- 16th April 2018
- Posted by: Manolis
As with any business decision, it would be ludicrous to just pick the entity that’s going to be selling your product out of a hat with little to no thought. In order to make the best possible decision, it benefits you to not only think of what’s convenient for your company in the short term, but also what those choices could mean for your middleman and how that reaction could affect your business in the future.
Why You’d Use A Channel At All
Perhaps you’re still considering whether you should use an indirect channel or sell your product directly to the client. That decision is highly personalized and dependent on your business’s strategy, product, and ideal client. There are several reasons why using an indirect channel can be a positive development for many companies.
For one, a channel might add value to your product that wouldn’t have existed inherently. For instance, if you craft and sell porcelain sinks, you might enlist a third party to sell the sinks and then install them in customers’ homes. Instead of having to personally train existing workers to install sinks or ignore the installation problem, you get to focus on your strengths and let the channel deal with the rest. You and the channel will both be better off, since customers are probably more likely to spend money on a sink that they know will be installed well by a “professional.”
An indirect channel also offers more specificity. If you want to sell your product nationwide or globally, a middleman can fine-tune sales tactics that work for each specific location where you’re selling. You may not want to work out the difference in client responses to your product in California and Japan, but a channel can.
Understand Their Revenue Streams
Chances are, your product is not being sold completely independently by your indirect sales channel. What does that mean? It is probably being paired with a service (like installation) or a complementary good that will help the channel make its own money. When choosing which channel to work with, understand what they’d be offering alongside your product and how they would be generating revenue.
If you’re coming out with a high-tech, little to no-assembly-required product, you might consider partnering with a channel that doesn’t rely too heavily on additional service sales, and being more flexible on your commission offer. Your clients might love the new gadget’s ease of use, but channels would lose service revenue. That means that the channel might not be so enthusiastic about pushing your offering.
On the other hand, if your product is lucrative on its own but requires a lot of hands-on assembly or could easily be paired with another product, you might do well with a channel that has a service-heavy revenue stream. The key here is to transparently look for a deal that’s mutually beneficial.
Recognize that your channel partners are not likely to ever be as focused on selling your products as you would be. Manufacturer’s reps and channel partners focus on the products and services that drive revenue for them, and allow them to stand out over their competition.
When reaching out to partners, illustrate how they can make money with the partnership. It’s critical to illustrate how what you offer might be a better fit than alternatives. If they don’t see a clear path for how they can grow their own business, they are not likely to be excited about growing your business.
Less is More
Instead of casting a wide net, I am a big fan of selecting a small number of strategic partners. This allows you to control channel conflict, and protect your best partners. When that happens, you might just create a successful channel that drives revenue without investing in a direct sales force.
The best partners generally know how to sell your products. This doesn’t mean that they have the greatest knowledge of your product and service. What I mean is that the skill you need to teach your partners is how to identify the symptoms that your product solves, and how to navigate the sales process. Place less emphasis on product feature training.
It’s Your Turn
As long as you choose the right channel, indirect sales can be a beneficial and efficient choice. What qualities do you look for in an indirect sales channel? Have you ever had your channel point out a “blind spot” in your strategy that you hadn’t noticed?