What is channel?
This is the first in a series of articles.
As the end of the lockdown comes into view, companies, just like yours, all around the world will be reviewing their sales strategy. One decision they will have to make is ‘what route to market should they take’. They could decide not to have a sales department and rely on referral and repeat business only. Alternatively, they could opt for a direct sale only model or even a channel-only sales model. Most companies will look at a combination of these. In this series of articles, we are going to explore Channel Sales, although I don’t really like this term, whether in a hybrid or channel-only model.
In this article, we will cover the basic question of ‘what is channel sales and what are the distinct types of channel partner?’ The accepted definition is that ‘Channel is an external route to market’. They become an extension of your own internal sales department. That’s great but, why would you use a channel partner? The main reason, is reach. They help you to penetrate new markets geographically, new industries and new customers. Sounds simple, but it isn’t.
Does that mean a ‘partner’ is the same as a ‘channel partner’? Well, the simple answer is yes and no. Yes, because it has become an accepted term but no because there are many types of partner that are not a route to market. You partner with your suppliers, your marketing company, and your external sponsors, but they do not, in this sense, provide a route to market.
Within your channel, you have two types of relationships, those that sell your products and those that provide access to the market via their influence and connections. Channel partners do a mixture, to a greater or lesser degree, of three things. Firstly, they provide their products, second, they sell your products and finally they provide services.
The non-selling or influencing channel partners are normally referred to as ‘Alliance Partners’. These are typically Systems Integrators, SIs, be them regional, RSIs, or global, GSIs. They can also be consultancies, accountants, lawyers or any professional firm that has a relationship with the end-user. Through their relationships with potential clients, they can introduce you to opportunities. They will typically not look to sales margin but may look for a referral fee. It is not unusual for these Alliance Partners not to take anything form of monetary reward for their introduction. They will normally be involved in a larger project with the client and they need a supplier of your product to fulfil it.
When we look at the channel partners who sell, they fall into several types.
Distribution. These companies will act as a ‘middle-man’ between you and the channel. They will provide many services other than selling to the end-user. They may stock your product, manage the legal and financial contracts with the end-user selling partners. You will be expected to give them a larger margin.
Reseller. An example of a reseller would be ‘TescoTM’, they take a product, they may provide marketing, and provide an opportunistic route to market without any, or few, additional services.
Original Equipment Manufacturer (OEM) or Independent Software Vendor (ISV). These organisations will take your product and make it a component of their product. Again, they look for higher margins than a reseller and it would not be unusual for your product or company name not to feature. Do you know who made the heating element in your cooker?
Value Added Reseller (VAR). For me, these organisations are the pinnacle. They will sell your product, provide services around it, including marketing, support and, managing the end-user relationship.
Can a channel partner be more than one type? Yes. In different engagements, they may act in several distinct ways. In working with one GSI, for example, I developed a relationship where they acted as an ISV and as an Alliance Partner at different times and on different engagements.
Always remember that any Channel Partner, or business partner, is an independent company with its own ambitions, goals and ethics. Always respect that and you will have their respect.
Finally, for now, the two things that all channel partners appreciate are communication and consistency. Be honest with them and predictable and it will help you to build a solid and profitable relationships.
This is a basic overview of the types of channel partners. I hope that it helps you to define what type of sales structure you should adopt post-lockdown and at the very least it gives you a common set of definitions when you are looking at your sales model.
For more information about the Channel Model and to discuss how we can help you see our LinkedIn company page, 149 Consulting.
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