When it comes to business, growth is key. Expanding your routes to market through partners can significantly impact your growth trajectory. Vation Ventures knows the power the channel has in the high-tech ecosystem. In this article, we’ll unpack the basics of a channel partner program, how to build a successful channel partner strategy, and how to determine if they are successful or need retooling. Let's channel our wisdom to you (no pun intended) and shed some light on this vital business strategy.
What is a channel partner program?
A channel partner program, in short, is an alternative route to get other people to sell your products. They are typically formal agreements with third-party vendors or other personnel. Your company gives these channel partners incentives, like commissions or discounts, that usually get better over time to stay loyal and value your partnership. All of this is done within a channel partner program to increase the scope of your distribution. The more demographics, regions, and web communities that showcase or sell your products, the better it will be for your bottom line.
A successful channel partner program can be extremely valuable to a firm. Many large companies use them, and one channel expert noted a nearly 2000 percent increase in revenue for a B2B startup within half a year. As for channel partnerships themselves, they can take on many forms. They have one thing in common: they will be looking to reap the channel partner program benefits you will provide in exchange for their services.
What do channel partners do?
Channel partners effectively serve as another branch of your sales department. After making a deal with them, you can consider them to be the partner sales and marketing agents you hire outside your company. Think of it like a food service: you could pick up or order pizza directly from a pizzeria (a direct sales motion), or you can utilize an app like GrubHub or DoorDash and simplify the process for everyone involved (an indirect sales motion). A good channel partner is like a third-party agent. You pay them referral fees or commissions, and they'll bring the sales and customers to your doorstep; in a literal sense, they channel revenue into your firm in exchange for a small piece of the pie.
With channel partners, you do lose a bit of the cut. But you will see more people coming to your site and more sales. Going back to the pizzeria example, sites like GrubHub and DoorDash take some revenue, but a small pizza joint can only distribute flyers to so many people in the region. Web platforms help get their brand out there for more people to enjoy, and that's precisely what channel partners do. The offset here is how many people it would take for you to hire to be able to distribute the flyers, triage the customers, and deliver the product. Embracing channel partners can help you scale business and enable your sales team at a rate that otherwise can be unfeasible from a cost standpoint to re-create the sales force needed.
What are the benefits of a channel partner program?
Channel partner programs can bring many benefits when done correctly. Some of these benefits are:
Channel partners can position your firm in new verticals and markets, some of which may not be familiar with your brand. Your channel partners will likely have a greater reputation in these areas, and as such, they will be more trusted. If these high-profile partners represent your brand and recommend your products in those niches, you can use their trust to everyone's benefit and enter into new markets.
Channel partners can offset and even eliminate some costs, such as marketing and administrative labor. Even the costs of marketing campaigns can be offset or eliminated due to these channel programs, as they work to spread your brand for you.
Channel partners can cross-sell your offerings with complementary services, promotions, or products. Your channel partners may bundle your product with other similar ones, thereby massively increasing your exposure through channel sales. Imagine being a startup that gets cross-sold with a big company like Microsoft.
Channel partners can amplify your workforce without incurring extra payroll or onboarding strains. Sure, the channel partners will be compensated for their help, but the upfront costs may be far less than the expensive task of hiring, training, and bankrolling new employees and come out of the cost of sale instead of your operating expenses.
Channel partners can fill a talent need by offering value-added integration services that your team might not be able to accomplish without extra training or recruitment. Small firms can only do so much, and your channel partners can help fill that talent void.
What are the challenges of working with channel partners?
There are, of course, drawbacks to everything. A channel partner program isn't for everyone and can vary by organization. They may not be the best for your firm because they:
Lose potential visibility and control over your sales forecasting. An unpredictable stream of sales makes revenue forecasting a more significant challenge.
Dilute feedback from customers. A lot of the customer relationship is handled by the third party, making it essential to find channel partners you trust to represent your brand.
Increase the chance of brand identity issues. Third parties may not follow your best practices and may be inconsistent in their services, which can reflect poorly on your brand.
Require extra resources to set up. Establishing and maintaining these programs takes time and money, so you'll want to ensure that your firm can absorb these impacts.
What are the different types of channel partners?
As mentioned, your channel partners may take on a variety of forms. Here are the main types of channel partners to help determine your ideal partner:
Value-added Resellers (VARs)
VARs, or value-added resellers, are in the business of selling third-party technology. This includes hardware, software, and apps. So, what makes these channel partners unique if they're reselling products like everyone else? It's simple: they also offer other “value” to the firm via consultations, customizations, and setting up systems and backends. In other words, they'll resell your products for a fee and add value to your business.
Managed service providers (MSPs)
MSPs, also known as managed service providers, are companies that will handle your firm's IT and end-user systems. Everyone from smaller firms to large government departments uses MSPs to help with their IT workload. These services may include network and infrastructure management, security, and monitoring. Compensation is usually in the form of monthly or yearly subscriptions.
This kind of remote management of your digital systems is a form of channel partnership because these systems are often the backbone of a company's infrastructure and could include aspects like cybersecurity operations, cloud management, financial or accounting, and everything else in between.
