What is Channel Sales? An Ultimate Guide

Every business, no matter its size, wants to scale and increase its income. After all, that is why you are in business - to make money. One major way B2B businesses do this is to hire a sales force. However, the objective truth is that time will inevitably slow down any kind of income increase. Even if your salespeople sold a product every second, all day, there would be a ceiling on the results you get. You then have two choices: increase the size of your sales force or enter a channel sales relationship.

While the first option may be a viable one, it has its drawbacks. Hiring and training a new crop of salespeople would take time and eat into your profit margins. With channel sales, you can avoid the blow to your profit margins and still get the results you seek. Rather than adding additional salespeople to your team, you may outsource marketing and sales to a channel partner, who will then distribute your items to customers.

In this article, we will examine what channel sales are, why they are necessary, how to begin, and how to sustain partnerships once they’re in place.

What is channel sales?

Under a channel sales model, a business sells through partners and third-party vendors such as referral partners, affiliate partners, wholesalers, distributors, managed service providers, marketplaces, or value-added resellers. Channel sales is quite different from the traditional direct sales strategy, which is what a company’s salesforce does.

While direct sales rely on your sales force to increase your company’s income, a channel sales strategy will provide more revenue streams for you, making it possible for you to reach customers who typically would not or could not buy directly from you. According to CSO Insights, 63.5% of companies say channel sales contributed significantly to their annual revenue¹.

A note of caution, though: while a successful channel sales program can dramatically improve your revenue, know that this does not happen on autopilot. You have to work closely with your partners and vendors to make sure they are using result-oriented plans and strategies.

This is a very vital point to note, as partners and salespeople have different selling strategies that require specialized messaging, marketing assets, and more. Therefore, it is critical to empower your partners to sell your products by providing training, tools, and assets for them to use. Most times, this provision will vary distinctly from what your direct sales team is using. To get the best results in your income generation strategy, it is best to employ both direct sales and indirect sales.

What are channel partners?

When we talk about "channel partners," we're referring to those awesome companies that help sell and distribute products on behalf of a manufacturer. This can include resellers, affiliate partners, distributors, value-added resellers, and independent retailers. They're like the manufacturer's right-hand people, but they do their own thing too!

Working with channel partners is fantastic because it helps your product reach a wider audience. Plus, you can target a similar group of buyers and make use of existing materials that really resonate with that audience.

Now, here's a handy tip: instead of partnering with a gazillion channel partners, it's actually better to be strategic and carefully choose just a few. Selling to everyone might dilute your focus, and partnering with everyone can be a bit overwhelming too. So, it's all about being selective when choosing your partners. That way, you can increase your revenue potential and build longer, more profitable partnerships.

What actually makes a good channel partner?

Think of it as finding a potential friend. The first step is defining what you'd consider an "ideal partner." Pay attention to the following aspects:

Complementary Product

Find a partner whose product or service complements what you offer. It should fill gaps or make your customers' experience even better when they use your product.

Market Alignment

Think about whether the partner's customers would genuinely benefit from your product. Consider things like additional support, features, or solutions that the partner may not have. Also, look at whether your products would suit their geography, use cases, and size.

Technical Expertise

It's important to know how much technical knowledge and training a partner needs to effectively sell and support your products. Give them the tools and training they need to succeed, and they'll be even more committed to working with you.

Sales Process Compatibility

Make sure your partner's sales process matches up with yours. It's ideal if there's a natural point in their process where they can introduce or upsell your product. Teamwork makes the sales dream work!

Manageable Commitment Level

Take a good look at the level of commitment it takes for both parties to succeed. Think about things like training time and product understanding. Find a balance that works for everyone, whether it's a day of training every few months or a quick video tutorial.

Once you've figured out what your ideal partner looks like, rank these characteristics by importance. This way, you can easily evaluate potential partners and find the best fit for your business.

4 advantages of channel sales

Channel sales can bring some great benefits to the table, such as:

Built-in Trust: Picture this – if you team up with a channel partner who's already well-known and respected in a certain market or industry, you get to ride on their coattails. That means your product automatically gains some extra credibility because of their endorsement.

