Channel Sales Can Help Scale Your Product
Hass Johnson wants to build a sales army. As the senior director of corporate at LogicMonitor, a data and cloud monitoring software provider, Johnson is in the process of transitioning his team from a direct sales model to a channel sales program.
Channel sales involves partnering with third-party businesses to sell your product. There are several different types of channel partners, ranging from classic retail stores to companies that bundle your software with its other products to firms that install and remotely manage your software for buyers. Under this model, sales reps focus on building relationships with partners rather than selling directly to buyers.
When it’s done well, each of your reps will have a team of sellers working with them to distribute your product. This is what Johnson means when he talks about creating a sales army.
What Is a Channel Sales Strategy?
“You could hire a bunch of salespeople and do direct sales, but it gets expensive,” Johnson said. “Or you can make your product so valuable that other parties want to sell it … and therefore you grow a lot faster.”
Still, it’s not an easy transition to make. It requires learning how to identify the right channel partners, training your sales team to build relationships with and partner with those organizations, and aligning both organizations’ strategies. If you aren’t careful, those organizations may neglect your product or misrepresent your brand.
6 Tips for Channel Sales Success
- Research how your product is sold to determine which partners are best suited to sell it. The right partners should flow from your product.
- Tailor your channel strategy to the types of partners you work with. Each partner has a different sales approach that changes how you support them.
- Find partners that share your company’s sales values. A bad customer experience with a partner will reflect poorly on your brand.
- Create a joint business plan to set your partnership up for success. Work together to establish two or three goals and KPIs you both want to achieve.
- Promote channel wins with your team and incentivize your reps to work with partners. If your reps can make more money doing direct sales, they’ll never expand your channel network.
- Always ask your partners how you can help them. The easier you make it for them to sell your product, the more likely they are to sell it.
Laying the Channel Sales Foundation
Before you can build your sales army, you need to understand your product and which channel partners are best suited to sell it.
It sounds obvious, but DLT Solutions VP of Channel and Corporate Development Skip Liesegang has watched plenty of channel sales strategies go awry across his 36-year career because a sales leader treated every partner the same. There are by some accounts 10 types of partners, and each offers its own benefits and requires different support.
Some of the most common ones, according to Liesegang, include:
Value-added resellers, which specialize in combining third-party software and hardware to create a customized solution for buyers and selling it for a higher profit. Think Microsoft Office pre-installed in laptops. These partners offer additional business relationships and sell complete solutions that can help you expand your customer reach.
Managed service providers, which are companies that sell IT or infrastructure products to buyers and then offer a subscription service to remotely manage the product for them. This type of partner may host your product in its data center or manage it on a buyer’s premises.
Systems integrators, which work with buyers to incorporate your product into a comprehensive software and hardware package. There are also boutique systems integrators, which may be technology-focused around areas like cloud, AI or DevSecOps, or industry-centric around financial services, healthcare or manufacturing.
Distributors, which serve as an intermediary between the company and end user, much like retail. They sell the product directly to consumers.
Consultants, which can promote and connect your product to other resellers, and provide additional training and marketing support to ensure a smooth process.
Decisions about which partners are right for you should flow from your product, Liesegang said. If you have a high-touch sales strategy with a lengthy buying cycle, you may want to stick with a direct sales team. If your software enhances an electronic device, value-added resellers might work best. Other solutions may benefit from a combination of partners.
“You might have the greatest product in the world, but if you can’t make money selling it or you’re a pain in the ass to do business with, who cares?”
Once you’ve identified the types of channel partners you want to work with, Liesegang recommends taking the time to learn how each partner operates. Research how each partner makes its money, what its sales process looks like and what training or assistance its reps will need.
Companies often overlook this step and build a one-size-fits-all channel program that leads to fruitless relationships, Liesegang said. Since partners are often selling dozens of other products (some of which may be your competitors), understanding how you can support each partner can help you better position your product within their ecosystems.
“You have to understand the different program elements for each type of partner,” Liesegang said. “If you don’t, you’ll often fail because one of the types of partners you may need will be excluded from the benefits [in your channel program].”
Every channel partner, however, cares about what Liesegang calls the “four P’s” and your channel plan needs to address them. The four P’s include:
Product: This includes what the product does, its quality and standing in the marketplace.
