What are channel sales and why are they so important?
For all companies, increasing revenue is essential. An increase in sales – ergo an increase in revenue – is the most reliable route for a company to pursue its growth ambitions and follow its underlying scaling strategies. So, what are channel sales, and why do they make up such a large percentage of the sales market?
Last week, on Selligence’s Sales Syndicate Podcast, our very own Ellis Campbell, Head of Enterprise at Selligence, spoke with Alex Whitford, VP of Partners and Operations at Channext, to learn about his background in channel and partnerships sales.
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Whitford has spent eight years building channels and partnerships right across Europe, the Middle East, and Africa. He has worked for some big names including Zoom, where he ran their distribution strategy through the pandemic.
What is a sales channel?
A sales channel is a way in which a company sells its product to its users. There are many types of sales channels that a company might use to develop its selling strategy, but all of these channels are based on relationships. It takes time to build trust and rapport, but in doing so a company can go to market with a much more effective outreach than traditional cold-calling strategies.
Building a channel takes time
Sales channels are designed to be efficient, but building an efficient process can take time to perfect. The selling/buying relationship can involve a lot of back and forth, involving lots of communication and managing of queries and expectations. It’s not just building the channel that you need to allow for either – that channel is only of real use to you when it’s taking care of itself. According to Whitford, it “takes months and really years to really start to be self-sufficient and running.”
But having a self-sufficient channel is where you need to be aiming. Any company looking to major growth, perhaps targeting an IPO, will want a channel network that is driving their business. “It’s a massive value add,” Whitford continued.
You need to change your approach for channel sales. Instead of wasting your time and energy chasing down one big opportunity, play it smart and go after that one company’s partners. Any one of these partners will also be selling to a number of other clients you might want to chase down. So, by winning a reseller, you will ensure that your product doesn’t just go out to that one contact but will actually be made accessible to multiple other organisations.
To build a channel, you’ll need to change your selling mentality. Approaching a prospect with ‘we want to work with you’ is often received much better than asking ‘do you want to work with us?’. The thing to remember is that these prospects want to be treated as partners, not just resellers of your product. By presenting the opportunity as a partnership where both sides can benefit as equals, you can frame a much more enticing opportunity. You need to illustrate that you can bring them value too, and that this will be a partnership of give and take.
How to negate the challenges
One of the biggest challenges facing any sales channel is the risk of churn. It’s easy to sell a product to someone but keeping them on board is a bigger task. Salespeople tend to over-promise: they tell a good story, tell you how much money you’re going to make and how easy it’s going to be. Then the newly signed client hits a brick wall and fails to see the results they’ve been promised. Lack of trust comes into play next. The client feels cheated, or maybe just underwhelmed. Churn is then a very real risk.
There are three main ways to work around this. One: build a very structured go-to-market and really focus in on how value can be added for the end users, and how that can generate revenue. Two: for new user acquisition, tie your product to another complimentary product, so you can both go out and co-sell to new users together. Three: for retention and renewal, look for a way to come in and add extra value (even free of charge for a period of time), so that your users can start living and breathing the sales cycle.
Narrowing your focus is essential to doing well. Stop over-promising and leading your clients to disappointment. Whitford says, “focus is critical because where I see channels fail is when they promise too much and then nothing happens in the right time frames and then ultimately it falls over. What you want to do is promise three wins and deliver three wins – then continually do that as you then ramp.”
Clarity is key
A narrow focus and clarity go hand in hand. Now you know what you’re doing, and what you’re promising, it’s time to buckle down and communicate that – clearly – to your prospect. For any plan that you’re putting forward you’ll need to consider the volume, the churn rate, and the expected conversion rate. Set your expectations very clearly.
When building a business plan with a partner, Whitford will state the lead and lag measure. The lag measure typically is revenue, what you’re driving towards. The lead measures might be volume, end users spoken to, proof of concepts delivered, conversion rate, churn rate, etc. Once these have been decided on, Whitford advises, “map it all out clearly so that even if you haven’t achieved revenue today, if you’re hitting all the lead measures, you can be confident that you’re going to hit the proven lag.”
Integrity will also come into play here. If you’re being transparent, thorough and are consistent, integrity and good reputation will follow. In business, people talk, so a good reputation will spread. On the flip side, “you can only screw over a partner once and they never forget. And the problem is, you don’t just end up screwing over one partner, you screw over a whole channel because they all talk to each other, they all go for drinks, and suddenly you’re the guy that screwed them out of one deal and it just never goes away.”
With a clear plan and strategy in place, you can afford to be selective in targeting your partners. To secure sustainable growth, you’ll need to be qualifying your partners and customers so you can root out any that don’t truly fit your ICP. If you don’t believe you can achieve sufficient ROI for both sides of the partnership, then it’s time to cut them loose.
With channel sales, the idea is you need to employ a different mentality. Selecting a partner because you think you can sell one deal is not the point. You need to be thorough and considered in your approach. You need to be making partnerships where you can sell hundreds of deals through that relationship, not just the odd one or two.
So, it boils down to a few key points. For Whitford, the starting point is with the end user: “who is your one end user who perfectly defines your market? Go and understand how your product works into that organisation. What value are they getting? What is it missing and what does it integrate with? And then I work backwards from that.”
Networking is central to building a channel, so spend time on networking sites like LinkedIn. The amount of information available to you in these environments is huge. In these forums, you can also build interest around your own brand so that you can get people coming directly to you too. By creating content on a networking platform, you can start driving a lot of interesting conversations. These can lead to valuable relationships that will serve you throughout your career. They can also help drive traffic and insightful conversation straight to you, so you can reduce some of the leg work!
Finally, focus on value. For a sales channel to become self-sufficient and really add value, you need to understand what that value looks like. You need to remember that value has two sides – what it offers you and your company, and what it can offer your partners. By understanding how your product can benefit your end user, you can also identify ways to add value for them too. Making your product more attractive, making it stickier and more integrated, is the way you will secure your own revenue value.
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