Channel sales allows you to scale up your sales operations and reach new customers without adding to your head count. Whether you’re selling consumer products or computer software, an effective channel sales program can help you achieve revenue goals. In fact, channel sales is so important, I wrote an entire chapter on it in my book.
Selling through partners is changing faster than ever as new channels emerge and the pandemic challenges our status quo. What worked five years ago or even five months ago may not work today, so sales leaders need to constantly seek ways to keep partners engaged, supply chains moving, and customers happy.
I recently reached out on social media to get a frontline perspective on what indirect sellers are experiencing and what questions they may have (previously, I answered questions about direct selling). Below are my answers to 10 questions using real examples from Salesforce customers and channel sales leaders.
First, ask yourself: what is your product? Who is your customer? How do they want to buy? Unfortunately, consumer purchasing habits are a moving target right now, especially with the explosion of online sales channels. That means you must first understand what channels your prospects prefer. Rarely is it only direct or only indirect, most companies have a blended channel strategy to accommodate different go-to-market and customer requirements. If you choose to include indirect sales, then you will need to create a separate organisation to focus on this new channel. This includes channel leadership, channel account managers, and channel program managers to design and develop the framework for your partners.
Most companies have a blended channel strategy to accommodate different go-to-market and customer requirements. Click to Tweet
For instance, toilet paper is a product often sold and distributed using a channel sales model. You usually can’t purchase it directly from the manufacturers. They will direct you to one of their partners, either online or offline. When retail partners ran out of toilet paper earlier this year due to hoarding and supply chain issues, it created huge frustrations for everyone.
These partners provide tremendous scale, logistics, distribution, and sales capabilities. When setting up the program, channel program managers should consider not only the cost of goods sold, but also ease of purchase, customer preferences, and additional logistics capabilities. This approach maximises your sales and market coverage.
Once you’ve decided to create a channel sales program, you’ll need to put the right resources behind it so you’re setting partners up for success.
Most organisations grow up selling directly to customers. It creates a level of comfort. It becomes their muscle strength.
Many sales leaders I talk to believe direct sales bring higher profitability and margins. This is a common misperception, and it doesn’t consider the additional sales expenses transferred from the company to the partner organisation.
With direct selling, you’re absorbing all the costs: commissions, employee salaries, health insurance, office space, and mileage. Those expenses don’t exist in channel sales, so while the product’s profit margins may in fact be lower, much of that can be offset by the reduction in selling, general, and administrative expenses.
Indirect sales can also help your organisation tap into new markets. Case in point: when Salesforce started selling in various Asian countries, it relied on local partners. Stephen Casey, Regional Vice-President, Alliances, Salesforce ASEAN, says that “Selling through partners in Asia is instrumental to the go to market success strategy at Salesforce. Partners allow usto scale across a very diverse and complex region. A clear and consistent channel program helps us ensure the success of our customers.”
Getting back to #1, if the executive team is committed to the “why” of an indirect sales channel, then they will prioritise and invest in that channel to ensure greater customer and market coverage and success.
While building and nurturing relationships is the job of every seller, managing channel partners and supporting others’ selling efforts requires a nuanced skillset.
The channel organisation looks and feels a lot like a direct selling organisation, but channel account managers or partner account managers are their company’s brand ambassadors responsible for galvanising, training, and supporting resources who work for another company.
Let’s go back to the toilet paper example. Your local retailer probably stocks several different toilet paper brands. Each one of those brands has a channel sales manager who is fighting for shelf space, funding marketing campaigns, training other companies’ employees, managing inventory, and the supply chain, all while navigating their own internal sales responsibilities.
Channel sales managers are responsible for getting partners to give their company more mindshare than its competitor. Understanding the interconnectedness of sales, marketing, and customer success is key.
When you have just a handful of partners, you have a lot more freedom in how to manage them. It could be something as simple as a spreadsheet, or even a very basic tool. However, if you hope to scale your indirect business, attract new partners into your ecosystem, and leverage the additional reach third parties can bring, then you will need a more sophisticated solution to help you manage the entire lifecycle of a partner relationship. (Hello, Sales Cloud Partner and Channel Management software.)
When companies use the same tools for partners as they do for direct selling, such as a CRM, it can lead to unintended consequences. Lead management is hugely important to partners, and the lead management system used in the direct business may not meet partners’ needs. Does it have a structured system for tracking leads all the way to closure in a two-tier or three-tier distribution channel? If not, the reputational and opportunity costs can be huge.
Technology that enables a better channel partner experience translates to a better customer experience. Click to Tweet
Technology that enables a better channel partner experience translates to a better customer experience, too. By replacing their legacy platform and its siloed systems with the more user-friendly and personalisable Sales Cloud partner management solution (PRM), Dropbox unlocked channel visibility, and partner productivity — resulting in a 310% increase in registered deals and a 68% increase in partner training completions.
Not all partners are created equal – not in their performance and not in their commitment and engagement with you. If you are able to determine which partners fit which category or at least have a good idea of how many fit into each category, then you can allocate the necessary resources, marketing dollars, and support efforts to each.
