A channel sales program can be a force multiplier for vendors of products and services in the IT space. Access to not only new customers and clients, but to entirely new sectors and industries, can transform even a modest technology organization in meaningful ways. Even better, a channel program can often deliver these new customers and clients with relatively little additional costs or resources needed. Tapping into the sales engines of other companies via a channel program can create great gains for your business without the challenges and investments traditionally associated with expanding a sales team.
However, a successful and well-structured channel program requires careful planning and execution to reach its full potential. Understand that just because you’ll be leveraging other resources and sales teams doesn’t mean setting up your channel sales program is simple. From finding the right channel partners, to structuring the program correctly, there is significant work to be done to set your channel program up for success. In this post, we will break down why a channel program might be right for your business, the different types of channel programs you should consider, and the requirements for setting your new channel program up for long-term success.
Channel sales are where a third party sells goods and services offered by another company, taking a commission or fee for facilitating the sale. Channel sales exist in almost every industry where a good or service can be bought and sold. From software, to car parts, to pipe fittings, manufacturers and service providers have been leveraging channel programs for many years to achieve sales at scale.
For vendors of SaaS business tools, IaaS offerings, hardware manufacturers, and the like, a channel sales program allows third party channel partners like MSPs, ISVs, VARs, and other IT service providers to offer the vendor’s products and services. For IT service providers, a channel sales program leverages partnerships and alliances with other businesses to add new revenue streams. For vendors, they are able to reach more end users through the channel than they would trying to sell into end users directly.
By having a channel sales program, you are taking advantage of another organization’s client base, sales team, and influence. Perhaps your organization does the hard work of offering a product or service that likely has appeal but lacks distribution. In exchange, your channel partners are taking advantage of your products, services, marketing materials, and support to expand their business. A channel sales program truly can (and should) be a mutually beneficial arrangement between organizations that operate in the same space.
As an example, imagine a company that offers softphone systems to small businesses in the health and medical space. Across town, there is a traditional MSP offering help desk and “break-fix” support to companies in the health and medical space. Through a channel arrangement, the latter can start to offer the phone systems via the former, growing revenue for both parties and delivering more solutions to the end customer.
In another scenario, imagine a hosting provider that works with MSPs and IT providers so that those companies can offer hosting solutions to end customers. Through the partnership, the hosting provider, the MSP, and the end-customer can all benefit.
So, what are the best ways to develop a channel sales initiative? As it happens, there are a number of different and widely-used ways to structure your channel sales program. The four most common versions of a channel are reseller partners, affiliate partners, white label partners, and alliance partners.
As the name suggests, a reseller partner resells your products or services to their customers. Most resellers handle the invoicing and customer service for their customers, essentially adding onto the price you charge them before they invoice their customers. One of the benefits of a reseller program is that invoicing your reseller partners is often easier than invoicing all the customers they bring you. One potential drawback is that the price you charge will need to be competitive enough for your reseller to add some margin and still be able to earn a sale.
Affiliate programs have grown in popularity in recent years, despite drawing the ire of the FCC. In an affiliate model, you provide a way for channel partners to sell your goods and services and collect a fee for doing so. Unlike the reseller model, in an affiliate program, the billing and support will be handled by your organization. Affiliate programs can be a great way for your partners to generate sales without the messiness of maintaining the ongoing support or billing relationship. Affiliate programs are quite popular with online software sales, less-so when it comes to offering managed services.
White label partners are those that sell your services or goods but put their name on them. To successfully offer this type of channel program, you’ll need to be able to provide everything from support to solution without any branding or having your name displayed. White label partnerships are extremely popular for companies that want to offer more solutions to their customers without having to invest in growing their own team.
Alliance partners can be those that provide introductions and referrals or those that co-sell with your team on larger opportunities. Oftentimes the benefits don’t come in the form of a commission but rather in the fact that bringing your business into a potential opportunity can increase the channel partner’s chance at winning their piece of that business. This happens often in the hosting and infrastructure arena as well as with managed service providers leveraging a last-mile partner or 24-hour NOC partner, for example.
