Before the inception of the e-commerce industry, manufacturing businesses had two options for selling their products.
- Through direct sales or
- Through an indirect sales channel i.e. through channel partners.
Some of the organizations have tried both strategies while there are others who have to choose to concentrate only on one strategy. Today most of the organizations work on channel sales and marketing. Instead of hiring employees for this job the companies offer certain profit margins to their distributors and retailers who in turn sell their products, services or goods. In return, the retailers and distributors get some margin on the sold products.
Unlike corporate sales channel sales to has its own challenges. The main challenge experienced in channel sales is that one has to deal with the same partners/dealers every day. Direct sales and channel partners sales have their own pros and cons. Companies who decide to go with the direct sales strategy need considerable investment in time to search and acquire the right talent as well as to train them. An added advantage here remains that such team would stay focused on the brand that they work for. While channel partners work independently and provide more effective results in keeping your investments relatively low.
So What Is A Channel Partner?
A Channel partner is a firm that collaborates with a manufacturer or a producer with an idea to market and sells their products, goods, services or technologies. Channel partners could be vendors, retailers, distributors, consultants, technology deployment consultancies, value-added resellers etc.
Cisco is a good example who follows the channel partner strategy. Cisco does direct sales with only 30 enterprises worldwide while the major share is sold by its 60,000 partners across the globe that create more than 85% of Cisco’s profit.
Understanding of Business Dynamics of Channel Relationships:
One of the toughest parts in B2B selling is budging manufactured goods through an indirect sales channel. The thumb rule of channel partner collaboration is that both you and your channel partner want profitability through the sale of your products. However, the ways you choose to achieve your goal are in direct conflict. You must be wondering how?
Well, you as a supplier look forward to cutting down your cost of sales by leveraging the resources of the channel partner like the floor space. While the channel partner looks forward to reducing their expenses and their cost of sales. In such circumstances, you must opt for a joint venture association meaning you must invest in marketing, training resources and provide sales support. On the other side, your channel partner must offer resources to get trained.
Channel relationship is a strategic investment. Hence make sure that you recruit the right resource for the job. Over-recruitment could lead to failure of indirect sales as an involvement of too many partners, may exceed your budget line and let you miss out on the opportunity of collaborating with partners who might actually be able to generate good sales for you.
You need to stay focused and invest in training a smaller number of channel partners. In order to craft a productive channel, you need to invest your time, efforts and money in offering them quality channel training.
Types of Channel Partners:
- Independent distributors:
Independent distributors could be wholesalers or retailers who sell your products.
Few things to keep in mind while collaborating with them:
- You need to understand their business and their underlying values.
- You need to identify what would motivate them
- To sell more of your products.
- To recommend it when customers visit their store.
- To stock more of your products and feature your brand in their marketing strategies.
- Referral Partners:
Networking has become an essential part of the present and future business tactics. In channel partnership world, referral programs let you construct relationships that help you
- Build your client’s base.
- Enhances your brand awareness.
- Builds an affluent network for your sales team.
- Outside Representatives:
Get your products sold through wholesaler, retailer or brokers. Outside representatives assist you by
- Bringing your brand to new customers and markets. They are able to do this because of their vendor relationship.
Now that we know who channel partners are and the types of channel partners lets now explore
What Is Channel Partner Management?
Channel partner management is a methodology that is crafted to assist channel partner managers to construct and manage a portfolio of partners to trigger higher sales outcomes.
Channel partner management is all about influencing channel partners on how they breed, manage and improve sales prospects. Organizations need to be eligible enough to spot and predict opportunities for sales that are in pipeline from their channel partners.
The contribution of Channel partner management to your organization:
Gives quick results:
Channel partner management lets you instantly know if there is a decrease in your sales cycle or increase in the profit margin.
Draws a Roadmap:
With the help of channel partner management, you can draw a roadmap that gives you an idea to prepare and execute plans towards the growth of your business.
Why Channel Partner Management?
Channel partner management is essential as it
- It enhances the effectiveness of your channel relationships.
- It executes method to maximize the return on investment from your channel relationships
- It increases loyalty among your partners
- It lets your organization stand apart from your competitors in the market.
Benefits of Channel Partner Management:
- Channel partner management lets you achieve long-term as well as win-win channel relationships.
- Channel partner management cuts down the cost on your sales
- It generates a significant return on your investment.
Here are ways how to effectively manage a channel partner that will let you stand apart from your competitors and make selling your products or services more efficiently with your channel partners:
- Set Criteria: Are you a channel partner selling a vendor’s products or services? Are you a vendor eyeing for good channel partners to sell your products? Either way, you have to recognize and evaluate what is most imperative for your organization.
In order to determine criteria you need to do a little bit of a study on your organization to find out precisely your position in the market and amongst your competitors in the market, the strength and weaknesses, the current and future collection of your products or services. The fissures you detect through this valuation serve as the criteria for recognizing probable channel partners.
- Establish An Evaluation Process: The criteria you select are essential for the success of a channel sales program. Make sure they are applied from the inception stage of any evaluation.
This means you need to
- Craft a procedure that not only organizes but also manages the interests expressed by potential channel partners.
- Assign individual responsibilities and resources that are needed to effectively manage potential channel partners.
- Develop a cross-functional team that assesses potential channel partners against the selected criteria.
- Test the Channel Partner: An ideal channel sales program cannot be created overnight. Success requires time no matter however strictly you follow the procedures that you have crafted. Channel sales partners should begin with a well-defined project. Being low-risk sales focused program it allows each participant to learn the advantages and disadvantages of working together with a shared objective.
Few signs you need to watch for your channel partner’s commitment.
- Check their willingness to participate in your organization’s sales events
- How quickly they respond to your requests such as re-configuring products so that the deal can be closed.
