One of the biggest challenges to scaling revenue? Your salespeople only have so much time. Even if you hire the most focused people, invest in tools that boost their efficiency, and remove all distractions, there’s a limited number of selling hours in the day.
Some companies choose to hire more reps.
That works — but it’s not the only solution. Plus, recruiting, hiring, and employing salespeople is expensive and cuts away at your margins.
Another potentially game-changing strategy: Using a channel sales model. Instead of hiring more reps, you’d distribute your products via a channel partner that will market and sell the product for you.
In this post, we’ll cover:
- What is Channel Sales?
- Channel Sales vs Direct Sales
- What are Channel Partners?
- Sales Channel Examples
- Sales Channel Strategy
- Sales Channel Partnership Platforms
- How to Measure Your Channel Sales Program
What is channel sales?
In a channel sales model, a company sells through third-party partners — affiliate partners (who get commission on each purchase), resellers, value-added providers (who typically bundle your product with their own), or another entity that doesn't work for you directly.
Channel sales offers many benefits, but it might not be right for your company. It’s important to consider the pros and cons of adopting this sales model over direct sales.
Channel Sales Pros
Adopting a channel sales model has significant benefits to consider. Apart from the fact that you could downsize your sales team, you’ll also enjoy built-in trust, increased efficiency, rapid testing and experimentation, and increased customer success. Let’s go over these one by one.
If your channel partner is already well-known within a market or vertical, you don’t have to do the work of establishing a brand presence. Your product will automatically seem more credible because of their endorsement.
One channel manager paired with several channel partners can bring in the same amount of revenue as five or six salespeople at a fraction of the cost. It’s also typically easier to bring on new partners than hire a new salesperson – especially once you’ve created the program and worked out the kinks.
Rapid Testing and Experimentation
Channel partners let you experiment with new customer bases, products, packages, promotions, and/or marketing campaigns in a low-stakes environment.
If your customers need training, onboarding, implementation support, and service, partnering with vendors who offer these services lets you focus on closing new business without sacrificing your existing users.
That all sounds great, right? But channel sales does have some cons — let’s take a look at them below.
Channel Sales Cons
While adopting channel sales has tangible benefits, there are a few drawbacks that make it less than ideal for some businesses.
Less Control Over Sales
You’re not directly managing the sales process. Your reps might not be able to jump in and take control if a partner is mismanaging a deal. They also might have zero say over the timeline of the deal — which can be frustrating and lead to unpredictable revenue.
If you partner with someone who has a poor reputation or treats customers badly, you’ll look worse by association. That’s why it’s important to choose a channel partner who’s known for a good reputation and excellent customer service.
In exchange for bringing in and/or closing deals, your partners will get a piece of the pie. You’ll make less on individual sales (but keep in mind, it’s probably cheaper to acquire each one).
Harder to Manage
It can be difficult to update your sales strategy, change your messaging, add a new product, or make any kind of major shift. You’re not simply rolling out a change to one group — you’re asking multiple external groups to adapt.
Slower Feedback Cycle
Because your partners are talking to some or all of your customers, feedback will take longer to get to you. And that feedback might not be 100% accurate — even if your partners are trustworthy, they may ask bad questions, use unreliable methods of gathering and/or analyzing the results, or unintentionally give you a biased interpretation.
Things can get very messy, very quickly when your direct salespeople compete with your partners for the same business. Suppose a rep decides to cut her partner out of the deal because she doesn’t want to give up the commission. If the partner finds out, he’s unlikely to ever pass her leads again. This leads to a case of channel partner conflict that could result in the relationship being severed.
Because of these drawbacks, some businesses are more drawn to direct sales. Let’s compare these two models.
Channel Sales vs Direct Sales
In channel sales, a company sells and distributes its products and services via a third party. In direct sales, a company sells its products and services directly to a consumer. Companies that use a channel sales model don’t need an in-house sales team, though they might use a mixture of direct and channel sales to increase revenue.
