partners can engage with training and quizzes when most convenient, co-brand select materials as needed, and find quick solutions using the portal’s search function. This results in partners having the autonomy necessary to be productive and achieve success on a mass scale.
- It utilizes automation to improve the partner experience - The portal micromanages partners on your behalf based on commands you set up prior to deployment. This means that you can gate some features and content from defined partner groups and map out content recommendations based on users’ past responses.
Another advantage of utilizing a specialized PRM is that it shows your partners that you invest in their success. You’re willing to spend to accommodate their needs rather than asking them to fit their square bodies into your CRM’s round hole.
Case in point, Serko, a technology solutions provider in the travel and expenses industry, uses Allbound to support their partners who manage over 6,000 customers globally. Channel sales managers at Serko were able to showcase a world-class partner program and portal in which each partner was provided with the right sales and marketing content for their needs. Serko now has 100% partner adoption, which you can read about here.
It’s not “PRM vs. CRM”, as you will need both
Your company’s CRM is not intended for managing your partner ecosystem. However, there are CRM capabilities that are indispensable to Sales and Customer Service that a PRM simply cannot provide.
The Value Your CRM Brings to Your Partner Program
Remember, CRM is an acronym for customer relationship management, meaning that it helps businesses track prospective and existing customers within a single system of record, regardless of whether they came from Direct or Indirect. Advantages of a CRM (in conjunction with a PRM) include:
- The ability for Customer Service to pull client information to better serve their needs
- Customer base data for easier analysis, enabling companies to create and test retention strategies
- The option to schedule emails to customers through the CRM and collect related open-rate data
- Comprehensive pipeline views and sales forecasting, achieved by pulling data from both your CRM and PRM into a single view
- Customer segmentation for intelligent automation and more in-depth analysis
In short, your CRM is essential to keeping all the won leads your PRM helped generate. Additionally, it grants long-term insights into the quality of partners’ leads. For example, if a particular partner group consistently generates customers with high abandonment rates, this could indicate that they’re pursuing the wrong audiences or are setting false expectations, both which modified training practices can fix.
How and Why to Integrate Your PRM and CRM
Your PRM and CRM should share real-time data with one another through integration. This will grant you:
- The ability to block duplicate deals across both platforms - when Direct Sales and a partner both lay claim to a lead, the results are messy. Avoid channel conflict by enlisting data-sharing between your PRM and CRM so both platforms will immediately notify users that the deal already exists within the sales ecosystem.
- A fuller understanding of your pipeline and sales forecasting - Your PRM and CRM should generate reports that give you an overview of today’s (and future) performance. However, why look at two separate reports when you can dive deeper into one?
- For data comparisons between direct and indirect sales performance - By enabling your CRM to pull data directly from your PRM, you can do side-by-side comparisons of how different audiences react to various strategies. This enables you to create better-informed hypotheses and have the sales channels learn from one another.
Allbound’s PRM technology has standard integrations with a number of CRM solutions, such as Salesforce, Pipedrive, SugarCRM, and Hubspot. We also can do custom integrations in order to accommodate new customers’ existing technology stacks. In order to have the process go as smoothly as possible, designated integration specialists will sync up our PRM with your choice of CRM (as well as with other technologies). The end result is seamless interactions between the two software with minimal maintenance required.
What About CRMs That Say They Offer PRM Capabilities?
Because of the rapidly accelerating interest in channel partners, the Sales world is abuzz about PRM technology. It’s only natural that some related software companies would want to capitalize on this interest by laying claim to the PRM title, even if their products don’t quite meet the definitions.
Remember, a true PRM acts as a centralized hub for partner management and sales prospect interactions. Read Automate, Scale, Integrate – PRM System Criteria for a fuller understanding of what features to expect, and remember that a tool that offers only a fraction cannot call itself a real PRM solution.
