Channel partnerships are a huge segment of both the B2B and B2C market. It’s how vendors and manufacturers distribute their products to customers when they don’t have their own sales operations.
As a manufacturer, you might use exactly this model in your business. There are lots of pros (and only a few cons) to this structure if you use the right type of partnership to support your business. In this blog, we’ll go through the pros and cons of using a channel partnership, as well as a few different ways to set up your partnership.
Pros and Cons
There are some obvious benefits to using channel sales in your business. For example, you reduce your overhead costs by not needing a storefront. Plus you have lower customer acquisition costs, can broaden your geographical stake, strengthen brand credibility and have time to focus on your end of the business.
There are some trade-offs to secure these pros, though. With a channel partnership, you’ll have to give up some control of the sales process when you hand over your product. There’s also more risk for your brand reputation if a partner doesn’t reflect your core values or gets into trouble. Lastly, it’s much more difficult to get direct feedback from your customers, which makes developing new products and fixing issues tough.
Overall, if you’re not willing to run the sales side of your business, then channel partnerships are likely a good choice. Just be aware of who you’re bringing into your brand and the type of partnership you choose.
Value Added Resellers (VARs)
This is the most popular type of channel partnership. In this set up, a reseller will buy your product, adjust for their profit margins, and add extra value services through their business. It’s an excellent way to not only move your product, but also build on your brand reputation through trusted resellers.
Using VARs can significantly boost your sales numbers and help you reach a broader market than you would on your own. It’s a good choice for businesses who are releasing new technology, want to break into a specific geographic region or simply don’t have the capital to expand their operations on their own.
Service Delivery Partners
These partners aren’t reselling your products, but they do offer additional services to your customers. Most of their services are customized to the potential customer’s needs, such as consulting before purchase, installing the product or technology and managing it throughout the life cycle.
This partnership is particularly helpful for tech companies who want to reduce the friction points between their customers and their products. Having a service delivery partner can make implementing their products easier and increase product use and adoption post purchase.
High Velocity Partners
If you’re attempting to scale your business and its sales, then you’ll likely need a high velocity partner. These are often referred to as fulfillment partners because their goal is to help you fill orders quickly and efficiently. This type of partnership doesn’t offer any added value to your customers, but it does speed up how quickly you can fulfill large numbers of orders and reduce your internal administrative costs.
This option is great for companies who are trying to rapidly scale their business and increase sales numbers. It’s usually used for products that are easy to set up or install, which is why customers will still opt in even without value added services.
As an added bonus, your high velocity partner might even be able to push your product into previously untapped or hard-to-reach markets through existing contracts. This means you not only can sell more products, but you can also sell to more people.
Channel partnerships are a great way to maximize the value and earnings from your products by using a network of other businesses ot help you sell and help customers. Keep in mind there are many types of partnerships and choosing the best fit for your needs is key to success.