What Are Channel Sales?
Channel sales involve working with third-party partners to sell your products or services. Instead of relying on your own sales team, you let others—like distributors, resellers, or affiliates—do the selling for you.
Think of it this way: you’ve built an awesome SaaS platform. Rather than selling directly to every customer yourself, you partner with resellers who bundle your software with their services or affiliates who promote your tool for a commission.
The payoff is that your product reaches a wider audience, and you don’t need to manage a massive sales team to make it happen.
Why Businesses Choose Channel Sales
Direct sales are great, but they can get expensive and time-consuming. That’s why many businesses choose channel sales to complement or even replace direct selling. Here’s why:
- Scalability: Expanding to new markets is easier with partners who already have local connections and customer relationships.
- Cost Savings: No need to hire and train a giant sales team. Instead, you share sales responsibilities—and costs—with your partners.
- Faster Market Entry: Partners can help you break into new regions or industries much faster than going it alone.
- Shared Risk: Selling is expensive, but with partners, you’re splitting the financial burden of marketing and outreach.
- Focus on Core Business: While your partners handle the sales, you can focus on product development, customer support, or other key areas.
Types of Channel Partners (With Examples)
1. Resellers
Resellers buy your product at a discounted rate and sell it to their customers, often bundling it with other services. They’re especially effective at reaching niche markets or specific industries.
Take CDW, for example, a leading IT reseller. They partner with companies like Microsoft and Cisco to sell software licenses alongside hardware solutions. By leveraging their established reputation in the tech industry, resellers like CDW help build trust with customers. This shortens the sales cycle and gives you access to markets that might be hard to reach directly.
2. Distributors
Distributors act as the logistical backbone of channel sales, managing warehousing, shipping, and inventory. Unlike resellers, they don’t sell directly to customers—they supply resellers or retailers.
A great example is Ingram Micro, a global distributor for tech and SaaS companies. They work with brands like Adobe and Dell, ensuring their products are readily available for resellers worldwide. Distributors like Ingram Micro save businesses from handling complex logistics, allowing them to focus on other priorities while scaling operations seamlessly.
3. Affiliates
Affiliates promote your product online in exchange for a commission, driving traffic and leads through content or ads. They don’t manage inventory or customer interactions—they simply focus on marketing.
For instance, HubSpot runs an affiliate program where bloggers, influencers, and marketers earn commissions by recommending its CRM tools. Affiliates add value by tapping into their trusted networks, bringing highly targeted traffic to your site. Because they’re only paid for actual sales, it’s a cost-effective way to boost visibility and revenue.
4. Managed Service Providers (MSPs)
MSPs integrate your product into a larger offering, bundling it with services like IT management or support. They often handle ongoing maintenance, making them invaluable to businesses seeking all-in-one solutions.
Datto, a cloud-based backup provider, works closely with MSPs who combine Datto’s software with their own IT management services. This setup simplifies the buying process for clients who want seamless solutions without juggling multiple vendors. MSPs also ensure high customer retention by offering consistent support and troubleshooting.
5. System Integrators
System integrators focus on combining multiple technologies to create custom solutions for their clients. They’re essential for large-scale projects that require complex integrations.
For example, Accenture serves as a system integrator for Salesforce, helping enterprises implement its CRM software. They don’t just deploy Salesforce, they integrate it with other systems like ERP platforms to streamline data across the organization. This makes system integrators key players in industries with intricate workflows, ensuring the product fits perfectly into the client’s ecosystem.
How Channel Sales Work
Let’s say you run a SaaS company. Here’s how a typical channel sales setup might look:
- Partner Recruitment: You identify potential partners—businesses or individuals who align with your goals and audience.
- Onboarding: You train your partners, give them marketing materials, and show them how to sell your product effectively.
- Sales Process: Your partners market and sell your product, either directly to customers or through their own networks.
- Revenue Sharing: You split the revenue—often as a percentage of each sale—based on your agreement.
- Ongoing Support: You keep the relationship strong by providing updates, answering questions, and helping partners succeed.
Challenges of Channel Sales
Like anything in business, channel sales aren’t without their headaches. Here’s what to watch out for:
1. Loss of Control
When you rely on channel partners to sell your product, you’re essentially handing over a piece of your brand representation to someone else. If they don’t fully understand your product or fail to align with your values, it can lead to inconsistent messaging—or worse, a bad customer experience.
