75% of world trade flows indirectly through channel sales. What are you doing to optimize your channel partnerships and get the most value from channel selling?
What are channel partners?
A channel partner is an organization that you partner with to market and sell your hardware, software or SaaS solution.
One of your the goals in your annual business plan is probably expanding your sales reach. What strategy will you use to get there? Will you direct your efforts towards direct sales and marketing? Or are you focusing on channel partner sales? If you're like most companies, you spend more time and effort on your internal sales and marketing process than on your channel process. But that might be a mistake. According to Forrester, 75% of world trade flows indirectly through channel sales – or selling through channel partners.
With such a huge percentage of commerce flowing through channel partners, focusing on your channel partner process is one of the smartest business decisions you can make.
In this blog post, we'll explore the benefits of channel partnerships, how different types of organizations use channel sales, outline questions to ask during the discovery stage of the channel relationship, and break down four components of a winning sales channel strategy. Let's go.
Why collaborate with channel partners?
There are two main reasons for developing channel partnerships. First, if you want to gain access to sales in new regions, partnering with a company that you trust will allow you to grow your sales in that area. Second, if your offering functions best when it is packaged with another product or service, partnering with a suitable company can actualize the value of your solution.
1. You want to gain direct access to new sales regions
There are instances when you can't enter a certain regional market for legal reasons. Exclusive regional partnerships or governmental restrictions on commerce are common examples. Even if you could technically enter a market, channel partners might already have a network of existing customers in a particular area or a better grasp of local business culture.
In any of these scenarios, channel sales help you increase your customer base and grow.
2. Your product or service is used as an element within another ecosystem
In this scenario, the channel partner bundles your solution with other elements or solutions for a turnkey package. Often, the partner seeks out the relationship with a manufacture or vendor to help themselves fulfill a particular need. These types of channel partnerships apply to both hardware and software companies alike. Let's take a look.
A. Hardware OEM Channel Partnerships
Original Equipment Manufacturers (OEM) are the most well-known type of hardware channel sales. Say you manufacture high-grade optical lenses. Your hardware is packaged with other components to create medical imaging devices. The device includes your lenses and other technologies, which are sold to hospitals. In this example the medical device manufacturer that buys your lenses is your channel partner and the hospital that uses the medical device is the end customer.
B. Software Provider Channel Partnerships
Now let's move on to a software example. You develop AI solutions for demand forecasting. Your powerful API library can be embedded into an eCommerce platform and used by the platform's vendors. An eCommerce platform that adds forecasting as a feature of their offering is your channel partner. The vendors who access the eCommerce platform to sell their merchandise are the end customers.
The best channel partnerships start with discovery
Engaging in proper discovery will help you clarify your goals and build a roadmap for success. Use this guide to ask the right answers and get actionable answers. Remember, the answers will vary depending upon the vendor and the specific partnership.
Questions to ask:
About your channel partnership business goals
- What is your number one goal?
- What regions do you want to target?
- How will the channel partnership advance your market share?
- Which KPIs will you track to ensure your partnership is successful?
About how you currently deliver your product or solution
- Do you make it easy for your channel to make regular purchases?
- What's your plan for ensuring version control?
- Are your workflows clear?
- How do you track channel partner product usage?
- How much data do you share downstream to your partners?
- How much data do you require the partner to share back upstream to you?
About determining your ideal customer feedback loop
- How will you collect customer feedback?
- How much brand visibility are you willing to sacrifice?
- Can you implement a way to access usage data?
- Can you offer tools or portals that your partners can use to create a better end customer experience?
4 components of a winning sales channel strategy
1. Automate processes to make your product easy to work with
Partnerships are a valuable go-to-market tool; it's worth developing systems that make it easy for partners to work with you. Investing in your partner's success is the key to creating efficient, mutually beneficial channel partnerships. Making data, tools, and information easily available to your channel partners should be a high priority.
Partnerships are easier to manage when routine interactions are self-service. Use cloud licensing and entitlements to create a free-flow of information. Feed data back to your partners through easy-to-use dashboards. Develop custom portals where channel partners can manage their purchases, sales, and track their data consumption.
Hardware vendors can make automation easier by decreasing the number of products they offer. If you are a hardware vendor that currently sells many pieces of equipment with different functionalities, consider creating a single hardware chassis with one SKU. Then turn functionality on and off using software licensing and entitlements.
2. Implement flows that allow you to access usage data
To remain a healthy organization, you rely on customer feedback for business insights. But when you sell through a channel partner, they talk to the downstream partners and the end customers. Sitting outside the feedback loop can lead to real challenges in your own marketing, sales, and product decisions. However, you can create processes that give you usage data from end customers, even when the product is sold through a partner.
Entitlement management platforms are the perfect conduit to seamlessly connect vendors with end customers.
Entitlement management platforms are the perfect conduit to seamlessly connect vendors with end customers. You can use methods like an integrated phone home, apply a file, or licensing connection to gain access to data. For example, if your software is embedded in measurement instruments, you could use hybrid cloud licensing to implement a periodic phone home for updates. Once the phone home is completed, use the connection to gather data on how often your product is being used, how long it's used for, and even which features your customers access most often.
3. Create visibility around product usage so you can bill accurately
Another area where you might struggle when setting up a channel partnership is billing for usage. When your partnership starts small, the go-to is often a trust-based system. For example, your partner might tell you they've used 500 GB of your service, and you charge them accordingly. Still, as your relationship matures and your business increases, you'll need a more accurate and scalable solution.
Don't just hope partners are complying with the stated terms. Instead, institute an entitlement management platform that provides a single source of truth tracking what users are entitled to and what they are actually using. Then connect that entitlement management system with an automated billing system to simplify accurately charge your partners for their actual usage
4. Control your brand image by creating delightful experiences for end-users and your channel partners
Your product is your reputation, even when it's sold through a third party. It's important to consider how to ensure a positive experience for everyone interacting with your product.
With channel selling, both your partner and the end user interact with your brand. You can package your offering with add-ons that are helpful for both your partner and the end user. Customer portals, self-service channels, and technical support are valuable services you can offer your partners, which ultimately ensure a better end-user experience. Develop a toolkit of creative solutions that enhance your brand without stepping on your partner's toes.
Better channel partnerships start now
Channel sales are an important way you can grow your business and increase revenue. Vendors with a firm grasp of their goals and who prioritize a win-win relationship will benefit the most.
If your organization is looking to boost the outcome of your channel partnerships, it's worth considering how a licensing and entitlement management can help streamline processes.
Want to learn more? Check out this video where my colleague Rachel Present Schreter, Content & Product Marketing Director at Thales, and I dig down even deeper into channel partnerships processes.