Increased Efficiency: With just one channel manager and a bunch of channel partners, you can pull in the same amount of revenue as a bigger sales team. That’s more bang for your buck! Plus, it's usually easier to bring on new partners than hire new salespeople. No fuss, no muss!

Rapid Testing and Experimentation: With channel partners, you can shake things up. Test new customer bases and play around with different products, packages, promotions, and marketing campaigns. It's like a playground for your creative ideas!

Customer Success: We all want happy customers, right? By joining forces with vendors who offer training, onboarding support, implementation assistance, and top-notch service, you can give your customers the royal treatment. You get to focus on attracting new business while still taking care of your existing users. It's a win-win!

6 challenges of channel sales

Channel sales can be pretty great, but hey, it's not all rainbows and sunshine. Let's dive into some limitations that might make it less ideal for certain companies.

• Less Control Over Sales: In channel sales, you don't have direct control over the sales process. So, if a partner messes up a deal, your own salespeople can't just swoop in and save the day. Plus, you have no say over how long a deal takes, which can be quite frustrating and sometimes leads to unexpected delays in getting the expected income.
• Brand Risk: If you partner up with someone who has a bad reputation or treats customers poorly, their bad vibes can rub off on you. That's why it's crucial to choose channel partners who are known for their stellar reputation and top-notch customer service. You don't want their negatives to overshadow your positives.
• Reduced Profits: Now here's the trade-off. When you work with channel partners, they get a slice of the sales pie in exchange for their efforts. That means you'll earn less from each sale. But keep in mind that it's often cheaper to acquire each sale through partners, so there's that silver lining.
• Harder to Manage: Making changes to your sales approach, messaging, introducing new products, or going through major transitions can be quite challenging in channel sales. Why, you ask? Because you're not just rolling out changes to one group. You have to coordinate and adapt across multiple external groups, which can be a bit of a juggling act.
• Slower Feedback Cycle: When you rely on channel partners to connect with your customers, feedback tends to take a bit longer to reach you. And here's the kicker – sometimes the feedback might not be 100% accurate. Even if your partners are trustworthy, they might ask the wrong questions, use flawed techniques to gather or interpret feedback, or accidentally give you a skewed view. Yikes!
• Potential for Competition: Sometimes your own direct sales team might end up competing with your channel partners for the same customers. It can get messy if a sales rep decides to cut their partner out of the deal to keep the full commission. That kind of tension and competition can strain the relationship and lead to some serious partner disputes. Not a pretty sight.

Now that you know the benefits and challenges found in channel sales, it is crucial to weigh these pros and cons and make sure they align with your business goals and overall strategy.

Types of channel sales models

Direct sales channel model

This one's pretty straightforward. In this model, companies cut out the middleman and sell directly to customers. So, everything from marketing to closing the deal is done in-house. It's like having a direct line to your customers, which allows for better control over the brand and a deeper understanding of what customers want.

Indirect sales channel model

In the indirect sales channel model, companies work with intermediaries or channel partners to sell their products or services. These partners could be resellers, distributors, agents, or affiliates who have established networks and relationships in specific markets. By teaming up with them, companies can tap into their knowledge and customer base to reach new markets and target different customer segments. It's like having a bunch of well-connected friends helping you sell your stuff!

Hybrid sales channel model

Last but not least, we have the hybrid sales channel model. It's a blend of both the direct and indirect approaches. In this model, companies sell directly to customers using their own sales team, but they also team up with channel partners to expand their reach or provide localized support. This way, companies can enjoy the best of both worlds: the control and direct relationship with customers, along with the resources and market expertise of their channel partners.

Channel sales strategy

Deciding whether to embrace a channel sales strategy can be a tough call for any organization. It works like magic for some companies, but it's not the right fit for everyone. Before you jump into creating a channel sales program, it's essential to take a step back and evaluate if it suits your needs. So, how do you decide if a channel sales strategy is right for you?