Many experienced professionals spend the last part of their careers in these roles, where they can help other businesses or up-and-coming stars by providing them with useful information. But in the context of channel partner programs, these consultants will help you figure out the best ways to market your business, such as which markets to get into, what a successful partnership looks like, whom to work with, and so on. They typically charge consulting fees, but more hands-on consultants may include a commission or revenue share.
System Integrators (SIs)
SIs, which stand for “system integrators,” are channel partners who put together IT systems for businesses by combining hardware and software from different sources. They will tell you what needs to be done to enhance your systems and then handle the work themselves. This digital optimization can be a significant benefit if your company is rapidly growing—the bigger it gets, the more likely it will outgrow your original systems. SIs help future-proof your company and ensure it has plenty of room to grow in a digital sense. Once again, this can be way cheaper and faster than hiring new IT workers because the SIs have a ton of experience in this specialized field.
Original Equipment Manufacturers (OEMs)
Original Equipment Manufacturers (OEMs, for short) are a wide-reaching category. They used to build the product and then sell it to other firms for rebranding and marketing. Now, though, they tend to be more focused on re-branding your original products and taking care of the sales end themselves. This is especially useful if you don't have an established brand but want to start making money fast. The OEM is more reputable and can take you under their wing.
Independent Software Vendors (ISVs)
Independent software vendors, or ISVs for short, are in the business of making and selling digital products (such as software) that are designed to run across various platforms. For example, you might release an app that works well on Windows. The ISV can help port that product to Macs, mobile phones, and other platforms to increase your reach by a wide margin.
A distributor acts as a go-between between the company that makes the product and someone else in the supply chain, like a retailer, independent software vendor, original equipment manufacturer, system integrator, consultant, managed service provider, or value-added reseller. In short, they handle the distribution of your product to other channel service providers or end users. Intermediaries can be helpful if the supply chain is complicated or you do not have the resources to handle it yourself.
Agencies are specialized firms (such as designers, marketers, salespeople, and even the consultants mentioned above) with a wide variety of clientele and fans—in other words, potential customers. They are a great option for certain products and services like a CRM utility or marketing analytics software as they can integrate your product or service into a larger conversation within the scope of their agency agreements with clients.
Why have a channel partner program?
Every business should be trying to increase its bottom line. As a startup company or an independent entrepreneur, ensuring that as many people as possible know about your product is crucial for business development. Creating your own channel partner program can create a multiplier effect that allows you to widen your scope faster and expand your brand further.
How do I build a channel partner strategy?
There are a few basic steps you can harness to make setting up your successful partner program and finding a potential partner a relative breeze.
Define a value proposition
Let people know how they will benefit from what you are offering. You can show them how it will be relevant to their interests with the help of metrics. It's also important to show how it compares to your rivals; you want to let customers know that your option is better, and it all begins with a good sales pitch.
Identify what an ideal partner looks like for your business
Determine what's right for your business to find the right channel partner, whether it be a retailer, independent software vendor, original equipment manufacturer, system integrator, consultant, managed service provider, value-added reseller, distributor, agency, or some combination for a successful channel partner program.
Create a sales process focused on the customer
You've established what value you provide to your customers and have figured out what kind of partners you want. But how do you make it all customer-centric while increasing sales growth? You need to understand each sales process step, especially once you've figured out what kind of partners you want. Consider it from the customer's perspective: what type of client would help me get what I want? On top of that, you need to build a sales process between you and your partners with aspects like a partner portal, deal registration guidelines, channel partner program guidelines, and more.
Create partner enablement and incentive programs
You need to enable partners to ensure they are motivated and set up for success. Your incentives should be strong, like offering subscription services, fees, commissions, or competitive perks. The more motivated your channel partners are to sell your products and integrate your systems, the more impactful the results will be. Make no mistake: your enablement and incentives won't be for everyone. It may take trial and error and some unsatisfied clients before you figure out what will work best for your firm. Above all else, remember that an enabled channel partner is a loyal partner who will stay with you as you grow.
Benchmark your competitors
It's critical to compare your channel partner strategy and performance with that of your rivals. But even beyond that, you must ensure that you are doing something feasible. If your competition is massive and highly successful, you'll have to work with channel partners who can help you compete at that level. If your competitor is small but prestigious, consider using channel partners to branch into areas that your rivals haven't ventured into yet—other markets, sites, and demographics, for instance. It's about differentiating yourself and ensuring you aren't biting off more than you can chew.
Running a successful partner program is challenging, but we're here to help.
Consider forming a channel partner program if you wish to widen the reach of your products and help your sales team. You've read about the wide variety of partners available, but where do you start? Our team at Vation Ventures brings years of experience in the channel and running channel partner programs for startups and Fortune 50 companies alike. We are consistently working with companies of all stages to introduce, build, and accelerate their channel partner programs. We help early-stage companies understand and benchmark their partner program and channel partner strategy against industry standards through our Channel Certification. Running a channel partner program takes both a financial and human capital investment to drive success; for those looking to offload their channel program to a team of experts, we work with companies of all sizes through our Channels as a Service offering. For those companies with an established channel partner program, we help accelerate key target partners through enablement, program management, and our expert advisors with our Channel Partner Sales Accelerator.
Interested in where your business can benefit from a channel partner program? Get in touch today.
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