What are the advantages of channel sales?
If you’re on the fence about letting a middleman sell your product or service on your behalf, you’re not alone. It’s difficult to relinquish control and there’s always a risk of losing brand authority (and damaging the customer experience) if a partner misrepresents your brand.
That said, there are many benefits of letting a partner sell for you. Here are some reasons why companies adopt a channel sales model (we’ll explore the disadvantages in the section immediately after).
Scale your business (even if your internal resources are limited)
Allowing referral partners to attract leads and get your products in front of them can be a fast way to acquire new customers and speed up your business growth.
However, other channel sales programs are not always faster to set up than direct sales programs. For example, value-added resellers can take six months to a year to onboard fully, and most channel sales partners will need frequent training as your product develops.
The right channel sales strategy, however, can enable you to grow very quickly? In the case of Alex Rampbell, current General Partner at Andreessen Horowitz, it meant taking a startup from zero to 10,000+ clients within two years. Rampbell notes that channel sales helped him attract long-tail clients or clients that had a deep need for his product or service but were difficult to find and thus sell to.
Effective channel partners can help you expand your network by getting your product or service in front of those long-tail clients you’d otherwise have trouble reaching. Once you amass several long-tail clients through channel sales, they could end up making up the bulk of your revenue.
Still, you will need to onboard channel sales partners and train them accordingly, which will take some time (though considerably less than direct sales onboarding initiatives). More on how to effectively do that later on.
Enter new markets and expand globally
If you’re a North American company looking to expand into the EU region, you probably want to work with someone doing business in Europe.
A local partner in a new region knows the target market better than you do, already has an audience in your preferred space and understands the business culture. Taking advantage of this is key when attempting to broaden your brand reach and acquire new leads, prospects and ultimately customers.
“Channel programs are a low risk and low cost approach to opening new geographic regions where a company does not have existing resources, or where they want to test or establish the market,” expands Pipedrive’s VP of Channels Sales & Partnerships.
Introduce your products to different customers
Whether it’s going global or getting your products in front of a specific demographic, partners can help.
Retail companies commonly rely on channel sales to expand their brands. Consider that 70% of shoppers are interested in shopping both in-person and via e-commerce platforms. It would make a lot of sense for an up-and-coming brick-and-mortar store to get their items featured in an online shop to expand their revenue streams and reach a wider audience—especially as many stores have had to close in the wake of the COVID-19 pandemic.
Some software buyers rarely purchase products directly from a company. In fact, 37% of medium-sized businesses prefer buying through resellers or managed service providers according to one survey. Channel sales can be used to reach these buyers, who otherwise may never have come across your product.
Save serious money on distributing, shipping and web hosting
Dealing with distribution and shipping is often tedious and time-consuming, not to mention expensive. Through certain channels and intermediaries, you can offload these costs on your partners that already have the existing infrastructure, supply chain and an established presence in your target market.
For example, big box retail stores, like US stores such as TJ Maxx, Home Good and Marshall’s, all owned by TJX Cos. Inc, sell products and merchandise from channel partners. Their entire business model rests on buying items from supplier and vendor partners and then selling them via their popular retail (and online) locations. This is a great opportunity for suppliers or vendors that are looking to grow their customer base and expand their reach by getting their product or merchandise in big name stores.
TJX Cos, Inc. brands not only use channel partners to source the items they sell in their stores, but they also use channel partners to distribute their products and merchandise to their many retail locations. Rather than hiring, training and maintaining a distribution fleet of their own, they use the services of partner companies that already have a fully functioning distribution chain. Leveraging a pre-built distribution channel strategy saves TJX Cos, Inc. tons of time, money and operational oversight.
Boost your company’s reputation and name recognition
There are also digital equivalents, such as Amazon Web Services and Samsung AppStack, which are marketplaces that sell software and apps from channel partners. These digital channel partners benefit in a number of ways:
- Their products have a wider audience
- They save on online administration costs and fees
- Their own websites get backlinks from well-known companies
If you’re a growing business, partnering with established brands creates a sort of halo effect for your company as you rub shoulders with bigger names in your industry.
For example, any tech company in the US that has their products featured at Best Buy or on NewEgg.com boast some serious credibility versus companies trying to sell software independently.
Forrester is predicting that 17% of the $13 billion B2B industry will be spent in marketplaces by 2023.
Empower your sales reps to focus on their strengths
So much of managing a sales team means making sure that your reps are actually able to do their jobs effectively. Rather than overwhelm them with unrealistic quotas, a channel sales strategy takes some of the pressure off your in-house team and sales operations.
This also allows your reps to spend more time talking to and building relationships with potential customers directly, and nurturing them along the customer journey. You never want to stretch your reps so thin that they sacrifice building and nurturing relationships with their prospects, as that will end up hurting your business’s credibility as valuable relationships decay.
Offer services for complicated products
Value-added services, such as consulting, customer success and professional services, are a vital part of many businesses, especially those that produce and sell software.
However, it’s often expensive to maintain, and although there are many advantages it can sometimes be difficult to quantify the added revenue.
The right partner will provide services for the people they bring to the company, guiding them through how best to use the tool and highlighting common challenges.
Channel partners are essentially salespeople, marketers, service providers and brand advocates rolled into one.