Channel sales explained: How to drive indirect sales in 2023
A channel sales model is a game-changing opportunity to grow your business. By partnering up on channel sales, you can dramatically expand your reach and tap into new income streams and markets, without the need to hire more sales reps.
But how do you know if a channel sales model is right for you?
In this guide, we'll cover channel sales from top to bottom.
You'll learn the ins and outs of this innovative approach to sales, and discover how to leverage it to maximum effect. We'll walk you through the process of identifying the best partners for your business, and provide you with practical tips and strategies to succeed.
So without further ado, let’s find out what makes channel sales so appealing.
Channel sales vs direct sales (what’s the difference?)
Direct sales refer to the process of selling products or services directly to the end customer, typically through an in-house sales team. Whereas channel sales is essentially the process of selling your products through partners, distributors, wholesalers and resellers, who then take a commission on each sale.
In direct sales, the company is responsible for all aspects of the sales process, including lead generation, customer acquisition, and closing deals.
On the other hand, in the channel sales model, the company also relies on their partners to market and sell their products.
Overall, the key difference between direct and channel sales lies in who is responsible for the sales process. With direct sales, the company has full control over the sales process, while with channel sales, the company shares this responsibility with its partners.
But which approach is right for your company?
It's essential to weigh the pros and cons of adopting a channel sales model versus a traditional direct sales strategy before jumping in head-first.
The advantages and disadvantages of a channel sales strategy
Giving up direct control over your sales process can be tricky, as there is always a risk of harming the customer experience if a partner misrepresents your brand.
However, using partners as a scalable sales channel can yield substantial benefits.
Not only could you downsize your sales team, but you could also benefit from greater efficiency, quicker experimentation, rapid scale and improved customer success.
Here are the pros and cons of each:
The advantages of channel sales
Access to new markets:
Working with a channel partner can help a company access new markets or customer segments that they may not have been able to reach on their own.
Lower sales costs:
Using channel partners can be a cost-effective way to expand sales without the need to hire and train additional sales staff.
Scale your business:
As a company grows, it can be challenging to scale direct sales efforts, whereas using channel partners can help a company expand its reach more quickly and efficiently.
Increase brand awareness:
Established channel partners can help increase brand awareness and credibility, particularly if the partner has a strong reputation in the market.
When using channel partners, the risk of expanding sales efforts is shared between the company and its partners. This can help reduce the financial risk associated with expanding sales efforts on your own.
The disadvantages of channel sales
When working with channel partners, companies have limited control over how their products or services are marketed and sold. This can lead to inconsistencies in messaging or customer experiences.
Selling through channel partners can reduce profit margins, as partners typically receive a portion of the revenue generated from sales.
Dependency on partners:
Companies that rely heavily on channel partners may become overly dependent on them, which can be risky if the partner decides to terminate the relationship or goes out of business.
Partnering with too many channel partners can dilute a company's brand and lead to confusion in the market.
Conflict of interest:
In some cases, channel partners may be more focused on their own profits rather than the success of the company they are partnering with, which can create a conflict of interest.
Is a channel sales strategy right for your business?
To decide whether to pursue a channel sales strategy, you need to ask yourself 3 critical questions.
1. Firstly, do you have the resources to handle increased demand that comes with diversifying your sales channels?
If not, it might be best to wait on leveraging a channel sales strategy until you have the necessary means and production infrastructure in place.
2. Secondly, do you have an effective, repeatable, and accessible sales process to suit channel partners?
If you're still refining your sales process or target market, a channel sales strategy may not be the best fit for you.
3. Finally, are you willing to trust potential partners with your brand reputation?
If not, then a channel sales strategy may not be suitable for your organisation. You must be ready to forfeit some control without losing accountability, as any mistakes by your channel partner will reflect on your product or service.
OK, then it’s time to find someone to partner with!