Your sales team is responsible for increasing revenue in a direct sales model. They might use a mixture of inbound sales and outbound methods, prospecting and qualifying leads to turn opportunities into closed-won deals.
In channel sales, you rely on third parties to sell your product or service. When considering adopting a channel sales model, you should take a few factors into account.
How to Know Whether Channel Sales is Right For You
If you’re planning to adopt a channel sales model over a direct sales model, it’s important to consider the state of your company, product, sales process, and more.
Company Size and Maturity
Small companies can use partners to grow their business without needing to invest in hiring and training a sales team. Once they’re larger, they can bring their own reps on board (or if channel sales is working, continue with what they’re doing!).
If your product is still in the early stages, you might want to take advantage of a direct relationship with your customers so you can quickly and efficiently assess what’s working, what’s not, and what to build next.
Sales Process Maturity
Before you can teach other people how to sell your product, you need to understand how to sell it yourself. If you haven’t defined the various stages of your sales process, the most important buying triggers, which customer stakeholders are typically involved, how long the average deal takes to close, and so on, you may want to postpone a channel sales initiative.
In this case, consider taking an inbound sales course to brush up on your skills, and build the confidence needed to refine your sales process. You should also consider your process’ complexity. The lengthier and more complex your sales cycle, the harder it will be for your partners to resell. A simple, straightforward, relatively short process is ideal.
If your offices are spread out, it might make sense to use a channel sales model. That makes creating multiple sales teams unnecessary. Of course, you can also use an inside sales model where appropriate.
It takes a lot of time and energy to get a partner channel system up and running. If you need money sooner rather than later, focus on direct sales for now. Firas Raouf, an expert in early-stage B2B tech companies, recommends building at least $20 million in revenue before launching a partner sales program.
To build a program, you’ll need to recruit third parties to sell and distribute your product. These third parties are called channel partners, and they typically take care of the sales process from beginning to end.
A channel partner is a company that sells and distributes a manufacturer’s product. Channel partners include resellers, affiliate partners, distributors, value-added providers, independent retailers — basically, anyone who doesn’t work directly for your organization.
Aside from making your product accessible to a greater number of people, channel partners serve a similar target buyer and have existing collateral or content that appeals to that buyer.
It might be tempting to partner with as many channel partners as possible, but it’s best to choose only a few, and to do so carefully.
Just like trying to sell to everyone reduces your focus and actually harms your overall results, trying to partner with everyone is a bad idea. Being choosy will pay off — not only because it will increase your revenue but because it will result in a much longer and profitable partnership.
What makes a good channel partner?
The process of finding partners is almost identical to finding prospects: First, you need to define what an "ideal partner" looks like. Let’s take a look at some of the aspects that you should look for.
Complementary to Your Product
The partner’s product or service should fill a gap in your offering or help your customers use your offering more effectively. For example, HubSpot’s marketing agency partners help small businesses take full advantage of HubSpot’s marketing software.
Aligned With Your Market
You should also consider whether your partner’s customers would benefit from your product. Are they demanding additional support, features, or solutions that your partner can’t currently provide? Are their customers the right fit in terms of geography, use case, and size?
High Technical Expertise
Identify how much technical knowledge your partner would need to sell (and potentially service) your products. You might have to do very little education and support — or you might have to do a great deal. Although training a partner requires more time and resources, it also gives them an additional incentive to work with you.
Tip: If your average selling price (ASP) is low, and your partners resell your product relatively infrequently, investing so much into training them isn’t wise. Make sure you’re tracking how much revenue the partner is bringing in compared to the average return.
Similar Sales Process
Your partner’s sales process should be compatible with yours. Ideally, there’s a natural point in their sales or services process for introducing or upselling your product.
Manageable Commitment Level
Ask yourself how much commitment would be required for success. For example, maybe your partner would need to spend one full day per quarter at your office getting training. On the other end of the spectrum, perhaps all they need is a basic understanding of your product, which they can learn from one 30-minute video.
