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Channel Sales Strategy for B2B Companies: Pros and Cons

Channel Sales Strategy for B2B Companies: Pros and Cons

Anirban Banerjee
Anirban Banerjee
September 9, 2022
•
5 min read

Once there was a merchant named Jack who traded in the best food products. He loved his business so much that he did not trust anyone. Jack handled all the affairs himself.

Within a few months, Jack-the-Genius built a sustainable model with a decent revenue. But when he entered a new market to scale his business, he was defeated brutally. He was not able to sell at the pace required to make his expansion profitable. He could either sell in the new market or in his existing market. Moreover, the new market wasn’t as open as Jack had hoped. They were somewhat wary of this newcomer or just simply hadn’t time for just another salesperson. Jack, despite his inherent skills, wasn’t able to find new customers.

What went wrong?

You know it: He was the:

Jack of all trades and master of none!

Jack could’ve leveraged a channel sales strategy to enter a new market. 

It doesn’t always help to be a lone wolf. 

And especially when your goal is centered around people, or more specifically, meeting new people (the right ones) and making a convincing argument to them. 

So what is this channel sales strategy that might have helped Jack-the-Genius win in his new market? Let’s take a closer look at this approach to selling and its buffet of benefits. We’ll also cover chief considerations for sales managers looking to dabble in channel selling. 

What is a channel sales strategy?

When you are selling your products with the help of a partner or a third party, you are utilizing channel sales. In this strategy, you do not interact directly with the prospects but instead work to convert leads to customers through a network of referral partners, affiliate partners, wholesalers, distributors, retailers, value-added resellers, and others.

Your network of channel sales partners does all the legwork for you. 

And yes, it's legit! 

As opposed to the traditional sales method- that is, direct sales -this strategy profits from an existing network of customers created and maintained by a third party. 

Channel sales partners are third parties who have prior knowledge of the market and existing connections with potential customers. You work with them to strategize sales and grow your B2B company. 

Sounds super-beneficial right? Well, like everything, it has its pros and cons. But before we dive into the top benefits and chief considerations for you to mull over before signing up for channel sales, let’s get a deeper understanding of channel sales by looking at the various types of partnerships out there.

‍Resellers

Resellers are the most primitive form of middlemen. They simply buy your product and sell it to their customers. By selling the product to the end customer, the reseller gains a profit. 

Value Added Reseller (VAR)

Value Added Resellers are an enhanced version of resellers. They buy your product, put a ribbon on top of it, and sell it to their customers. The ribbon is the object of value here that increases the market price of the original product. Thus by selling it, value-added resellers gain a higher profit than the margin on the original product.

For example, a laptop can be sold as plain hardware but an electronic store might sell the laptop with Windows installed. The electronic store is a Value Added Reseller.

Affiliate Partners

Affiliate partners promote your B2B company through websites and blogs. A pre-determined portion of the profit made from the sales goes to them. The profit can be on a commission basis or in the form of a referral fee. Amazon also has an affiliate program that gives referral fees to website owners for promoting its products.  

Wholesalers

Wholesalers are sales reps who sell your product to retailers. They buy goods directly from the manufacturer and supply them to restaurants, stores, and other retailers. 

Retailers 

Retailers are your stores, family-operated stores, and small business owners who buy goods from a manufacturer or wholesaler and sell it to the end-user. But retailers can also be as large as Walmart, buying goods in huge quantities and selling to target customers.

Dealers

Dealers have the same job as retailers. Except that retailers have a more general range of products. For example, you will find a variety of products at a grocery store. But dealers are more specific like automobile dealers.

Agents

Agents work on behalf of your B2B company. They act as a spokesperson for your brand representing you in front of the customers. Equip them to embody your brand better with extensive market research and the right sales techniques.

Now that you know how channel sales work, you’re all set to explore the pros and cons of channel sales. 

Pros: What are the benefits of channel sales? 

Scalability 

Channel Partners have an established relationship with their target audience. Your sales team can save energy that will be required for lead generation to expand your network. They can focus on their existing basket of leads.

New customers can be acquired faster for more rapid revenue growth. Training and onboarding channel sales partners are more convenient and faster.

Because your potential new customers are already your sales partner's loyal customers, venturing into new markets doesn’t get easier than this.

Cost Effective

When you grow your business using channel partners, you incur lower costs because you don’t have to invest in additional in-house sales team recruitment. Your channel sales strategy helps you save on recruitment costs, the capital needed for upskilling your sales team, overheads involved in an in-house team’s lead generation efforts such as leasing an office space, telephone and internet costs, traveling allowance, or per diem, and so on. 

Moreover, distribution and shipping are the intermediaries’ burdens. You can leverage the channel partner’s existing supply chain relationships and negotiated rates in your new target market. Your channel partner will - in all likelihood - have access to bulk pricing discounts in their area of influence and operation. 

Increasing Your Brand Value

Channel partners are supposed to come in with an excellent reputation. Offline, your products stand to benefit from the prior trust that your channel partner has built in the market. Online, or when you are using channel partners for content marketing, your products will benefit from Google’s ranking of such websites because they have backlinks from other well-known companies.

Being promoted by an established channel partner reduces the years that it will take to build your brand and market it globally to the target audience. 

Cons: What are the challenges of channel sales?

Reduced Control

You can strategize, plan, and work hard with your channel partner, but the result depends on them because you won’t be interacting with the end customers. They will!

Technically speaking, you have given up control over a huge chunk of your sales cycle. 

Your partners are speaking on your behalf, and they will create an image for your brand. Any mistakes or half-heartedness could cost you a customer or, worse, your reputation. Depending on a third party always comes with risks.

Reduced Profits

Depending on the partner you have chosen the cost incurred will change. You are bound to pay those you hire. And you cannot help but pay the channel partners in the same way you are paying your other employees. However, it is important to note that the cost is - in most cases - far lower than hiring a new in-house team and leasing additional office space. Moreover, you might be able to manage costs by choosing low-cost channel partners. For example, affiliate partners might charge less than agents. 

Feedback

Feedback and KPIs can get in transition lost when it comes to you via a middleman. They might not tell you the entire story. Or might not be interested in listening to feedback in the first place. 

That’s why it is critical to choose channel partners who share your selling ideals. Work with them on charting out ideal SOPs for customer retention, deal closing, and feedback. You also want to give them literature that helps them sell better, but that also offers your customers a direct hotline to you if they feel like they are not being heard by your channel partner.  

Wingman’s got your back. All kinds of selling is easier with Wingman. 

Whether you choose a channel partner or decide that your existing sales team is sufficient for your current revenue goals, you still want to optimize your selling efforts. You want your sales reps to win.

The Wingman platform is driven by AI that enables your sales team to come up with pitch ideas in real-time. Your sales team and channel sales network can benefit from Wingman’s on-call cues on when they need to let the customer get a word in - via talk-to-listen ratios and real-time alerts. Its AI-powered sales insights get your sales reps a peek into the prospects’ thought process to get valuable points that they could use to tip the discussion in their favor. 

The call transcriptions are stored to provide metrics that can help you better judge the performance and skills of your channel partners. This can help you to fast-track your B2B sales cycle. 

Wingman is all about convenience and working together. It integrates seamlessly with salesforce, Slack, CRM, and other business tools to achieve high efficiency on a sales call. 

To make your selling and buying experience easy-breezy with Wingman, book a demo today!

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