The Bottom Line About CRM vs. PRM
The market has already started moving to a comprehensive partner management approach. In fact, 65% of high-tech companies have already adopted PRM tools that deliver a significant amount of company revenue. Companies that continue to manage partners in traditional ways via CRM or spreadsheets are not only missing out on new end customer sales, but also valuable insight from the data provided by channel partners. Consider creating a great partner experience to see big returns on your bottom line.
To learn more about choosing a PRM that fulfills your program’s needs, we recommend reading Partner Portal Best Practices and Design Checklist.
How does PRM work within a complex partner ecosystem?
Channel partners are your company’s selling allies, an extension of your sales team. PRM tools give you the functionality to support a variety of partners and their end customers.
PRM tools automatically gather and analyze performance data and metrics, with a clear focus on revenue and activity metrics. Rewarding your most profitable partners with MDFs for hitting revenue targets, or training completions, ensures that you see ROI from your investment.
PRM and tracking revenue
The revenue metrics for partner programs are unique to the indirect sales model, which is why PRM tools have extensive features to track leads and revenue including:
• Partner portal software for easy communication and data exchange
• Access to relevant parts of the customer database
• Dashboards for tracking leads, deal progression, deal registration, and sales KPIs
• Data about which partners perform well and which individuals fail to generate or convert leads
• Integrations with contract, scheduling, expense, and content tools
What are the benefits of PRM?
Overseeing a partner program has traditionally involved complex spreadsheets and manual correspondence for every deal, which required switching between a CRM and other tools to fill in the gaps. This is a huge competitive disadvantage and makes it almost impossible to correlate partner activity and training to closed business. That’s why PRMs provide partner management specific features like:
• Business intelligence, automation, and template-based workflows
• Visibility on the impact of 3rd parties on reaching new buyers
• Partner segmentation for targeted experiences
• Partner channel avoidance through clear registration processes and pipeline integrations
• Planning, recruitment, onboarding, enablement, co-selling and co-marketing, and incentives
• Overview that channel managers can use to track how well training and content is performing in relation to deal registrations
Integrating your partner tool with your CRM
For a complete view of your entire revenue org, both indirect and direct, integrate your PRM with your CRM tool. Look for a PRM vendor that helps you get your integrations in order.
Allbound let’s users bring their existing sales tools with them into the partner management process. You can pass information between your PRM and CRM to create a consolidated pipeline that is your single source of truth and stays relevant with real time updates on deal registrations. Syncing your data also avoids duplicate deal registrations, making partner conflict resolution much simpler.
Conclusion
Guide to Implementing a Channel Loyalty Program
What's one thing that starts and never stops? You might be thinking that the answer is Newton's first law of motion, but you'd be wrong. The answer is much simpler than that: partner recruitment.
Expert panelists Adam Pasch, Co-Founder of Stealth Startup, Ben Wright, CEO of Partner Fuel, Blake Williams, CEO of Ampfactor, and Chris Murray, VP of Partner Ecosystem at Lead Forensics join us to teach you how to recruit powerful partnerships that will take your business to the next level. We're talking about partnerships that will crush your revenue goals.
In this webinar, we'll discuss:
- How to nail a partner pitch
- How to build an IPP
- Why you should use ABM as part of your recruitment strategy
Ryan Sherman
VP of Product
Kyle Koski
Sr. Product Manager
Teresa Hoffman
Sr. Product Manager
Prashant Sharma
Product Manager
- 9 Steps to Creating a SPIFF Program to Incentivize Channel Partners - January 20, 2023
- 7 Steps to Successfully Onboard Partners - December 7, 2022
- 16 Partner Program KPIs to Measure Channel Performance - September 18, 2022
Simplify Channel Management and Increase Partner Engagement with Allbound.
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Give your channel partner program an in-depth health-check utilizing the four key performance indicators (KPIs) proven to increase pipeline velocity.
As a bonus, you’ll see exactly how you stack-up against fellow industry leaders and get intelligent recommendations to improve problem areas – all in just minutes!
