One of the most difficult jobs in B2B selling is moving a product through an indirect sales channel. In these situations your customers are other sales people, who then have to sell to the end customer. In many cases, it's a bit like herding cats, because you're not their sales manager, and you can't force them to sell your product, especially if there's easier money to be made selling something else.
A Sales Machine reader emailed me last week with a classic channel sales problem: a reseller channel struggling against "direct to consumer" sales, and an unwillingness of the supplier's management to spend money to make the channel successful. Here's the email, followed by my advice.
I am a sales consultant for a manufacturer of surveillance system. We sell entirely through resellers. It is my job to provide inventory control, staff management, lead generation, product management, and technical support to these resellers.Absolutely.
My industry is getting saturated and many manufacturers are selling directly to consumers. We cannot and will not do that because it does not serve the customer well. I need to help my existing resellers to become more effective selling our products while acquiring new resellers.
Unfortunately, my company is unwilling to spend money to create demand for our products with the end customer, which means that resellers must "push" the product. They're not always very good at that and I'm at a loss about how to make them more effective.
Can you help?
You want to increase your sales through indirect channels. However, you're going about it the wrong way. Your plan is to increase the number of channel partners and then spend money on demand creation to create pull-through. That's going to be very expensive and very high risk.
My recommendation is to do the opposite. I think you should DECREASE the number of channel partners and pay MORE attention to the channel partners that remain, so that they become more effective at selling your product.
To understand why this will work better requires some understanding of the business dynamics of channel relationships.
The first ground rule of a channel relationship, of course, is that both you and the channel partner want to make a profit through the sale of your product. However, it's important to understand that, while you both want profitability, the ways in which you pursue that goal are in direct conflict.
You, as the supplier, are looking to drive down YOUR cost of sales by leveraging the resources (personnel, floor space, etc.) of the channel partner. Meanwhile, the channel partner is looking to you to minimize the cost of ramp up and reduce THEIR cost of sales.
Under the circumstances, the only solution is to create a joint venture relationship that takes into account the resources that both companies can bring to bear in order to make the relationship successful. This means that YOU need to invest resources in training, marketing and sales support. Likewise, the channel must commit resources to training and actively promote the solution.
Each channel relationship is therefore a strategic investment. You don't want to recruit too many of them. Instead, you want the ones that you DO recruit to be effective as possible.
In fact, over-recruiting (the strategy you recommend) is one of the primary reasons that indirect sales efforts fail. When there are too many partners, your support budget can be spread too thin, starving partners who with the proper support might otherwise be able to make good sales.
Rather than spending money on advertising, you need to focus on training a smaller number of channel partners. The ability to make a channel productive is directly proportional to the amount of effort that you put into quality channel training. Here's a five point program:
- STEP #1: CREATE PRACTICAL SALES TOOLS. To be effective, channel sales training must go beyond the sales training that you would normally supply to a direct sales force. Your channel partners' sales reps will need competitive data sheets, sales scripts, selling videos, testimonials as well as the usual brochures and specification sheets. If the channel partner's value proposition is to take your product and customize it, they'll need case studies and real world implementations to learn from.
- STEP #2: PROVIDE EXCELLENT TECHNICAL SUPPORT. Channel partners need a lot of hands-on technical support, which it is your job to supply. Because the channel partners typically stretch products to do new things, they're more likely to surface problems, thereby creating an additional support burden. The danger here is that you'll spread yourself too thin, which is why you need to limit your partners to a number that you can support well.
- STEP #3: CREATE WAYS TO COMMUNICATE FREQUENTLY. Ongoing communication is vitally important to the health of a channel relationship. Today, every business moves quickly, so you'll need to constantly inform your channels what's going on with your company, the target markets, your installed base, and so forth. Consider implementing a news-feed that provides your channel partners with key information on a weekly or even daily basis.
- STEP #4: BUILD A SALES INCENTIVE PROGRAM. While your partner's sales staff may already be well compensated, they'll be far more likely to sell your product is they feel that there's "something in it for them." Similarly, you might set up a system where channel sales reps earn points when they sell your product, along with the ability to transform accumulated points into a prize or gift. It doesn't have to be something expensive, BTW.
- STEP #5: MEASURE THE RELATIONSHIPS. There are two reasons to measure. First, the key to the channel relationship is trust, which means that you need flexible in making adjustments that improve performance. That's only possible if you know what's happening. Second, when a channel partner isn't performing (i.e. consuming more resources than the revenue they create), you need to know quickly so that you can either fix the problem or cut the partner from your programs.