Channel Partnerships: What Are Reseller Channels?
As companies work to increase their sales volume, building out an in-house sales team is only one way to create a high-impact sales strategy. Implementing the channel sales model can drive additional revenue through reseller channels. With channel sales, a company works with third-party channel partners, including affiliate partners, value-added partners, and, yes, resellers. The goal? To have other entities sell your company’s products to end customers.
For example, imagine a company is supplementing traditional in-house sales with channel partnerships. To do this, it implements a channel sales strategy that includes high-level management roles to oversee a team of dedicated sales reps for each type of channel partnership targeted. But before we get ahead of ourselves, let’s start with the basics.
What are Channel Partnerships?
A channel partner is a company that sells products, services, and technologies on behalf of a manufacturer or vendor. They function as the go-between connecting you and the end customer. It’s a mutually beneficial relationship that works as a vehicle for growing market share and increasing revenue. Channel strategy can be a fantastic way to introduce your product to new customers or new markets, and to build your customer base.
Being a channel partner means the independent company is an indirect extension of your sales team. They generate revenue by distributing your product/service/technology, collecting referral fees, and selling ancillary items. Some companies may use the terms channel partners and resellers interchangeably.
Sometimes channel partners emerge as part of the natural business development ecosystem, sometimes it’s a strategic business decision to take sales to a new level, and sometimes it’s been part of the business model plan since start-up. Regardless of what prompts the action, when the company decides to embrace channel strategy and take partner relationship management (PRM) to the next level, a channel partner program is born.
As you can imagine, launching a channel partner program is not something that can be done well overnight. A good channel partnership involves planning technical support, developing a partner portal, creating service level standards for partners, and an inclusive planning process. We’ll cover more of that in other articles.
What are Reseller Channels?
Reseller channels are a collection of different models a company uses to expand its sales through a win-win agreement with a third-party partner that purchases a product for resale. These differ from inbound channel partnerships because the partner actively promotes and sells your product, not referring or connecting the end user to you directly to make the purchase.
Among the different reseller channels, the specifics of who the channel’s target customer vary, but they all share the common trait of having a problem to solve or a pain point to relieve that your company’s product can help with.
Reseller vs. Value-Added Reseller Channels
Regarding resellers, there are two primary channel partners: traditional resellers and value-added resellers. Standard resellers do just that - they resell your product without any modifications. The simplest example is a corner retail shop selling you a Pepsi bottle. The corner store didn’t manufacture Pepsi; they purchased it at bulk or wholesale rates, increased its price to make a profit, and resold it. The reseller transaction doesn’t usually get more complicated than that.
Value-added resellers (VARs) pair a product or service with complementary offerings. Your product may be the base product that additional value is being added, or it may be the value-added add-on to another product or service offering. A simple example is purchasing a computer and receiving six months of antivirus software updates for free, after which they must buy a subscription.
Examples of Reseller Channels
There are several types of channel partners, including:
- Wholesalers purchase bulk quantities at a discount from a manufacturer and frequently warehouse these products alongside other companies’ products. They then resell these to retailers for sale to the public.
- White-Label Resellers collaborate with you to resell your products as their own by rebranding existing products and services. Often, an end customer won’t know they are buying repackaged products or services, so a company with a trusted brand can easily add on new service lines without having to build them. Clone Resellers are similar, except they’re not precisely a reseller themselves. The company itself creates them to promote a specific niche and create the illusion of competition.
- Original Equipment Manufacturers (OEM) embed your products into their solutions and sell them to end users. OEMs sell these under their brand. A tech industry example is when IBM releases a new personal computer, but installers load the latest version of Microsoft Windows and Microsoft Office on it. IBM partners with Microsoft and pays a licensing fee to install its software. Because small businesses and consumers are frequently not fluent in installing their own operating systems and software, both parties benefit as a result.
- Managed Service Providers (MSPs) are third-party companies who help small and mid-sized businesses by providing outsourced technical support and remote IT maintenance. They also serve as IT advisors to decision-makers at each company. They will often be among the first a company exec will seek advice from when making software purchasing decisions. They’ll also have a standardized system they use with their clients, and they’ll like using preferred partner products.