Once you’ve crafted your ideal partner persona, rank the characteristics by importance. This exercise will give you a framework for evaluating specific partners.
Which channel partner types can you choose from? Here are some examples of sales channels through which you can sell your product or service.
Sales Channel Examples
A reseller purchases a product from the company that produces it, and resells it to the intended end-user for profit. Essentially, a reseller serves as an intermediary between the company that makes a product, and the final customer.
In this scenario, the customer will typically go straight to the reseller to initiate the purchase and the reseller will work with their sourcing companies to fulfill the order.
2. Affiliate Partners
In an affiliate partnership, a retailer will pay commission to website owners, businesses, and individuals who promote their products. Affiliate partners are typically paid a percentage of each sale they are responsible for bringing in.
The Amazon affiliate program is a popular affiliate partnership platform.
Distribution channels provide products directly to the consumer. Some distribution channels are agents, websites, or businesses that serve as intermediaries between the companies that produce the products and the final buyer.
A wholesaler is a type of distributor who specializes in getting physical products on store shelves to be purchased by consumers. Wholesalers typically have sales reps who work to sell their products to retailers.
Common examples of wholesalers include suppliers who sell food and other goods to restaurants, and stores such as Costco who buy their goods directly from manufacturers and sell them to their customers.
5. Value Added Reseller (VAR)
Value added resellers are companies that specialize in purchasing and reselling technology products with additional software or features that are above and beyond the standalone features of the product.
An example of a value added reseller would be a computer company that sells hardware with another company’s software pre-installed.
6. Independent Retailers
An independent retailer is a business owner who runs a retail company that is not tied to any major brand or franchise. For example, if an entrepreneur founded and operates a clothing boutique without the support of a parent company, they would be considered an independent retailer.
Dealers sell products directly to end consumers, but operate differently than retailers who sell several variations of a wide variety of products. The most common type of dealer is an automobile dealer, that sells and leases cars directly to the end-user.
In this channel, agents serve as an intermediary who does not have any ownership over the products or services they are selling. Agents facilitate deals between buyers and sellers, assisting with the negotiation process.
A common example is real estate. A real estate agent or broker is not the owner selling the property to a buyer; however, they do oversee the process until an agreement is reached and the deal is closed.
Channel consultants support the creation and efficiency of sales channels. Individuals in this role often connect retailers, manufacturers, distributors, and vendors to ensure the smooth delivery of a product to its customer. Though channel consultants do not directly sell, they play an integral part in making sure sales channels are running smoothly.
Now that you know the types of sales channels you can use, let’s go over how you can create a profitable channel sales strategy.
Sales Channel Strategy
When HubSpot was building a sales channel strategy, our team used inbound marketing principles to attract partners. We created content that specifically targeted the types of channels partners we wanted to have.
Not only is this strategy easier to scale than an outbound one, but it also guarantees that your potential partners know about your company from the first conversation.
With that in mind, here’s how to create a sales channel program step-by-step.
1. Craft relevant, useful content to attract partners.
Use your ideal partner persona to craft relevant, useful content. For example, if you want to work with staffing firms, you might write an ebook on how to place consultants, or host a virtual networking event for staffing firms to meet job candidates.
The partners you attract should be highly relevant to your industry. Once you’ve attracted a few prospective partners, reel them in by focusing on their needs.
2. Focus on the partner’s needs.
Once you’ve started talking to a potential partner, make their needs the focus of the conversation. They won’t be interested in working with you unless they’re also benefiting. Figure out how you’d be able to help — by enabling them to sell additional services, reach new clients, or enhance the value of their product or service.
Once you’ve established a few partnerships, choose a structure for the partnership.
