A question that often comes up in the early stages of a software and hardware companies is “how should we sell our product?” Very few producers actually sell the goods they produce themselves, which are instead, sold through channel marketing partners and distributors.
To put simply, when a company decides to replace its direct sales force (the salespeople who sell directly to the customer) with indirect organisations (partners/distributors), this creates the company’s ‘channel’. Resulting in the people who sell the product and interact with the customer are not direct employees.
Channel partners are companies that work with a vendor (manufacturer) to help promote their products or services.
Channel marketing is very popular with technology-based businesses, including the biggest players in the industry. It allows them to focus their time on improving their products and responding to constant change in the industry, whilst still selling. Channel marketing can create new business opportunities faster, at a lower cost and with lower risk which is why many high-tech companies have found that channel marketing is the fastest way to scale a new product launch.
When deciding if channel marketing is right for your tech business there are some advantages and disadvantages to consider:
Advantages to Channel Marketing:
- Reduced sales, marketing and distribution costs and efforts – Many vendors don’t want to deal with the implementing of their technologies to the end users and would rather spend their time focusing on improving their products and keeping up to date with new technology. Along with having more time, vendors will also be cutting down on costs by using channel marketing; from not having to hire and train a sales team, distribution costs etc.
- Can scale very effectively – Once a channel marketing partnership has been established it’s easy to scale up your model effectively or penetrate new markets, simply by bringing more channel partners into the programme. As long as your model is set up correctly and easy to apply to other partners, this won’t require major expansion for your internal resources.
- Established Partners – Your channel partners will already be established which gives your product instant credibility in their market. They also already understand your target audience and have relationships with existing customers.
Disadvantages to Channel Marketing:
- Splitting the profit – As a vendor, you’ll have to give a cut to all partners in the channel in order to give them an incentive of selling your product over others.
- Partners will still be selling other vendors’ products – A channel partner isn’t obliged to sell your product over other vendors’ products. They’ll often have more vendor partners than just you, meaning there isn’t any requirement to give equal sales and marketing efforts, often focusing more on the ‘hot product’ of the moment.
- Being your own competitor – Vendors can sell their product directly to customers as well as through channel partners, resulting in them being a competitor to their own sales channel. An example of this is Apple; Apple have Apple stores selling directly to the customer, as well as Apple Certified Re-sellers.
Once you’ve decided if channel marketing is right for your company, you’ll need to consider how to ensure you build the best partnership with your channel partners:
- Creating clear visibility into your channel strategy will help to build belongingness into the corporate vision. Having a clear plan of responsibilities and expectations from both sides of the partnership will help everyone understand what part they are playing in the sales process.
- By being completely transparent with your channel partners and building a strong relationship helps to build commitment to your marketing plan, as well as making sure all expectations are clear and align with both yours and your partners business model.
- Constant collaboration with all partners is crucial for success. Communicate often to make sure your channel partners have all the tools and information they need to be successful. Regular communication will help to make everyone feel valued and working towards the same goal.
- Understanding your partners will help you to offer the right incentive at the right time. The most successful incentives are the ones that are easy to explain and easy to implement. One of the most popular incentives in channel partnership programs is offering a percentage of the total sale as a commission. If you’re a SaaS company, recurring commissions from monthly payments are a popular way to push for larger contracts
- Many vendors distribute a handbook with basic brand guidelines. In order to build the best partnership, consider going beyond providing just brand guidelines. Give them ideas and tactics for using your brand guidelines effectively, as well as showing them previous examples of successful campaigns.
Channel marketing isn’t right for every company but when executed correctly it can be a huge driver for your business to grow and still allow you to have time to keep up to date with ever changing technology and responding faster than competitors. Remember, you and your partners are a team who need to work together in order to make a successful business.
To find out more about channel marketing for your company, come and listen to our talk “How to Successfully Build and Run Channel Marketing Campaigns” at the B2B Marketing Expo, ExCel London 25th March Theatre 5 at 11:40am.
Get your FREE tickets to the B2B Marketing Expo 2020 here.