- System Integrators (SI) are advisors who serve as end users' consultants. They typically work with several channel partner programs at different companies to gain access to valuable resources they can leverage to serve their clients better.
- Independent Retailers are retailers who are not tied to a larger franchise. These can be valuable partners as they are not beholden to any “corporate” rules and can make decisions about partnering with you that you might not get from franchisees. They frequently get products from wholesalers or a distributor, and may like dealing directly with a manufacturer, as they may see a higher profit margin than using an intermediary.
Reseller Program Incentives
When building your reseller channels, it’s essential to understand why potential channel partners want to work with your program. Consider what you will offer resellers, such as access to a free partner portal, complimentary partner account, discounts, certification, referrals, and lead generation resources, training webinars, marketing materials and templates, early access to new company initiatives, etc.
Reseller Marketing Channels
So now you’ve got a good idea of how to get started with a referral partner program, but how do you identify referral partners? How do you find them or help them find you? There are a number of marketing channels you’ll want to explore in order to draw in channel partners.
- Organic and Paid Advertising - Targeting search optimization efforts to with terms like “partner program” or “affiliate program” tied to your brand.
- Webinars - Holding reseller and partner program webinars from onboarding to sessions on ‘how to integrate our product into your product’ tells potential partners you’re serious about supporting them when they come on board.
- Social Media - A robust social media helps your brand awareness grow. Many companies invite their reseller network members to social media groups on LinkedIn or Facebook to share ideas and roll out information.
- Industry Trade Association Partners - When working to identify potential resellers, especially OEM and value-added resellers, partnering with trade associations that specialize in your market (or related ones) can create terrific opportunities to network with other companies in your market share and discuss a win-win partner sales strategy.
- Trade Shows and Conferences - Companies frequently purchase booths to showcase their products and services to consumers and industry professionals, but should also send partner managers to identify potential referral partners, not just from your show booth, but at networking events and by having your channel partner manager visit other booths who may be ideal resellers to add to your network in varying market segments. These shows equal rooms of qualified leads!
Pros and Cons of Entering a Reseller Channel Partnership
Reseller channels can play a significant role in a successful sales strategy when implemented correctly. Here are our lists of pros and cons!
Reseller Channel Partnership Pros
- Not only can they drive sales, but they can provide important value-added services, so you don’t have to, like training or implementation support.
- Because resellers have their own customers, you lower customer acquisition costs.
- You can expand into new market shares such as geography, industries, etc. without having to invest in building out teams and infrastructure in those areas.
- You can use co-branding and affiliation (as can your partner) to build credibility who already trust the other brand.
- There is obvious win-win financial and growth potential.
Reseller Channel Partnership Cons
- You may not have direct access to the end users, so you’re reliant on partners to push out updates or communication appropriately, efficiently, and responsively.
- You don’t have control over the final sales process, nor are you included in the business modeling decisions made by different partners. That can make projections and forecasting difficult.
- There is always the risk that competitors are attempting to lure partners away from you. If they are successful, you may lose an entire block of customers, especially when dealing with managed service providers that may use your systems with all their clients.
- Supporting partners can be more than a full-time job. It requires proper resourcing from your side including channel partner managers, analysts, trainers, and resource creators.
Using Relevize to Manage Your Sales Partner Relationships
All of this may sound like a complicated process, and it certainly isn’t something you should jump into without a strategy. Luckily, many channel partner program managers use a software as a service (SaaS) solution like Relevize to increase visibility into their partner-generated sales pipeline, and scale that growth to maximize their channel sales revenue by automating the demand generation process for your channel partners to efficiently generate leads, pipeline, and revenue.
Here at Relevize, we work with thousands of channel partnership programs across the tech space. Our high-impact team of experts specializes in helping technology companies drive high-quality leads, brand engagement, and awareness through their channel partners. We also take immense pride in ensuring our customers and your reseller partners benefit from increased growth.
Curious to see see what our platform can do for your channel sales strategy? Give it a test drive today by requesting a demo!