Merging Sales Models and Channel Strategies
The benefits of selling through the channel are undeniable, but developing an effective indirect-sales program takes time and effort.
By Diana L. Mirakaj
Many vendors do a tremendous job of producing technology systems, which brings up the question of whether they really need intermediaries. Can’t they just sell directly to the end user? Of course they can, but selling direct isn’t a practical strategy. By leveraging the channel, vendors can avoid hiring, training, and supporting the army of salespeople, engineers, and technicians needed to cover their total addressable market. Simply put: The channel is a means of accelerating sales and achieving scale while keeping costs down.
Indirect sales through the channel can be one of the most profitable business models for vendors, allowing them to leverage channel partners’ sales resources and existing customer relationships. But creating a successful channel program involves far more than simply signing up partners.
According to our research at The 2112 Group, vendors engaging the channel gain access to a market that generates nearly $500 billion in annual sales; yet the value of many channel partnerships isn’t fully realized. The reasons for that are numerous—among them, a lack of communication and misaligned strategies between a vendor and its partners.
When it comes to channel programs, the devil is definitely in the details. A lot of specifics have to be figured out ahead of time—the onboarding process, compensation plans, incentive programs, training and support, etc.—and a lot can go wrong along the way. Rushing the preliminaries to launch a program as quickly as possible can be a costly mistake.
Also, there are several common errors vendors make regarding channel sales. Those include expecting new products to fit into existing channels; choosing a channel that doesn’t fit your customer profile; treating all of your partners the same; and dedicating insufficient internal resources to the management of your channel. In a challenging economy like today’s, it’s more important than ever for companies to make sure their channel programs are well planned, flexible, composed of incentives mapped to actionable and accurate data, and bi-directional, with benefits aimed at both driving sales and increasing partner loyalty.
There’s no one formula for building a sales channel; nor is it an overnight process. The key to success is setting goals that can be measured and implementing effective – and consistent – channel management. It’s important for vendors to influence how channel partners develop, manage, and optimize sales opportunities, while at the same time listening to feedback from those very same partners and making investments in their success.
The 2112 Group works with vendors and partners to build and optimize channel programs. To learn more about the value and economics of indirect-sales models, download our Channel 101 Primer: Engaging with the Reseller.