Every B2B firm should be aware of the opportunity in channel sales, and how to manage those sales effectively. It might not be relevant to every industry, but B2B sales are increasingly going through channels as opposed to direct purchasing.
Channel sales is a distribution method in which a business splits its sales force into groups focused on different selling conduits. A channel strategy is a vendor’s plan for getting a product or service through the chain of commerce to the end customer. Such strategy might use a direct or indirect sales channel, or a combination of the two.
According to Mike Moore, VP of channel strategy at Averetek, “channel marketing is focused on communicating the value of your products and services to, with, through and for channel partners.”
Businesses wishing to enjoy the benefits of outsourcing the costs of their far-reaching sales operations while preserving a significant chunk of the sales profits are looking to channel sales as an operational model. This strategy is significantly cheaper than training and running an in-house sales force.
How buying decisions are made has changed thanks to improved access to product and service information. According to CEB, 57 percent of the purchase decision is complete before a customer even contacts a vendor. This means smart marketing offers great opportunities to influence more than half of the decision-making that occurs prior to initial vendor contact.
The simplest and most obvious channel sales approach involves direct channel vendor-to-customer sales. Vendors can rely upon their own in-house sales department to deal with customers, or they can use e-commerce websites, indirect channels involving retailers or value-added resellers (VARs), businesses which bundle various vendor products and services in order to offer more comprehensive customer solutions.
Channel sales can be used in different ways. Some businesses use them to reach as far as possible, while others prefer to focus on expanding sales of their most popular products or services. Regardless of how they are implemented, channel sales are becoming tremendously important in B2B marketing.
The Importance of Alignment
In the B2B realm, organizations must be careful to plan channel strategies, keeping in mind partner-specific needs and concerns. Formal alignment must be established during the launch planning phase to ensure vendor and partners are on the same page. SiriusDecisions has identified three specific areas of alignment that must be addressed in order to ensure channel readiness:
- Channel product alignment entails clearly defining what market segments partners will target before devising a distribution strategy and competitor analysis. The objective here is showing partners why your product or service is their best option.
- Channel sales alignment means cooperation between product marketing and channel marketing to determine net partner margins on new offerings, as well as an analysis of whether additional products or services can be brought to the table by partners in order to increase the size of the deal.
- Channel marketing alignment is the crucial step of building awareness of new offerings. According to SiriusDecisions, successful channel organizations spend as much as one-third of their budgets marketing to partners. Stoking partner demand is a critical element of any successful new product launch.
The Future of Channel Sales
What can we look forward to in the future of channel sales? Cloud-based offerings will become mainstream for many channel programs going forward. Channel sales leaders must determine whether their partners are willing to sell new cloud-based solutions.
Improved partner performance metrics will also allow channel sales leaders to better focus their efforts on partners who are on track to meet or exceed targets.
Also look for the evolution of sales enablement tools created specifically for channels, allowing full accessibility to interactive products and enabling demonstrations of how various products or services can cooperate to solve customers’ individual challenges. Soon, channel partners may be able to integrate virtual 3D product demonstrations into a single interactive sales tool complete with branding, with an eye toward presenting better customer solutions.
“Not only would the ideal tool have access to all product lines, but unlimited users will have access 24/7, online or offline, anywhere in the world, providing a universal experience regardless of location or platform,” envisions Kaon Interactive marketing director Dana Drissel. “Easily translatable text would make creating international versions of the application a snap, and universal cross-device compatibility would turn any device partners possess into a captivating sales accelerator.”
B2B organizations will continue to use and improve channel sales strategies to meet the competitive challenges of today’s increasingly complex marketing world, always with an eye toward delivering superior client outcomes.
Photo via Flickr user Jon Evans. Used with permission.