Profitability: This covers profit margins and how much money a rep can make selling your product compared to others in the partner’s portfolio.
Process: Liesegang describes process as how easy it is for the partner to work with your company. Are you responsive? Do you provide sales enablement or other resources to help the channel rep sell?
People: Sales is about people. If you’re easy to work with and you provide support, partners will gravitate toward you and sell your product.
“You might have the greatest product in the world, but if you can’t make money selling it or you’re a pain in the ass to do business with, who cares?” Liesegang said. “You have to have those four elements working together.”
Finding the Right Partners
When Johnson reviews a potential channel partner, the first thing he looks at is whether or not its sales values align with LogicMonitor’s approach.
If the company isn’t collaborative and customer-oriented, then Johnson knows it won’t be a good partner regardless of how many customers it might bring in. That’s because your partners are a reflection of your brand in channel sales, Johnson said. When a customer has a bad experience, it will be your company’s reputation on the line, not the channel firm.
“I want to make sure when we work together we have that connective tissue in all those places.”
That’s why LogicMonitor takes a selective approach to building its partner network, Johnson said.
Once he gauges the company’s sales approach, Johnson wants to know what types of companies make up the majority of a partner’s accounts. If 80 percent of a partner’s accounts match LogicMonitor’s ideal customer profile, then it’s a good sign that his company will be a good fit with the partner. From there, he makes sure that its territory and business segment overlaps with LogicMonitor’s.
“I want to make sure when we work together we have that connective tissue in all those places,” Johnson said.
Some of this evaluation happens through research and conversation with the partner, but it can also help to work a few deals together to evaluate its values. If you notice that they don’t share the same sales values as you, it might be a sign that you should drift away from that partner, Johnson said.
Walking away from a bad relationship can even help add integrity to your channel strategy, said Liesegang.
“If they’re not adding value or competing with your other channel partners and are diluting the value of your channel program ... then you have to walk away from it,” Liesegang said. “It adds so much integrity to your program because the other partners see that and know you’re serious about running a channel program that’s first-rate.”
Still, the best way to source your partner network is to figure out who your customers are working with. When a channel partner has a close relationship with your target customers, it’s usually a good sign that they align with your organizational goals.
“If a customer is saying, ‘You need to work with these folks,’ that’s a good sign,” Johnson said.
Create a Joint Plan to Set Your Partnership Up for Success
One of the biggest challenges with channel sales compared to direct sales is that you don’t have control over the partner’s sales organization.
That’s why Liesegang suggests creating a joint business plan with your most valuable partners. A joint business plan is a document that defines what your goals and your partner’s goals are for the upcoming year, along with an outline of the strategies and tactics that work toward that goal.
The key to any successful plan is to keep it simple and build it together, Liesegang said. He’s seen companies create meticulous 14-page plans for their partners — and the partners inevitably toss them in a drawer never to look at them again.
Instead, limit your plan to a page with two or three goals that you decide on together. These goals can include things like entering a new market, targeting specific companies or growing your user base.
At Impinj, a RFID manufacturer, senior partner manager Cheryl Green likes to meet with her partners at the start of every year and ask them what their focus is for the year and how she can support them. Each partner has its own internal goals. Often the best way to ensure a productive relationship is to figure out what those goals are and then create a plan to help them achieve those goals.
Sometimes partners who embed Impinj’s RFID chips into another product don’t need marketing support, but they may need to know what Impinj’s latest features are and how it impacts their offerings. In other situations, a partner may require sales training or marketing material to boost sales of the product. Green will commit to providing them those resources while establishing a reasonable revenue target.
“We can mutually set those goals and talk about the things we want to do that will help achieve them.”
Once those are outlined, Green meets with the partner periodically to review whether both parties have delivered on what they said they’d do and what needs to change. This helps keep the relationship aligned, she said.
“We can mutually set those goals and talk about the things we want to do that will help achieve them,” Green said. “Then we can go back and say ‘Here are the goals, here are the tactics we said we’d do to achieve those goals. We didn’t [reach the goal]. Where do you think we fell short? What do we need to do differently?’”