3. Choose a structure for the channel sales partnership.
There are three main ways to structure channel sales. First, you and your partner can sell together. Your products improve each other. For instance, if you offer catering services, you might partner with a company that provides event clean-up. This type of partnership helps companies add more value to their customers.
Second, you can sell through your partner. Department stores are a classic example — they curate items from a range of third-party brands. Variety is typically the key. If you can find a partner who’s already selling several similar products to yours, they may be a good fit for this type of partnership.
Third, your partner can sell for you. These partners incorporate your product into theirs — in fact, the end user may never know about your company. When you go to the supermarket and buy the store brand, you’re actually buying an independent brand that’s been packaged with the grocery store’s label. You don’t have to use one method exclusively. Many companies use two or even three of these simultaneously, along with a direct sales model. It all depends on your needs.
4. Motivate your channel sales partners to sell.
Channel sales is extremely challenging because you’re trying to motivate people you have no direct influence over. If a regular salesperson doesn’t meet quota, you can work with them and/or put them on a performance plan. If a partner isn’t selling — well, there’s not much you can do, apart from “fire” them from the program. That’s usually not the most desirable option.
To get partners to sell, you’ll need to develop excellent resources that they can use to confidently sell your product. You should invest twice as much in content for your channel partners than you do for your direct sales reps. After all, your partners are much less familiar with the product.
Make sure they’re armed with clear, comprehensive, prospect-ready product specs, testimonials, customer examples, competitive comparisons, email templates, call scripts, meeting agendas, and objection-handling cheat sheets.Having this material will make partners feel more confident, which will boost their desire to sell.
5. Communicate often with your partners.
If your partners rarely hear from you, they won’t be as invested in the program. They also won’t know the latest news, product updates, and strategic announcements. On your end, you might not discover issues until they’ve festered for a while.
The solution? Maintain regular contact with your partners. Send a periodic email, create a Slack room, make a Facebook group, hold partner “office hours,” run webinars, host meetings at your office — whatever you need to do to stay in touch.
6. Offer extra rewards.
While earning commission on deals is a compelling incentive, some companies (like HubSpot) add additional reward systems to their partnership.
This lets you create “superpartners” and drive specific desired behaviors. For example, you might have a tiered system: One tier for basic partners, a higher tier for partners who sell over a specific amount per month or year, and a third tier for partners who sell over an even higher amount per month or year.
Depending on their tier, offer advanced marketing support, tickets to exclusive events, strategic consulting, meetings with your executives, access to beta features, premium listing in your directory, opportunities to interact directly with your audience, features in your email newsletter, and so forth.
7. Use a sales channel partnership platform.
For scaling multi-channel businesses, keeping data related to your partnerships organized can be a challenge. Using a tool designed to keep your channel data streamlined can be a helpful option. This will not only allow you to keep track of revenue generated by your sales partners, but sustainably grow your channel sales program.
Sales Channel Partnership Platforms
Here are a few sales channel tools that can support your business as your channels and partnerships become more complex.
PartnerTap’s Channel Insights tool empowers companies to automate channel mapping and scale their sales efforts. This platform provides in-depth analysis on your current accounts, showing where there is opportunity to grow current partnerships and helps users determine the viability and profitability of future partnerships.
PartnerTap is also part of the HubSpot Ecosystem, and their tools integrate flawlessly with your CRM.
Pricing: Free; Pricing available upon request
Crossbeam provides powerful software to manage channel partnerships. A major upgrade from spreadsheets, notable features of Crossbeam’s tool include real-time forecasting, instant account mapping, and cross-partner lead generation.
Crossbeam can also connect directly to HubSpot CRM, making co-selling and co-marketing even easier.
Pricing: Free; Pricing available upon request
Channeltivity’s partner relationship management software provides an all-in-one channel management solution. This cloud-based tool has an extensive set of features including a channel partner portal, partner training materials, distributor management, a commission management platform, and more.
Channeltivity also offers a HubSpot edition of their software that provides real-time pipeline visibility for businesses and partners.
