Develop Your Channel Strategy
After completing this unit, you’ll be able to:
- Understand why having a channel strategy is important.
- Identify the key considerations of a channel strategy.
- Outline the basics of your channel strategy.
Let’s start by defining what we mean by channel sales, since it can mean different things to different people. For the purposes of this module, channel sales means distributing and selling a product or service through a value-added reseller (VAR), distributor, or dealer/broker. The selling organization is outside your company, and typically these companies can (and often do) sell and distribute for several companies. In other words, they don’t just sell for you. That’s why it’s so important to have a strategy in place to encourage these partners to sell your products and services
Did you know that 80% of the world’s commerce is sold through the channel? Yet relatively little has been written about developing and managing a channel when compared to direct selling. This unit can help you better understand best practices in channel management and give you some food for thought when you consider what’s best for your organization.
Why do you think companies decide to sell through the channel in the first place? Most would say that selling through the channel has a direct impact on their overall business goals, whether those goals involve increased sales, entering new markets, or introducing new products. But the first step in a successful channel strategy is ensuring that the strategic goals support your overall corporate goals. We know that many of our customers using Sales Cloud PRM are looking to enter new markets or launch new product lines. And in many of these instances, selling exclusively through the channel (for new markets or new products) makes a lot of sense.
And here’s where the “Power of the Partner” comes into play. Partners can bring you access to new markets or help you introduce new products to their existing customer base. It’s this type of synergy that makes for a successful channel program.
“Developing a channel strategy is a complex and challenging task.” —Axel Schultze, Channel Executive
As you think about your channel strategy, ask (and answer) several key questions.
- Why are we building an indirect sales channel, and how does that fit into our corporate strategy?
- What do we need to invest in order to build the channel, and where does that investment come from?
- How do I get my partners to sell my products/services versus those of my competitors?
- How do we plan, get reports, and be able to manage the indirect business?
- How do we support partners with demand creation and demand fulfillment?
Susan, head of sales for the West Coast division of her company, is approached by a big account who wants to buy her new line of diagnostic kits for emergency field personnel. She’s excited about the opportunity to close new business and meet her quota, but quickly realizes that this product line is sold through one of her platinum partners. What should she do? She could go to her leadership and ask for an exception this one time, to help her out. But alas, the answer is no. Susan has to go back and tell the customer they need to go through the partner.
Unfortunately, these kinds of conflicts crop up all the time, and they need to be managed appropriately. Often a customer approaches a vendor thinking they will get a discount or better terms by dealing with the vendor directly. But in the long run, the customer will benefit by dealing with the partner, who provides enhanced support throughout the sales process, a commitment to provide support after the sale, and their deep expertise in knowing the right products for the customer’s needs. In this scenario, the partner was able to accurately recommend what to buy (and the right quantity) that wound up benefiting the customer greatly. Not only that, the partner knows the competition well and was able to explain why this product from Susan’s company was the best option.
This is just one example of what we typically see in channel conflict, and that’s why it’s essential to uphold your relationships with both your partners and your customers. Treat them well and it will pay off in the long run. Don’t be tempted to “go around” your partner. Be sure you’re providing the right incentives and pricing to make them successful, too.
Deciding what products and services to offer through the channel is a decision that should not be taken lightly. This is as strategic as the decision to sell via an indirect channel in the first place. And once again, the right strategic partner network can play an important role here. Your partners may have product expertise even beyond your own capabilities and they can give good feedback on what to offer. In fact, companies need to think about how they can involve partners in the decision-making process around what products and services to offer via the channel.
Here are a few of the important considerations to take into account:
- Partner expertise (what can they bring to the table?)
- New product launch (is there an opportunity to use the channel strategically as part of a product launch?)
- Exclusivity (will this product only be available through your partner network?)
- How will these decisions impact your partners? Will it make them more successful?
Channel partners have many options when it comes to vendors. According to a 2017 survey conducted by The Channel Company, a typical partner works with 12 vendors, of which the majority of their revenue (80%) is driven by 3 vendors. That means companies can’t take for granted partners will work with them. Therefore, partner success is a core element of any channel strategy. Here are a few elements to keep in mind (we go into more detail later in the module).
- Find the right match. Spend the time to vet, qualify, and get to know partners (quality over quantity).
- Enablement/training is evergreen. Develop comprehensive training programs, make sure they are fully certified and know your products, and always be ready to answer their questions.
- Have clear (easy to understand) policies and guidelines. Ambiguity can cause problems, so be sure to have a good set of guidelines that cover all aspects of your partner program.
- Give them an opportunity to grow. Get to know their business goals. Are they looking to focus on a few vendors? How will you support their business objectives?
- The relationship must go beyond transactional. Partners are an extension of your business, they represent your brand and they are taking on risk by partnering with you over someone else. Make sure your partner program focuses on relationship-building.
There are three basic pillars of how companies should approach a channel strategy.
- Executive sponsorship. Executives need to be involved and support this program on an ongoing basis.
- Invest in people. Have the right personnel to manage your channel (sales, marketing, support).
- Invest in technology. Have a robust portal (such as Sales Cloud PRM) to manage your partner network and bring value to all involved.
Now that we’ve covered the key considerations for a successful channel strategy, let’s take on the next topic: Establishing the Foundation of Your Portal.