Using the channel model as part of an overall sales and growth strategy is a hot topic—unfortunately in a lot of cases for the wrong reasons. I’d like to clear up a few misconceptions:
It’s Not a Field of Dreams
In case you don’t remember the Kevin Costner movie, my point is that if you build the channel, they won’t necessarily come. Establishing the channel without carefully considering everything it means for your company will lead to a lot of wasted time and resources, not more sales. You have to go into the channel because it’s the right move at the right time for your business and product.
Companies should look at how their company is structured and what internal resources can be brought to bear in support of the channel. That’s because the channel needs a lot of support—training, marketing, sales management partnership management, analytics and performance reporting. Also, look at the ease-of-use of your product. How much instruction is required for a sales person or prospect to understand what it does? And think about what value the channel could bring to your product—and what value does your product bring to the channel?
If you don’t have a clear understanding of and answers to all of those questions, you’re not quite ready to dive into the channel.
It’s Not a Cost-Savings Move
A lot of people want to move to the channel right now because they think, “We can just get rid of a lot of our internal salespeople. We can just get into the channel and sell that way.” They think it’s a way to reduce their internal head count and thereby cut expenses.
In fact, companies that are most successful working with the channel are those that have a sales force to sell with and enable the channel. Companies that have a skeleton sales force, or a direct salesforce that’s not engaged with and supporting the channel efforts, are not going to succeed.
It’s Not Going to Make Any Money in Year one
You’re going to be investing a lot before you show any return from the channel. For starters, you need the infrastructure that’s going to enable your partners to learn how to sell it: things like your portal, training options, internal resources who will work with and support the channel. Channel marketing managers, for example, play a big role in the success of the channel. (Look for our post next week on how to hire the right channel manager for your organization.)
Margin is another area where you’ll need to be ready to invest. If your current price point is, let’s say, $1,000, selling in the channel means your price to your partners is now $600. That invites another question: can you sell enough through the channel to make that profitable?
And you also now have a sales force whose job is no longer to go out and sell directly to end users, but rather to secure, close, and nurture the channel partners – all while you are still paying them commission.
So launching a channel strategy means a lot of different investments. Like most investments, if they’re made wisely and with informed consideration and careful planning, they can pay off handsomely.
It’s Not a Set-It-and-Forget-It Kind of Thing
Implementing a fruitful channel is like caring for a small child. They require tender loving care, attention, reassurance, guidance, direction, toys (aka marketing and sales collateral) and constant support. If the relationships of each partner within the channel are not fostered, they are likely to wither on the vine. Once prodigious partners may wane in their production or be wooed by competitors who are willing to “wine and dine” them. Or at least call them frequently and make sure they have the support they need. This again reinforces the need for a strong channel manager as well as partner relationship management software that can provide insight into each partner’s performance.