4. Allbound PRM
Allbound designs its partner portal technology to strike a strategic balance between customization and automation. Channel managers can tag partners based on region, industry, company size, and other descriptors so the platform only displays content relevant to individual users. Multi-tiered learning tracks and accompanying quizzes automatically award new portal permissions as partners advance their learnings. Plus, Allbound’s Channel Insights grants full visibility into engagement and partner sales performance.
As a HubSpot certified app, Allbound integrates with your CRM for comprehensive pipeline visibility and consistent practices across your sales ecosystem.
Pricing: Available upon request
How to Measure Your Channel Sales Program
Wondering what success looks like? Here’s what to measure for every aspect of your channel sales program.
Channel Sales Recruitment Metrics
- Total number of partners
- Recruitment quota attainment
- Partner attrition rate
- Percentage of partners recruited by channel (for example, 50% from networking groups, 20% from proactive outreach, 10% from referrals, etc.)
- Average cost of recruiting and onboarding new partner
- Average length of time to recruit and onboard new partner
Channel Sales Success Metrics
- Total number of partner deals registered
- Average value of partner deal
- Percentage of accepted partner-submitted deals
- Percentage of closed partner-submitted deals
- Average sales cycle length
- Percentage of partners who registered leads in past month or quarter
Channel Sales Training and Support Metrics
- Percentage of partners using provided sales and marketing collateral
- Percentage of partners who attend optional events and/or ongoing training
- Average partner satisfaction score
- Percentage of partners who attempted certification
- Percentage of partners who completed certification
Channel Sales Profitability Metrics
- CAC for each partner sale versus direct sale
- Retention rates for partner sales versus direct sales
- Cross-sell and upsell rates for partner sales versus direct sales
Looking for someone to manage your channel partner relationships? You’ll need a channel sales manager. Below, you’ll find a general definition of a channel sales manager, plus a sample job description you can use in a job posting.
Channel Sales Manager Job Description
A channel sales manager works with potential and existing channel partners to drive sales. They typically establish a strategy, help their partners implement it, and work toward a sales quota. The national average salary in the U.S. is $94,358.
Our company is looking for a channel sales manager in [location]. This is an exciting opportunity to [grow a new channel, take a high-growth channel to the next stage]. As our channel sales manager, you’ll identify potential new partners, show them the value of working with us, and enable existing customers to sell our products.
In this role, you will:
- Work with internal stakeholders (Support, Customer Service, Marketing, Legal, Direct Sales, etc.) to ensure partners have everything they need to successfully resell
- Ensure partner expectations are being met (or exceeded!)
- Ensure partners are following agreed-upon guidelines
- Proactively help partners hit their sales goals/milestones
- Give demos, virtual presentations, or in-person presentations to potential partners
- Create demand using tools like marketing collateral, campaigns, webinars, and events
- Communicate regularly with partners and company stakeholders
- Travel to customer and partner sites on a weekly, monthly, or quarterly basis
We’re looking for someone who has:
- [X to Y] years of relevant experience in consulting or channel sales
- Experience working in [industry]. It’s a plus if you have established relationships with potential partners
- Proven record of achieving in sales roles
- Ability to work autonomously in a fast-paced, technical, and complex sales environment
- Excellent written and verbal communication skills
- BA/BS required, MBA preferred
- Ability to travel [X%] of the time
Tailor this job description to your company’s employer branding. If you’re relatively formal, you may need to tweak the language so it’s less casual. If your messaging is typically relaxed and friendly, you might want to turn up the playfulness.
Grow Your Business with Channel Sales
While building a channel sales program is a major investment, it can make a huge difference to your company. Not only will you reach new customers, but you’ll develop mutually beneficial relationships in your industry and grow your revenue as a result.
Editor's note: This post was originally published in June 2017 and has been updated for comprehensiveness.
Originally published Apr 28, 2021 2:00:00 PM, updated June 28 2021