Sales Channels
More often than not, most growing business typically use sales and marketing efforts to drive their revenues. Marketing basically uses advertising and other techniques to bring leads into the business. And your sales team either closes the leads handed to them by the marketing department (inbound sales), or they actively hunt new end-clients down with prospecting efforts (outbound sales). But there is another path that most companies don’t pursue, which could be the most effective for quickly scaling your revenues, and that is channel sales. This post will help you understand what channel sales is, and how best to set up your channel sales efforts for maximum success.
What is Channel Sales?
Channel sales is identifying third party companies that have large quantities of your target customers to become a reseller of your product or service, typically in exchange for some revenue share. For example, let’s say you are a software business that helps manage a company’s financials. Instead of calling into target companies one-at-a-time with your outbound sales team, let’s stay you reach out to a consulting firm that has hundreds of CFO relationships. You convince them on the value of your software and how it will help their clients’ businesses and drive incremental revenues for the partner, and their sales team takes your software to market for you. So, think of it is one-to-many selling, as opposed to one-to-one selling, which should result in a much faster go-to-market strategy and scaling revenues more quickly than you typically could on your own.
Best Products for Channel Sales
Honestly, most any product or service could be set up for channel sales success. In the B2C world, let’s say you are a consumer product. Instead of calling into the end retailers directly, build a channel sales effort around selling into key distributors nationwide that already have solid relationships with the end retailers you want to be distributed through. Or, in the B2B world, you just need to find potential partners that have large target audiences that match your product or service. That could be selling through trade associations, consulting firms, value added resellers, or whoever else would make sense.
Are you intrigued at this point? Good, you should be, as channel sales is like giving your revenue growth a steroid injection. If you are now interested in learning how best to set up your own channel sales program, follow these lucky 7 steps to success:
1. Set Desired Partner Criteria
The first thing you need to do is define what a good partner looks like to you, as trust me, not all partners are created equal. Setting some high level categories of potential partners and a questionnaire of key questions you want them to answer to “qualify” as being a good partner for you. Maybe they need to be of a certain revenue or customer size? Or focused on a potential industry? Or have happy client references? Or have known demand for your product or service? Or a desire to create a new revenue stream for themselves using your product or service? And are willing to put some sales and marketing muscle behind the launch of the efforts together? Or, all of the above! A good channel partner program must be structured in a win-win way, so both sides are invested in its success and are economically incentivized to see it succeed.
As part of this, you will need to figure out how to structure the program in a way that the channel partners are not duplicating efforts, calling into the same companies or regions. This is often done by giving the channel partner a particular region of focus (e.g., 50 different partners selling into 50 different U.S. states). But before giving anyone exclusivity, make them earn it in their first year. Give them a sales target to shoot for to earn exclusivity in their region, as you won’t know if they are a good channel partner driving new clients for you, until months after the relationship kicks off. So, don’t get blinded during their sales pitch to you as a good partner, unless you are 100% confident they are a trusted business in their space.
2. Partner Prospecting List Creation
Now that you have set the criteria, you need to build a target list of companies to reach out to that you feel meet that criteria. Let’s say you want to reach out to big consulting firms as channel partners, you can find lists of the largest consulting firms online. That will give you the company name, but you need to find the right person to sell this idea to. The bigger the idea, the higher up in the company you pitch it. If your product or service can become a billion-dollar seller for their organization, it might be time to pitch the CEO or CFO on that idea. Or, if it is more tactical, find an internal champion at that firm to help you sell it into their organization. Maybe you want their head of a particular industry group that would most understand your solution. Or, maybe they have a head of business development that you can pitch, and they will tell you the most logical person at their company most likely to be your primary relationship person. Anyway, this phase is all about buildings lists of companies, individuals and their contact information.
3. Selling & Acquiring Partners
Just as you would sell an end-customer, you will need to sell the channel partner. Accept this time, in addition to pitching your product or service, it is more important you pitch the benefits of the channel partnership to the partner. You will need to emphasize how much money they will make from the relationship (e.g., from a 20% revenue share), and what your plan is to support them and their customers going forward. So, make sure you have a good pitch deck for this purpose, a good calling and follow up strategy, and a draft of the partner agreement detailing everyone’s roles and responsibilities here. It is particularly important to detail how they plan to bring sales and marketing support, as your product or service won’t sell itself.
4. Onboarding Partners
Getting a contract to close is only half the battle; now comes the hard part. The partner is going to need to be onboarded to help make them successful. This includes having training materials and setting up a training program on your products and desired process. The point here, like in anything, you will need to invest in the partner in order to achieve the desired outcome of success. It’s much more than simply signing the contract.
5. Partner Marketing & Support
Now comes their hard part, they are going to have to put effort into sales and marketing, making their customers aware of your new product or service. The promotional plan will have been detailed in the agreement, and now is the time to execute that plan. But you will need to assist your channel partners. They will need example product pitch decks, email/phone scripts, etc. Anything you would give your inside sales team, you will need to give your outside channel partners, for them to be successful. And you will need to provide them a “hot desk” contact number, in case any of their clients or salespeople have any questions best answered by you. So, support your channel partners, no different than you would support your in-house sales team.
6. Revenue Sharing & Reporting
Assuming the channel partners are successful in finding you customers, now we need to pay them their agreed upon revenue share. So, you will need a clear process to attribute sales from a particular partner. If you are an online business, oftentimes, that can be done with affiliate tracking software; you give each partner a unique URL to promote, and then if anything closes, they get credit for the sale. If you are an offline business, it is a more manual process. That could be the partner gets credit for each lead they send you in your CRM. Or if they are promoting your product to their customers, they give their customer a unique coupon code or reference ID number they give you at the time of the sale. But these revenue share calculations should be done monthly, and reported and paid to the partner at such time. The sooner they see money flowing their way, the more they will want to promote your products or service. So, make sure there is a clear process for tracking, reporting and paying partner revenues.
7. Partner Nurturing & Upselling
You can’t think of this process as “one time and done”. It is perpetual and recurring, quarter after quarter. You should set up quarterly business reviews with your partners to make sure everyone has clear goals to shoot for and can report progress thereto. And your channel sales manager needs to reach out to partners to stay fresh in their minds and keep them abreast of new products or services that you may have added since the partnership started, so the partner can upsell those products to their clients, as well. Your channel sales manager needs to manage these partner relationships, no different than your sales executives manage your direct customer relationships.
Channel Sales Pitfalls
The one downside of channel partners—they will never love your business as well as you love your own business. You will never be their sole and #1 priority. They will obviously bias their own sales efforts over selling your products, and you may be one of many products or services that they are reselling. That is why it is so important you do your homework upfront, to make sure this is going to be a clear win-win for both parties, so that each party are willing to invest in its success.
Closing Thoughts
Hopefully, you now have a new idea on how best to take your product to market, and channel sales may be that winning formula for your business. Channel sales won’t replace your internal efforts, but a well-designed channel sales program will certainly augment and accelerate your stand-alone efforts. If you have any questions, don’t hesitate to reach out. Good luck!
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George Deeb is a Partner at Red Rocket Ventures and author of 101 Startup Lessons-An Entrepreneur’s Handbook.