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Your product is good and so are your people.
You’re ready to increase customers, to grow revenue.
You’re ready to scale. Now if only there were more selling hours in the day.
When it comes to scaling revenue, your biggest blocker is time, in which case there’s a proven strategy at your disposal: channel sales.
A channel sales model is one where third parties — resellers, distributors, affiliate partners, independent retailers — sell your product. You don’t employ these salespeople full-time as you would in a direct sales model. Instead, you rent them, paying a commission for each sale they make.
Given time (i.e., 3 – 12 months), commitment (i.e., a dedicated channel sales rep), and a proper approach, the right partners can propel brand awareness, revenue, and growth at any organization — and this article is an introduction to that process, covering both:
- Channel Partner Strategy: The benefits, drawbacks, and the common structures of a channel sales model
- Channel Partner Tactics: The steps involved in finding, engaging, and closing your first partner
Let’s get started!
Channel Partner Strategy
Entering into a well-implemented, well-managed channel sales partnership can help you increase brand awareness and gain market share in even the most competitive spaces. Where and how you start will, in many ways, constrain the path your business takes. An informed start will lay the groundwork for success, helping you to scale sales and maximize revenue for years to come.
Here, at a high level, are the three things you should know before even considering finding a channel partner: the benefits, the potential drawbacks, and the exact structure that aligns best with your goals.
Channel Partner Program: Benefits
Working with a channel of independent partners is proven to promote brand awareness, amass leads, and increase revenue because it drives:
Expansion: A channel partner can help develop and grow a company’s reach efficiently, driving expansion into other regions and verticals by leveraging a wider, more targeted audience.
Focus: With the help of a channel rep, a strategic partner can assume responsibility for training, onboarding, and servicing new customers, giving your in-house sales team the bandwidth they need to concentrate on closing new business.
Credibility: A channel partner that’s established — trusted in your market — lends immediate clout to an emerging brand. Smaller companies will instantly benefit from the name recognition and reputation of larger vendors in their space. Of course, this piece will come with time and experience, as it’s difficult to land a large partner from the onset. That said, it’s prudent to pursue smaller relationships at first, working your way up.
Channel Partner Program: Drawbacks
Of course, a channel sales model also has a set of innate drawbacks, baked-in flaws that every sales organization should understand and account for. For example, it can hinder:
Profits: Though your customer acquisition costs will drop, you’ll typically pay a commission on every deal you close. In other words, you’ll make less on every sale but you’ll also spend less money to find each new customer. Initially, this commission could be as high as 30%, a steep percentage that will gradually decrease with time and success.
Control: Partnerships distance in-house salespeople from the overall sales process — the terms, the timelines, the relationships themselves. This lack of control can lead to communication breakdowns, causing confusion over ownership and frustration over missed opportunities.
Feedback: Given the lack of control within a channel partnership, players often experience feedback erosion. That is, given the inherent separation between a direct sales force and its customers, feedback loops naturally become less clear and distinct, hazier.
Channel Partner Program: Structures
How a channel partner program is structured depends on several factors, including the products you’re selling, the professional relationships you’re fostering, and the types of customers you’re pursuing. In any case, finding success hinges on knowing and understanding your options, which are:
1. Selling together with your partner: This makes sense if your product adds value to something your partner is already selling. For example, Coca-Cola partnered with McDonald’s to sell soda and cheeseburgers.
2. Selling through your partner: This makes sense if your partner is selling other similar products through an already established infrastructure. For example, Giorgio Armani partnered with Macy’s to sell cologne through the department store.
3. Having your partner sell for you: This makes sense if your partner can seamlessly incorporate your product into their business model. For example, Dell partnered with Nutanix, a cloud computing software company, to sell its software.
Now that you know the benefits, drawbacks, and basic structures of a channel sales model, let’s explore the high-level tactics behind securing your first partnership…
Want more information around channel partner strategy? We’ve curated some great content on this below:
- 5 Tips to Perfect Your Channel Marketing Strategy: When it comes to establishing successful, sustainable partnerships, the onus is you. In this piece, we suggest five ways to own and deliver the necessary legwork.
- Strategic Alliance Examples That Failed and Why: Some partnerships are doomed from the start. In this piece, we present several real-world examples that went belly up — and the factors that led to their demise.
- 5 KPIs for Your SaaS(ed) Channel: Finding and measuring your work according to the right metrics is central to ensuring your channel partner program is profitable and productive. In this piece, we dive into five useful KPIs.
Stay tuned for step 1 in this series: How to Find Your Candidates.