6 Questions to Ask Before Starting a Channel Program
Vendors shouldn’t presume they must work with channel partners; they need to define why they need partners and why partners need them. These six questions can shape channel necessity and strategy.
By Larry Walsh
Many in the technology industry presume the channel is the best route to market. And why not? A vendor selling products and services direct is anomalous and strange. Even vendors that are difficult to partner with will maintain some level of channel engagement. The logical conclusion is that channels are good, right?
The channel is a tremendous means for creating numerous points of sale and extending market coverage. Channel partners have a lower cost of sales, which translates into greater profitability per sale. Partners provide access to customers a vendor doesn’t have and act as tremendous relationship managers. And partners can extend and augment support provided to customers.
Simply put, partners are an outstanding resource for enhancing customer experience and, ultimately, the perceived value of a vendor.
These are all good reasons for working with partners and selling through indirect-sales channels. However, vendors can’t start with reasons for working with the channel. Vendors need to start with questions about working with partners to take products and services to market.
The following are six essential questions every vendor needs to answer before launching a new channel program or changing an existing one.
1. Why do you need (not want) a channel?
Questioning the need for a channel is a cultural one. A vendor may need a channel to extend sales, lower cost of sales, and reach customers in remote and niche markets. In some cases, customers may compel vendors to sell to them through preferred resellers. Building a channel requires a compelling reason. Without a compelling reason, vendors won’t commit to channel objectives and working with partners.
2. What can’t you do without channel partners?
Vendors are great at building products and services, but they have limitations. Identifying the things a vendor can’t do without partners’ help or resources is key. Partners augment vendor sales and technical support capacity, but they can do more. Partners bring relationships with complementary technology vendors and integration expertise. Partners can fill gaps in vendor capabilities too.
3. What would channel partners do to increase your value proposition?
It’s one thing to identify what a vendor can’t do without channel partners; then there’s the question of how partners will extend the value proposition of a vendor’s products and services. Partners can extend a vendor’s value by providing add-on capabilities, complementary technologies, and services for specific types of customers (e.g., health care and financial services) or technologies (e.g., security).
4. What role would channel partners play in your go-to-market strategy?
Vendors need to define the role of their channel partners. Vendors have options in the form of sales models – sell-to, sell-through, sell-with, sell-in, and sell-around (referrals). Vendors need to define the working relationship with partners to ensure effective operations and the potential for return on channel investment.
5. Why would channel partners work with your company?
Partners need a compelling reason to work with a vendor too, whether it’s brand recognition and market value, market-leading technology, innovations that complement existing products in a portfolio, or a push by customers into vendor relationships. Vendors need to show partners that there’s an opportunity through partnership.
6. What are the economics that make partnerships feasible?
Finally, vendors need to define the economics of partnership. This goes beyond margins and incentives. Vendors need to define the total economic value of the partnership and the potential return on investment for partners. In practical terms, this is the value of product sale, plus the accretive benefits that come with the sale through value-added services and attached product sales.
If the answers to those questions point to the need for a channel, then the vendor knows what it has to do. It can begin the process of building a channel with the confidence of achieving success. The answers to those questions will guide the channel mission, define programs and partner benefits, and shape the relationships with partners. Those six questions can make the difference between merely having a channel and having one that contributes to successful indirect sales.
The 2112 Group works with vendors on defining their go-to-market strategies and shaping channel structures. For more information about 2112 services, contact [email protected].