Starting a channel sales program begins with forging alliances with the right partners. If you are looking to offer your solutions, products, or services through a channel sales program then you will need to find organizations that meet a few important criteria. For starters, you’ll want to work with businesses in specific sectors, markets, or industries. Whether you want to enter new arenas or simply reach more clients in sectors you presently serve, make sure your channel partners sell and serve the markets that fit your business initiatives.
Your channel partners should have a sales team or at least a structured sales function. Nothing will dampen your enthusiasm around a channel program faster than having partners that fail to sell your products or services. Additionally, it’s worth exploring how successful your channel partners have been in the past when it comes to offering third party goods and services. A partner with several thriving partnerships usually makes for much better alignment than a partner without many channel relationships. At the same time, a partner with too many products and services in their catalog might not have much time to focus on offering your solution. There is definitely an appropriate balance that must be found.
Once you’ve identified and connected with the right partners, you’ll need to decide which types of partnerships are best for your organization. From affiliates to resellers and all versions in between, a strong channel program is built on having the right kind of program for you, your partners, and your eventual customers. For example, if your service requires a lot of client interaction then choose a program model that allows that interaction to continue after the sale, it isn’t good for anyone if a partner sells your service and the client has no idea how to get in touch with you.
Additionally, your channel partners will be counting on you to prepare them for continued success. From training them on the products and services you offer, to supporting their sales efforts with marketing and technical support, as well as inside/outside sales support. Once you have a partner, the hard work has just begun. From co-branded collateral, to joint webinars, to internal training sessions, there are a myriad of ways for you to support your partners as they take your offerings to the market.
Finally, you’ll need to make sure that the back-office portion of your channel program is set up and organized before any sales start to happen. From keeping track of your partners to properly processing any commissions they earn (or fees invoiced), you’ll need to have a way to track almost every detail of interaction both with partners and with new customers. Most partners will require an integration with their billing system to avoid the manual process of passing these costs along to their customers as well as the challenges with visibility into the services being provided. Many software platforms help fascinate channel programs from top to bottom. Absent implementing one of those, your existing CRM can provide a good foundation for tracking channel activity.
As with anything worth doing, there are some challenges and potential pitfalls of which you should be aware. When creating a channel sales program, having the right perspective from the start will set you up for success.
First, it is important to realize that a channel sales program is not simply handing off sales and marketing to another company just because they already have a sales and marketing team in place. A successful partnership will rely on your organization supporting them with resources and training. Clear, and frequent, communication is critical to success.
Next, you must recognize that both your customers and your partners will need support around your solution. How will you set and deliver on those expectations? Will you provide, for example, sales engineers or technical sales support to your partners or leave that to their team alone? When a customer has a support question or need, do you have a system in place to help them, and is this a dedicated support team? Or will your partner provide Tier 1 support?
Finally, administrating a channel sales program is different than managing direct sales. From tracking opportunities to managing payouts, you will likely need to invest in software to make your program a success. Launching a channel sales program without this infrastructure in place will likely lead to issues that feel impossible to unspool.
While the effort and resources needed to start a channel program might be greater than you initially imagine, the payoff can be greatly worthwhile. Channel programs have been at the heart of some of the fastest-growing and most successful technology vendors in the world. From AWS’s thousands-strong partner network to a small cybersecurity provider with two or three strategic partners, having other organizations helping to drive your sales efforts is a great idea. Leveraging other resources and partners to find new avenues of growth is not just prudent, but also a game-changer for those that can do so successfully.
If you’re looking to build your own channel program or simply curious to learn more about how the channel can help your business grow, contact eBridge Marketing Solutions for assistance. There are many aspects of creating a successful channel program where we can lend a hand or point you in the right direction. Contact us to start a conversation around what the channel could mean for your business.