Ready to scale, but lack the resources? Even if you want to bulk up revenue, there are only so many sales your team can make in a day. However, this doesn’t mean you have to spin your wheels.
There is a simple solution to this common problem and it’s called channel partnering.
What is a Channel Partner?
A channel partner is a company that sells products, services, and technologies on behalf of a manufacturer or vendor. They act as the middleman between you and the end customer. It’s a mutually beneficial relationship that works as a vehicle for growing market share and increasing revenue.
A channel partner means they are part of your indirect salesforce, but act as an independent company. They generate revenue by distributing your product/service/technology, collecting referrals fees, and selling ancillary items.
This type of partnership helps to leverage the activation rate for customers and users as well. People are quicker to buy, use, and adopt your brand.
A prime example of the channel partner business model is Amazon. Independent vendors have set up online shops, selling millions of products from a variety of companies and manufacturers, every single day.
In addition to selling, a channel partner may be responsible for other tasks like:
- Customer service
- Marketing and advertising
When you define channel partners, it also involves branding. Many of these unions represent a co-branding relationship, which involves a strategic alliance and joint efforts.
Direct Sales vs. Indirect Sales
When you are selling products and services directly to the customer, and there is no other touchpoint along the way, this is known as “direct sales”. This is the conventional approach, as it’s typically the shortest distance for a customer journey.
A channel partner represents a type of indirect sales, in which a third-party steps in to make the sale happen. It’s like outsourcing the costs of having a remote sales team.
However, this doesn’t mean shipping off products to a warehouse and crossing your fingers. It simply means keeping your channel partners up to date with the latest products/services/technologies, ensuring they are adequately informed, and regularly updating them on any changes and issues. This helps your indirect salespeople function at their very best.
Types of Channel Partners
Just as there is a multitude of models to run a business, there are various ways to approach a channel partnership. Here are the most common types of channel partners you will find:
Value-Added Reseller (VAR)
You can’t answer the question “what are channel partners” without talking about value-added resellers. A VAR (also called a solution provider) takes a product/service/technology, adds value and a profit margin, and delivers it to end-users. They can be regional partners that specialize in a specific location or national in scope.
For example, a VAR may purchase a piece of equipment, build a unique app around it (to be bundled with the original product) and resell it at a higher cost. This might also include other services like training, tech support, or installation.
Original Equipment Manufacturer (OEM)
This channel partner definition traditionally involved a product that the OEM built to be modified, resold, and rebranded. Over time, this has changed.
Now OEMs purchase products/services/technologies and either:
- Rebrand them as their own and resell as is (no alteration)
- Add extra features or bundle with additional products, then resell
Managed Service Provider (MSP)
An MSP is a company that monitors, manages, and maintains your IT infrastructure. This is an ideal setup for SMBs that do not have on-site professionals. It also works for enterprises that want their IT to focus on more strategic tasks.
Responsibilities for an MSP can include (but are not limited to):
- Remote monitoring of your network
- Ensure accessibility to all staff
- Management of end-user devices
- Data security and storage
- Product installation and upgrades
This type of channel partnership is really about playing the middleman. A distributor will warehouse, transport, and sell to dealers, installers, and end-users.
You may choose to sell through a distributor to shorten the time-to-market because they already have an established distribution channel. These channel partners have a significant amount of influence to determine which brands and products to promote first.
Distributors may also provide training, marketing, customer service, and other features to complement your business.
Other Types of Channel Partners
The list is long, but here are a few other types of channel partner relationships to consider:
- Independent dealers and sales reps
- Agency partners
- Affiliate programs
- Systems integrator
- IT consultant
The Benefits of Channel Partners
It’s hard to quantify the various benefits a business can derive from engaging in channel partnership, but here are a few advantages:
A channel partner is one of the quickest ways to gain market share. They have spent a great deal of time and effort developing customer relationships that open up a whole new avenue of exposure for your business.
Establishing an indirect sales channel means less need for hiring and training in-house staff. This can save on employee salaries, travel expenses, and time wasted on unqualified leads.
Channel partners have a specific understanding of industry verticals and specialized knowledge. This can give smaller companies the resources they need to focus on growth. For example, outsourcing IT is a huge relief for start-ups that are just trying to build.
Summing it Up
Is channel partnering right for your brand? As partnerships continue to evolve, there’s no “one-size-fits-all” approach.
B2B channels are in transition from a resale and fulfillment function to a more fluid and enriching relationship. This involves an ecosystem of advocates, affiliates, and alliances. It’s an exciting time for developing new business relationships.
The beauty of a channel partnership is that together, you can cast a bigger net that reaches a wider audience, drives quicker sales, sources new streams of revenue, and propels growth like nothing else!