First off, you've got to assess if your company has what it takes to handle the potential growth that comes with a channel sales strategy. Expanding your sales channels means reaching a wider audience and potentially dealing with a surge in demand. Can you handle all that? If you don't have the resources or manufacturing capacity to meet the rising demand, it might be wise to hold off on embracing a channel sales strategy for now.

Another crucial factor is your sales process. It has to be rock-solid, repeatable, and accessible to suit channel partners. Your strategy won't work if you're still figuring out how to sell your product or service or struggling to define your target market. Your channel partners need something solid to work with, you know? So, if you're still "getting there" with your sales process, it's probably not the right time to dive into a channel sales strategy.

Lastly, let's talk about trust. A channel sales strategy is all about trusting external partners to market your products or services on your behalf. You're essentially giving them the reins to your brand. If the thought of potentially damaging your brand reputation due to a partner's mistake keeps you up at night, it might be best to reconsider using a channel sales strategy.

So, take the time to carefully evaluate your unique circumstances and answer these essential questions. Trust your instincts and weigh the pros and cons. It'll help you make the best decision for your sales efforts.

How to create a sales channel program?

You can create an effective sales channel program using the following steps:

• Tailor your approach to attract partners by crafting compelling and relevant materials that address their needs. Put yourself in their shoes and think about how you can assist them in offering extra services, finding new clients, or enhancing the value of their own products or services.
• Choose a collaboration structure for your channel sales. There are three main approaches you can take: selling together with your partners, having them sell your products or services on your behalf, or empowering them to sell for themselves under your brand.
• Motivate your channel sales partners by investing in resources for them that are twice as much as what you provide to your direct sales agents. Give them access to clear and comprehensive product specifications, testimonials, customer examples, side-by-side comparisons, email templates, call scripts, meeting agendas, and cheat sheets for handling objections.
• Maintain regular communication with your partners to keep them engaged in the program and updated on the latest news, product upgrades, and strategic announcements. Use various communication channels like email, Slack rooms, Facebook groups, webinars, and even in-person meetings at your office.
• Go the extra mile and offer additional incentives to your partners. Consider implementing tiered systems that reward partners who exceed a specified sales target each month or year. Provide advanced marketing assistance, tickets to exclusive events, strategic consulting, meetings with executives, beta feature access, premium listings in your directory, direct communication channels with your audience, and features in your email newsletter.
• Utilize a sales channel partnership platform like TUNE Partner Marketing Platform to keep your channel data organized and efficiently expand your channel sales program.

Remember, creating a successful channel sales program takes time and effort, but with these steps, you'll be well on your way to building strong partnerships and maximizing your sales potential.

9 sales channels examples

There are different types of sales channels, and we list a few below:

1. Resellers

They buy products from the manufacturers and sell them to the end-user for a profit.

2. Affiliate partners

In an affiliate partnership, the retailer pays website owners, businesses, and individuals who promote their products a commission for every sale they make. The commission is typically a percentage of the sale price, but some brands pay flat rates.

3. Distributors

They serve as intermediaries between manufacturers and final consumers and provide products directly to the consumer. They can be agents, websites, or businesses.

4. Wholesalers

Wholesalers typically get physical products on store shelves for consumers to buy. They also usually have sales reps to help create awareness about the products.

5. Value Added Reseller (VAR)

These are companies that specialize in buying and reselling technology products and adding additional software or features to the products.

6. Independent retailers

An independent retailer refers to a business owner who operates a retail company that isn't associated with any prominent brand or franchise.

7. Dealers

A dealer also sells directly to end users, but operates differently from retailers. Unlike retailers who may sell a wide variety of products, dealers will specialize in specific products or brands.

8. Agents

Agents do not have any ownership over the products or services they are marketing. They are solely intermediaries who facilitate deals between buyers and sellers.

9. Consultants

They support the creation and efficiency of sales channels. Though they do not sell directly, they play a vital role in ensuring the sales channels run smoothly.

Conclusion

Key takeaways

• Channel sales is a model where a company works with third parties to facilitate greater sales.
• Channel partners are companies that work with businesses to facilitate sales.
• Channel sales has lots of benefits, but it is best for a company to weigh the pros and cons of channel sales before adopting the business model.

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