Why is channel sales important?
Your salespeople only have so much time. Even if you hire great talent, invest in enablement tools, and remove all distractions, you can’t create more time. Some companies choose to hire more reps.
This works up to a point.
A channel sales model is another potentially game-changing strategy. Instead of hiring more reps, your product or service is distributed using a channel partner, who markets and sells it.
What is channel sales?
In a channel sales model, a company sells through third-party partners – types of partners include affiliate partners, resellers, value-added providers, or another entity you don’t control directly.
Channel sales offers many benefits, but there are tradeoffs. It’s important to consider the pros and cons before taking action. Why consider sales channel development lays these out, plus tips to apply and pitfalls to avoid.
B2B companies often use a mixture of direct and channel sales to increase revenue.
Is channel sales right for you?
If you’re planning to adopt a channel sales model, the state of your company, product, sales process, and more is important to consider.
- Company size and maturity. Smaller companies use partners to grow their business, without needing to invest in hiring and training a sales team. Once they’re larger, they can either hire their own reps or continue with what they’re doing.
- Product maturity. If your product is in the early stages, you might want to take advantage of a direct relationship with your customers, so you can quickly and efficiently assess what’s working, what’s not, and what to change.
- Sales process maturity. Before you can teach other people how to sell your product lines, you need to understand how to sell it yourself. You first need to define the stages of the sales process, the buying triggers, who gets involved, how long the average deal takes to close.
- Geography. If your offices aren’t spread out, it might make sense to use a channel sales model. That makes creating multiple sales teams unnecessary. Of course, you can also use an inside sales model where appropriate.
- Revenue needs. It takes time and energy to get a partner channel system up and running. You’ll need to recruit new, qualified entities to sell and distribute your product. If you need money sooner rather than later, focus on direct sales.
Because we are often asked how to build a partner channel, we shared The phases and pitfalls of channel development.
What makes a good channel partner?
Don’t be tempted to partner with as many channel partners as possible. It’s best to choose only a few, and to do so carefully. Trying to partner with everyone is a bad idea, just like trying to sell to everyone reduces your focus and harms your overall results.
The process of finding partners is almost identical to finding prospects. The first step is to define what an “ideal partner” looks like.
Complementary to your product
The partner’s product or service should fill a gap in your offering or help your customers use your offering more effectively. For example, partners of a highly specialized provider of software help an enterprise take full advantage of the software’s capabilities.
Aligned with your market
You should also consider whether your partner’s customers would benefit from your product. Are they demanding additional support, features, or solutions that your partner can’t currently provide? Are their customers the right fit in terms of geography, use case, and size?
High technical expertise
Identify how much technical knowledge your partner would need to sell, and potentially service, your products. You might have to do very little education and support – or you might have to do a great deal. Although training a partner requires more time and resources, it also gives them an additional incentive to work with you.
If the average selling price is low, and partners resell your product relatively infrequently, don’t invest much into training them – the ROI isn’t worth it. This highlights the importance of making sure you track how much revenue the partner produces compared to the average return.
Similar sales process
Your partner’s sales process should be compatible with yours. Ideally, there’s a natural point in their sales or services process for introducing or upselling your product. For example, if the partner sells integrated solutions, and your product fit’s with that approach, then it could be a good match.
Manageable commitment level
Understanding how much commitment a partner would need to make to succeed is essential. Is it spending one full day per quarter at your office getting trained? Or is watching one 30-minute video plenty?
Once you’ve crafted your ideal partner persona, rank the characteristics by importance. Now you have a framework for objectively evaluating partners.
Which channel partner types can you choose from? This article describes the different types of indirect channel partners.
Now let’s go over how you can create a profitable channel sales strategy.
Sales channel strategy
Your sales channel strategy should consider using inbound marketing principles to attract partners, not just outbound techniques. This requires creating content that targets the types of channel partners you seek.
Not only is this strategy easier to scale than an outbound one, but it also guarantees that your potential partners know about your company from the first conversation.
With that in mind, here’s how to create a sales channel program step-by-step.
Sales channel partnership tools
As your work with channel partners expands, you will need enablement tools much like your direct sales team uses. Here is a list of a few indirect sales channel tools – you can evaluate the merits of each. Integration with your CRM is helpful.
How to measure your channel sales program
Wondering what success looks like? A range of metrics and key performance indicators can help you measure and measure every aspect of your channel sales program.
But be careful – the list of what you track can spiral out of control if you aren’t careful. While you can’t improve what you don’t measure, fewer metrics will likely bring greater focus. Here is a sample by major category:
Channel sales recruitment
- Total number of partners
- Recruitment quota attainment
- Partner attrition rate
- Average cost of recruiting and onboarding new partner
- Average length of time to recruit and onboard new partner
Channel sales success
- Total number of partner deals registered
- Average value of partner deal
- Percentage of accepted partner-submitted deals
- Percentage of closed partner-submitted deals
- Average sales cycle length
- Percentage of partners who registered leads in past month or quarter
Channel sales training and support
- Percentage of partners using provided sales and marketing collateral
- Percentage of partners who attend optional events and/or ongoing training
- Average partner satisfaction score
- Percentage of partners who attempted certification
- Percentage of partners who completed certification
- Channel sales profitability
- Customer acquisition cost (CA) for each partner sale versus direct sale
- Retention rates for partner sales versus direct sales
- Cross-sell and upsell rates for partner sales versus direct sales
Whether you’re embarking on the journey to build a new channel for the first time, or you need skilled resources to manage execution of your partner channel strategy, we can help.
Either way, let’s start a conversation. Book an appointment.