The different types of channel partner
Channel partnerships come in many forms, including:
- Resellers - purchase products from manufacturers and resell them to customers for profit
- Affiliate Partners - receive commission for promoting and selling products on behalf of a retailer
- Distributors - intermediaries between manufacturers and consumers, delivering products directly to the end-user
- Wholesalers - specialise in getting physical products onto store shelves for purchase by consumers
- Value Added Reseller (VAR) - specialise in reselling technology products with additional software or features beyond the standalone product
- Independent Retailers - business owners who operate a retail company without the support of a parent company or franchise
- Dealers - sell products directly to end consumers, often specialising in one particular product or category (e.g., automobile dealers)
- Agents - intermediaries who facilitate deals between buyers and sellers without owning the products or services being sold
- Consultants - support the creation and efficiency of sales channels, connecting retailers, manufacturers, distributors, and vendors to ensure smooth delivery of products to customers.
So what makes a good channel partner?
Success in channel sales isn't just about closing deals or increasing revenue.
It's about building a long-term relationships with benefits for both parties.
While it may be tempting to partner with as many companies as possible, it's important to choose wisely. Just as trying to sell to everyone can hurt your results, partnering with just anyone can do the same.
Instead, it's best to be selective and choose a few partners carefully to maximise revenue and build a profitable, long-lasting relationship.
What qualities make for a successful partnership?
Well, you first need to define what your ideal partner looks like. Certain qualities are desired, such as:
Do they complement your service?
It's important to ensure that your partner's product or service complements your own offering.
This could mean identifying gaps in your product line that can be filled by your partner's product, or finding ways to help customers use your product more effectively.
Remember, it’s not just about selling products. These partnerships should create value for customers. This can take many forms, from product innovation to market access and improved customer experience.
By providing complementary services, these partners should add value to the overall customer experience and help drive growth for both parties involved.
Do you have market alignment?
Assess whether your partner's customers would benefit from your product or services, and if there is a good match in terms of size, geography, and use case.
If your partner's customers require additional support, features, or solutions that your product can provide, then this could be a good opportunity for collaboration.
Do you share goals?
Both parties need to be aligned on the goals and objectives of the partnership.
This includes understanding each other's target markets, product positioning, and sales strategies.
When both parties are on the same page, it becomes easier to work towards a common goal and achieve success.
How much effort will it take to train them?
Assess the level of product and technical knowledge your partner needs to deliver an exceptional customer experience and sell your products.
Some partners may be pretty self-sufficient, while others may need extensive training.
Ask yourself, is the potential return worth it?
How to implement a channel sales strategy (in 7 steps)
So, you’ve decided to run with a channel sales model… fantastic!
Now it’s time to build a comprehensive channel strategy that will recruit, onboard and continually endear partners to your product(s).
You’ll need to flood them with sales enablement resources they can leverage to maximise reach and stay on brand.
Step 1: Engage potential partners with really useful content
Use your ideal partner persona to craft relevant, useful content that focuses on their needs.
Let's say you want to work with eCommerce platforms.
You could create an in-depth guide on how to optimise your eCommerce store for higher conversion rates or host a webinar on the latest trends and strategies for eCommerce success.
Ensure that your content speaks directly to the pain points and goals of your ideal partner. By showing that you understand their needs and can provide valuable solutions, you'll be more likely to attract and engage potential partners.
Step 2: Figure out their needs
Potential partners won't be inclined to collaborate with you unless they perceive a mutual benefit.
Therefore, it's crucial to identify how you can help them, whether by enabling them to offer additional services, expanding their customer base, or increasing the value of their product or service.
Step 3: Choose a structure
Once you have established a few partnerships, you need to decide on the best structure for your collaborative efforts.
There are three primary models for channel sales partnerships, each with its unique advantages. These include:
- Selling together
- Selling through your partner, or
- Having your partner sell for you.
Depending on your goals and specific circumstances, you may choose to employ one or more of these strategies in tandem with your direct sales model.
Step 4: Peak their interest
Since you lack direct control over partners, it can be a challenge to engage them.
To encourage partners to sell, it is crucial to provide them with excellent resources that they can use to confidently sell your product.
Top tip: We’d recommend you invest more in developing content for your channel partners than for your direct sales representatives. Partners will be less familiar with your product after all.
Ensure that your partners are equipped with clear and comprehensive product specifications, testimonials, customer examples, competitive comparisons, email templates, call scripts, meeting agendas, and objection-handling cheat sheets.