However, just like not all partner organisations are created equal, the resources supporting them should have different remits. Channel sales managers covering high performers should focus on maintaining current momentum and supporting the initiatives both companies are collaborating on. It is less about selling to your high-performing partners, but rather keeping them engaged. You are responsible for ensuring your joint customers are successful.
High-potential partners have a lot of upside with the right effort (people, process, and systems). Target them for business planning sessions to outline the best way to realise joint success. That type of planning can help define where you focus on providing leads, co-selling, using market development funds to stimulate new joint opportunities, and provide the training and enablement to point them in the right direction. The business planning session can very quickly validate how serious they are about the partnership. If they don’t engage or put forth any real effort during the planning process, that should be a clear indication they may not be worth the effort.
Partners who are not engaged with you in any meaningful way, yet still demand time and resources can be draining for channel sales managers. Those are the ones you want to consider eliminating from your ecosystem.
If you are a smaller organisation with limited resources, you must pay attention to the companies you recruit into your channel program from the start. This way you don’t waste time and energy on those who were never going to provide the returns you seek. The takeaway: choose wisely.
Unfortunately, even with the best intentions, when both companies are committed to the partnership, things may change, and you have to make hard choices and remove them from the program. The channel sales manager needs to evaluate partners based on engagement, opportunity, and fit on a regular basis. Then remove the ones that no longer make sense. This ensures your ecosystem is healthy, your customers are happy, and you have the right level of partner engagement.
Market development funds (MDF) — money companies give to partners so partners can market to their customers — have been a focus for many companies over the past decade. Some companies spend millions of dollars on MDF (annually or even quarterly). It is the engine that keeps the leads flowing, deals moving forward, and partners engaged. However, there is another side to the MDF story.
Sometimes partners don’t use their MDF, because they don’t have a marketing department to plan and execute a campaign. Sometimes it’s because the dollar amount is so small, they feel they can’t do much with it. Or sometimes the partner takes a short-term approach to marketing or isn’t focused on selling that vendor’s products during the specified time frame.
Since so many partners lack their own dedicated marketing departments or resources, an easy way to encourage engagement is to share pre-built campaigns, trade show in a box or brandable content with them. That way, you're knocking down barriers and making it easy for them to begin to market with less upfront investment. Plus, they'll have professional looking materials at their disposal that are still in line with your brand guidelines and standards.
Yes! You see companies that originated as a direct-to-consumer model, and now that they’ve built a radical fandom, they’re expanding their go-to-market strategies by including indirect selling partnerships with large big-box retailers. They’ve realised that if they really want to get scale, it’s hard to do and very expensive on a one-to-one basis.
One example is Mitsubishi Chemical Cleansui Haili. Haili is the sole distributor of Mitsubishi Chemical Cleansui, Japan’s number-one water purifier brand in Vietnam. It recently opened other distribution channels through a new business to business to consumer (B2B2C) model. These channels are managed through the Salesforce Partner Relationship Management (PRM) tool.
According to Trang Le, Business Marketing Manager at Haili, “The advantage of this model is that we do not need to recruit too many sales people and we are able to increase our speed to market as well as consumer coverage. Dealers are our extended sales army.”
The way a partner represents the brand is important. Companies won’t be able to reap the benefits of scale and reach if selling through channels damages their company’s reputation. Channel leaders should monitor the satisfaction of customers who purchase through partners so they can address any issues that might arise. One way to do that is to survey the partner's customer directly. Were they satisfied with their experience? What went well? What could be improved?
While a survey might sound easy enough, this is fairly difficult to execute, because you don’t always know who the end customers actually are. Some companies use product registration to create that direct customer connection, so they can survey and uncover unmet needs or service issues. Others might require partners to register customers, so that the company knows who ultimately bought the product. Others have no visibility into the end customers at all, and that closes the door on being able to survey at all.
If you are able to survey and get real time customer feedback, you can keep your partners accountable for the quality of service you expect. If they don’t live up to your standards, you can lower them in the program or maybe stop doing business with them altogether.
Selling through partners looks very different today than it did just even a decade ago, because of all the new selling platforms and online channels we have at our disposal. You can sell on social media, brick-and-mortar retail, online retailers, and more. The good news is the list is endless. The bad news is the list is endless.
However, just because there are more sales channels to leverage doesn’t mean that you should. Less is more. Unless you have a significant amount of resources, marketing budget, technical capability, and need, I would avoid adding new channels until you have achieved stability and proven success in another.
This goes back to: who’s the customer and how do they want to buy? If your customers are teenage girls, then they may be more inclined to buy makeup on Instagram rather than a department store. If your customers are men over the age of 50, then you might choose to partner with a sports podcast rather than TikTok. It’s easy to get caught in the comfortability of “we've always sold this way.” Use the current market context, what your prospective customers expect, and where your customers shop to help shape your future go-to-market plans.
For more tips and strategies on indirect selling, check out our free training on Trailhead.
Finally, learn more about how our Partner and Channel Management Software can help you build your partner ecosystem, here.
This post was originally published on the U.S.-version of the Salesforce blog.