While you can’t tell partner reps what to do, you can establish metrics to evaluate the partner relationship. Some useful targets to track include the revenue a partner generates and net new logos. It can also help to evaluate the number of product training certifications a partner has taken and how many deals the partner has led, Liesegang said.
Over time, you can use those metrics to engage with the partner and ask them what resources they need to improve. If the numbers continue to lag, it can also be grounds to dissolve a relationship.
Enabling Your Salesforce
Channel sales success doesn’t just require a plan, you also have to get your sales reps onboard to execute it. That can be tricky if your team is used to direct sales.
As LogicMonitor transitioned from direct sales to a channel strategy, Johnson had to restructure the way he coached his reps. Channel sales requires a different mindset, he said. In direct sales, a rep delivers the deal from start to finish on their own. But in a channel approach, you have to rely on a partner and help them execute deals at a macro level, which can be a difficult leap for some reps.
“It’s a lot easier to close a deal yourself versus depending on someone else,” Johnson said. “It’s about moving from independence to interdependence model, which is a logical leap.”
To help shift to that mindset, Johnson has taken to calling his rep’s CEOs. It’s not just for show, either. He encourages them to think about their territories and verticals in terms of developing their own business. Instead of creating relationships with buyers, their job is to build and enable their own sales army through channel partners.
Finding those channel partners also involves a different prospecting strategy. Johnson has adapted his sales training to focus on helping his reps identify the right partners and then crafting a sales pitch around how LogicMonitor’s product can enhance the partner’s business portfolio.
“It’s about moving from independence to interdependence model, which is a logical leap.”
But you also have to get the reps to buy in that this strategy will be beneficial to them. Some of that comes from making sure your compensation model is aligned with your channel strategy. Liesegang recommends increasing commission when a rep leverages a channel to close a deal to incentivize the strategy or at least establishing an equal commission for closing a direct sale or channel sale.
“If your sales rep can do a sale direct and make more money, it’s going to kill the channel,” Liesegang said.
Since it can take time to see the benefits of a partnership, it’s important to frequently promote the benefits of a channel strategy within your team, Johnson said. He recommends celebrating the channel wins and reinforcing the opportunity working with partners provides.
“I’ll say, ‘Do you want to have a one-to-one sale or do you want to have a many-to-one sale?’” Johnson said. “The mathematics make sense. Once you start to buy into that and develop your sales army, you start to see some of the fruits of your labor.”
Developing Relationships With Your Partners
Whenever Green meets with channel sales teams in her network, she always asks them: “How can I help you?”
It’s a simple question that has helped her build thriving partnerships throughout her career. It’s also one that partner managers easily overlook, she said. While you might think your product is a priority, it’s important to remember that partner reps often have dozens of other products in their portfolio and some of those may be your competitors.
You have to make the case for why they should sell your product and Green has found that the best way to do that is to be helpful.
“They are not my employees; they can sell a competitor’s product,” Green said. “So I’m constantly looking for ways for my product to stand out, whether it’s through my behavior or how I support them.”
The first step in building a fruitful channel relationship is to create awareness around what the product does. At LogicMonitor, Johnson said they try to find a deal they can work on together and make sure it’s going to be a beneficial relationship.
“It’s not just, ‘What have you done for me lately?’ ... It’s a relationship. That’s why we call them a partner.”
From there, relationship building is all about spending time in front of the sales team. This is where Green asks how she can help the rep. The answers they give will shape the resources she provides them. Some might tell her they need more marketing, others will say they want more training to feel comfortable selling the product.
The more assistance she can provide, the more likely Impinj’s products will come up in a sales opportunity.
But it’s equally important to understand what makes each rep tick, Green said. Every channel rep has their own priorities that dictate which products they sell. Some focus on selling products with a higher profit margin, others like to know that they can call a product’s rep any time they need assistance, and others still might prioritize product reliability.
Ultimately, you can’t tell a partner what to do, but you can give them the resources to make it easy to sell it. And that’s the next best thing.
“For me, it’s making sure they’re viewed as and understand they’re an extension of us. Any information we get directly, I want my resellers to know that as well,” Green said. “It’s not just, ‘What have you done for me lately?’ ... It’s a relationship. That’s why we call them a partner.”