These resources will help partners feel confident, thus boosting their motivation to sell.
Step 5: Keep up the communication
To ensure your partners remain invested, make an effort to maintain regular communication.
Remember, you’re probably not their only partner.
So keep them up-to-date with the latest news, product updates, and strategic announcements. Without regular contact, issues can fester and go unnoticed.
Communications can take various forms such as sending periodic emails, using an online portal, creating a Slack space, setting up a Facebook group, hosting partners in your head office, running webinars, roadshows or events.
Whatever the method, make sure to stay in touch to forge strong bonds and build brand advocacy.
Top tip: If in doubt, it’s always better to over-communicate!
Step 6: Reward desired behaviours
Offering additional rewards over and above commission payments can foster even more compelling partnerships.
By implementing a tiered system of channel partner incentives or tactical SPIFFs, you can incentivise desired behaviours and create brand superfans.
You could offer enhanced marketing support, exclusive event tickets, strategic consulting, meetings with your executives, points-mean-prizes rewards, exclusive beta feature access, premium directory listings, end of year travel incentives, and more.
These rewards will motivate partners to work harder, improve their product knowledge and build mindshare.
Step 7: Get organised with a Channel Partner platform
Staying on top of partner data can be a daunting task when scaling a multi-channel business.
Thankfully, specialised tools exist to streamline your channel data.
This not only helps you track revenue generated by your sales partners but also facilitates incentive payouts, e-learning and communication. Thereby ensuring sustainable growth of your channel sales programme.
So what does good look like in channel sales?
Well, there are several ways you can assess the progress of your new initiative. Here are 20 that spring to mind:
- Recruitment quota attainment: Gauge the success of your recruitment efforts
- Total number of partners: Assess the effectiveness of your outreach and relationship-building efforts
- Average time to onboard a new partner: Understand whether your recruitment and onboarding processes need to be re-evaluated or streamlined
- Number of partner deals registered: Get an idea of the volume of deals your channel partners are able to make
- Average cost of onboarding a new partner: Determine how cost-efficient your channel partnership-building process is
- Percentage of partners recruited by channel: Determine where partnerships are coming from (such as networking groups, proactive outreach, or referrals)
- Percentage of partners using provided collateral: See whether the materials you're providing partners are accessible and effective
- Percentage of partners attending events and training: Reveal if partners are enthusiastic about your training methods
- Average partner satisfaction score: Understand if you need to tweak your training to better suit partner needs
- Average value of partner deals: Shows you how effective your partners are in selling your product or service
- Percentage of accepted partner deals: Determine whether your channel partners' sales efforts are reaching expected levels
- Percentage of closed partner deals: Shows the number of deals that were successfully closed by your channel partners
- Average sales cycle length: Determine the effectiveness of your partner training and identify top performers
- Cross-sell and upsell rates for partners vs direct sales: See how effective your channel partners are at generating incremental revenue
- Percentage of partners registering leads: Assess channel partner performance in generating leads
- Percentage of partners attempting certification: Reveal whether your partners find your certifications useful and unimposing
- Percentage of partners that have completed certification: See if your certifications are accessible enough
- CAC for each partner sale vs direct sale: Spot the difference in profitability between your channel partner strategy when compared to direct sales
- Retention rates for partner sales vs direct sales: Know whether the relationships developed during your partner sales have staying power
- Partner attrition rate: Measure the number of partnerships that fail over a given period, to identify problem areas
Top tip: Be sure to set KPIs from the outset and have reporting to hand for at least a few of these (preferably all of them!)
Grow your business with channel sales
So there you have it! If you're looking to take your business to the next level, channel sales can be an absolute game-changer.
Sure, building a solid channel sales programme requires an upfront investment - not only of money but also your time and effort - but the benefits are immense.
With channel sales, you not only get access to new customer segments, but you also establish strategic partnerships that can drive sustainable growth.
Think about it - by working with channel partners, you gain access to their customer base and unlock new revenue streams. What's more, channel partners can offer unique insights into your market and help you refine your go-to-market strategy.
By leveraging these partnerships effectively, you can take your business to new heights.
So what are you waiting for?
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