- Is their transparency level as an individual company or an as a vendor on the same page especially if when they sell their products directly to their customers along with channel partners.
- Appoint A Manager With Assigned Responsibilities: In order to manage your company’s channel sales program, you need to recruit a manager who will take charge of the channel sales program of your company.
A channel sales manager functions as the key interface between vendor and channel partners.
Assign him with duties like:
- Preserving, observing, and reporting the status of sales that are about to take place as well as report those probable sales that can be converted into prospective leads.
- Dealing with the clashes between channel partners.
- Strong Onboarding For Early Engagement: A strong onboarding effort lets partners craft unique valuable schemes for their customers which will generate substantial return on investment.
- Let the Experts Help: The internal experts of the company have better knowledge as they are the ones who have worked from start to the end and have learnt every detail of the products they are selling. Letting partner channels to use this knowledge can pep up the engagement and bring about brand awareness to larger audiences.
- Provide Customized Training: You need to make sure that you have customized training material that is crafted according to the, language your channel partners follow. Also, you need to take into consideration the infrastructure where your channel partners are located. This is because access to training may be limited due to limited internet bandwidth and computer access.
- Maintain Cordial Relations: It’s important that the channel sales manager you appoint should be able to maintain cordial relations with your channel partners. You need to keep in mind that your distributors/retailers are proprietors and entrepreneurs themselves so they deserve your respect always. You need to recruit someone from your organization who is good at maintaining the relationship. Choose someone who can maintain relations with different types of distributors/retailers.
For instance: Titan uses distributors and retailers to carry out the sales of its watches. The company has appointed a channel sales executive who is responsible for tallying the stock and makes sure that finest sales come from the distributors and retailers.
- Network: Channel sales materialize on the bases of geographical territory. Within a specific geographical territory, you will find various channel dealers of different or same brands. It is important for your channel manager to establish a network of channel partners that can be useful at any point in time.
It might happen so that a competitor might turn over to the distribution of your brand or your distributor might require a long list of retailers to distribute his products. In such case, your networking plays a vital role. The more new channel partners you add into your network the more opportunities of success you have at channel sales.
- Motivation: In order to have your channel partners do business with you, you need to keep them motivated. You could follow the 3R’s strategy to keep your channel partners motivated. The three Rs include Respect, Recognition and Reward.
Respect can come from your channel sales executive while recognition could come from managers and senior grade people in your firm who show recognition to the dealer and his importance in your firm. You could use certificates or awards for the recognition process.
Rewards come in a monetary form where dealers are given certain percentage reward for the products sold to keep them motivated. To help you keep your channel partners motivated we at Xoxoday provide channel performance rewards to top channel performers.
Key highlights of our reward program:
- Our channel performance reward program provides high perceived value experiences and products to channel partners on target achievements.
- It is a point based engagement and loyalty program which has features like announcements, surveys, referrals, special perks, experience and gift voucher redemption.
- The LSA box will contain redemption card, certificate, experience booklet as per client’s requirements
- Our reward program has the wide variety of reward options to choose from: experience box, customized Xoxoday voucher, enterprise portal, and whitelisted page
- Automatic delivery of experiences and gift vouchers on partner’s email, SMS or through IVR
- The Marketing Mix: The marketing mix of your firm plays an imperative role in channel sales. The right marketing mix will keep your channel partners motivated and under your control. A poor marketing mix can lead to losing customers to competition which will demotivate your channel partners.
For instance: If you do not promote your product properly or sell your products at high prices or if your products have too many technical issues then all these reasons of marketing mix will lead your channel partners to lose out on orders. Thus your company should prepare a marketing mix in such a manner that keeps your channels motivated to sell your products.
- Conflict Resolution: Conflicts are bound to emerge when there are too many people involved in a business. Territory demarcation and prices combat are the common reason for conflicts to emerge. In both the cases, there are some rotten apples in the basket who are the cause of the problem. These rotten apples need to be taken out so that they don’t hamper the functioning of your channel. Sometimes conflicts are essential as they show you whether your channel is functioning in the right manner or not. Some conflict within the channel is good for your business but however, we need to make sure that the conflict should be a healthy one.
- Payments: Sales is one feature of channel sales while the other feature is collecting payment on time. Manufacturing companies operate on the profit-centred module. In the profit centre, if you fail to collect the payment on time, interest is applied to your profit centre which brings down the margin of your business.
Several companies give their managers a margin based target that needs to be achieved. These targets are from companies point of view while from a dealers point of view they might have loan accounts with their banks. If the dealer takes a loan from the bank he would have to pay heavy interest to the bank. Thus you need to ensure that your dealer to is financially sound so that he can collect the payments on time else he can become a victim of the liquidity crunch.
- Commitments: Your channel partners are made up of businessmen who are there in the market to do business. Hence whatever support your promise to your channel partners the commitment needs to be adhered to. Any false commitment from your end could destroy the brand image of your firm. On the other hand, if you stand by your word you build a positive image and your dealers will support you whenever your sale is down.
Thus your relationship, your network your commitment all counts towards making you the best channel sales manager.
- Monitor Sales And Training Results Together: Unlike other aspects of business, channel partners to need to be analyzed. Use of right tools can let you monitor your partner channels. If you encounter a case where a partner channel is underselling, then you can check the sales data and compare it to the training data to get an idea about where things are going wrong and get it rectified.
Conclusion: Managing your partners effectively can let you have the opportunity to grow revenues and reach your goals. Providing your channel partners with help in both sales and marketing will let them quickly generate revenues by selling your products. The more effectively you manage your channel partners the more they will embrace your offer to help and the more they will enhance the sales performance and develop great client relationships.