Variety is the spice of life and, in the channel sales world, there is plenty of variety when it comes to different types of partners.
From referrals to tech alliances to affiliations, the right partnership structure depends on your needs and the stage of your program. But across organizations and industries, value-added resellers are among the most popular types of channel sales partners – and for a good reason.
As the name suggests, a value-added reseller (VAR) adds something extra to the product or service before reselling it. The added value to the end user can be anything like additional features, a bundle with other products, consulting, training, implementation support, or other accompanying professional services.
This concept is nothing new but the ways of working with value-added partners continue to evolve, alongside ever-increasing opportunities for both parties.
What’s a Value-Added Reseller? And Why Work With One?
The very premise of the value-added reseller business model is enhancing the product or service to make it more appealing – or valuable – to the customer.
This is fundamentally different from a traditional reseller who is simply selling the product or service to the end customer as a third party, without any augmentations. It also diverges from system integrators (SIs), another partner type to which it’s often compared.
So what’s the key difference between system integrators and value-added resellers? Like VARs, SIs add additional value but that’s either by combining multiple solutions and providing additional services on an ongoing basis. VARs enhance the product and resell it with the additional value add-on.
Value can be added to any type of products but, in the channel space, VARs most commonly provide additional features or services on top of existing tech solutions – particularly software products. And this brings huge benefits for your business, the reseller, and the end customer.
Benefits of the value-added reseller model for everyone involved
For one, working with a tech or SAAS value-added reseller can help you expand much more rapidly than relying on direct sales or hiring an internal team. Additionally, your product becomes that much more competitive to a specific audience and you’re able to tap into your partner’s established customer base; after all, having partners promote joint packages may appeal to customers more than disjointed, multi-tool solutions. The value-added reseller model also allows you to diversify your pipeline and revenue streams with the enhanced product.
For the reseller, they get the benefits of working with a product that’s supported and already has brand recognition. Plus, they can focus on selling and marketing without having to build a product from scratch.
And for the customer – they get a product that better addresses their needs. It’s a win for everyone.
How Do You Recruit and Work With Value-Added Resellers?
A great partner program consists of great partners, but how do you find the right value-added resellers?
As your channel sales program grows and gains momentum, you may find potential partners seeking opportunities to join. This is particularly true of more established programs that have a history of success.
In those cases, having a webpage giving an overview of your program – requirements to join, benefits, and a way to get in contact – is a great place to engage prospects who are actively seeking to work with you. You can also share that your program is growing on social media, industry-specific platforms and groups, and other places you engage.
In other cases, especially when your program is just getting launched and starting to grow, you may have to reach out to VARs on a one-to-one basis and specifically market the benefits of partnering with you. Highlight advantages like co-marketing opportunities, your brand reputation, growing demand for the product and the added features, and compensation. Share any case studies of partnerships with similar value-added resellers to show the potential profits for everyone involved.
Fundamentally, though, you want to understand what their goals and pain points are to be able to make a persuasive pitch of why they should work with you over any other organization.
Vetting value-added resellers
Regardless of whether you’re seeking out the partner or they’re coming to you, it’s important to be selective with VAR partners. The wrong fit won’t just be a drag on your channel sales program but can damage the reputation of your product and business itself.
Since the success of VAR partnerships is contingent on how they are adding value to your product or service, that should be among the first considerations when recruiting and vetting new partners.
You want to make sure that the customer base for the product exists before investing too much into the VAR relationship. If there are no customers you can tag as early adopters, the partnership will be much harder to sell internally or see an immediate return on investment.
Ask yourself and your value-added reseller questions like:
- What’s driving the decision to add this feature?
- What specific customer pain point does this added value address?
- Where will this enhanced product be sold?
- What kind of marketing and sales support will be needed?
- Does the partner have the capacity to meet expected demand or scale in the future?
- Who is the value-added reseller’s current and target audiences, and do they align with my brand goals?
Compensation packages for value-added resellers
Money isn’t the only reason for a VAR partner to work with you, but compensation is always part of the conversation.
Typically, a VAR earns money from the profit margins of the product. In some cases, they may receive a percentage commission of the sale or a revenue share.
Value-added reseller margins can be relatively modest, depending on the product, which is why it pays to offer other benefits in your compensation package in addition to profit margins or commissions. Ongoing support through training or certifications can help set these partners up for continued growth and success selling your product.
Likewise, market development funds – that is, monetary funds and resources to support marketing and sales efforts – can go a long way in helping partners run initiatives like webinars, events, or campaigns.
Consider tiering your VAR partners based on their activities, engagement, or performance. Multiple partnership levels can help prioritize your partners and optimize your resources to invest in the partners with the most promise. This also makes compensation clear and holds everyone more accountable.
Building a Partner Program Value-Added Resellers Want To Join
Working with value-added partners is a great way to expand your reach and increase revenue, whether you’re just starting out with a partner program or tweaking your channel strategy.
In our new channel partner go-to-market guide, we dig further into how to build a partner program that will attract and retain top-performing VAR partners. We explore the best ways to tier partners, how to create supporting content that will help set them up for success, and how to create an engaging channel community.