For example, a reseller might overpromise on what your product can do, leaving customers disappointed when their expectations aren’t met. This reflects poorly on your business, even though the fault lies with the partner. To minimize this, you’ll need to invest time in training partners and ensuring they represent your brand accurately.
2. Channel Conflict
Channel conflict happens when your sales efforts compete with those of your partners. This is particularly common if you sell directly to customers while also relying on channel partners. For instance, if your direct sales team offers discounts or perks that your partners can’t match, customers might bypass the partner entirely.
This can create tension in your relationships with partners, discouraging them from promoting your product.
To avoid conflict, consider setting clear rules about which segments or regions are managed by direct sales and which are handled by partners. Transparency and fair play are key to maintaining harmony.
3. Partner Engagement
Getting a partner on board is just the beginning—you also need to keep them motivated to sell your product. Without regular communication, training, and incentives, partners might lose interest and shift their focus to other products in their portfolio.
For example, if your competitor offers a higher commission or better marketing support, your partner could prioritize their product instead.
To prevent this, create a strong engagement strategy. Offer periodic training sessions, provide co-marketing funds, and celebrate their wins with bonuses or recognition. A little effort goes a long way in keeping your partners loyal.
4. Revenue Splits
Channel sales come at a cost—partners don’t work for free. Whether it’s a reseller taking a cut of each sale or an affiliate earning a commission, you’ll need to share a portion of your revenue. While this is expected, it can eat into your profit margins, especially if your product pricing is already competitive.
For example, if a reseller takes a 30% margin, you’ll need to carefully assess whether the remaining revenue justifies the partnership. This means you’ll need a clear understanding of your cost structures and pricing strategy to ensure profitability while still offering partners an attractive incentive.
5. Performance Tracking
One of the biggest hurdles in channel sales is figuring out which partners are pulling their weight. Without the right tools, it can be difficult to measure performance or identify areas for improvement.
Take, for instance, you might not know how many leads a partner has generated or how effectively they’re closing deals. This lack of visibility can lead to wasted resources on underperforming partners.
To solve this, invest in a Partner Relationship Management (PRM) platform like Allbound or Salesforce PRM. These tools help you track key metrics, monitor progress, and provide insights to optimize your channel strategy.
Best Practices for Channel Sales
Channel sales aren’t something you can just wing. If you want it to work, you need a clear game plan and a good relationship with your partners. Here’s how to set yourself (and your partners) up for success:
1. Choose the Right Partners
Not everyone’s going to be a great fit for your product. That’s why it’s so important to pick partners who really get what you’re offering and know how to sell it to the right audience.
For example, if you’re selling a SaaS tool, look for resellers who already work with businesses in your target industry. If they’ve got an existing customer base that overlaps with your ideal users, that’s a huge win. And don’t just focus on their reach—make sure they’re aligned with your values, too. A partner who cuts corners or overpromises can do more harm than good to your brand.
2. Provide Top-Notch Training
Your channel partners can only sell your product effectively if they truly understand it. A one-time orientation isn’t enough. Offer ongoing training sessions, updated marketing materials, and easy access to resources like FAQs or demo videos.
For example, let’s say you sell a project management platform. Instead of just giving your partners a feature list, show them real-life use cases that resonate with their clients. The more confident they feel about your product, the better they’ll perform. Plus, consider creating a dedicated partner portal where they can access training materials 24/7.
3. Set Clear Incentives
Let’s be honest, partners are in it for the rewards. Sure, they might love your product, but at the end of the day, they need to see what’s in it for them. That’s why having solid incentives is non-negotiable.
Competitive commissions are a great start, but go beyond that. For instance, you could offer bonuses for hitting certain milestones, like landing a big client or meeting quarterly sales goals. If you want them to push your product harder, co-marketing funds are another great idea. Basically, make it worth their while, and they’ll go the extra mile for you.
4. Communicate Regularly
One of the easiest ways to lose a channel partner’s interest is by failing to stay in touch. Regular communication ensures partners remain aligned with your goals and keeps them informed about product updates, promotions, or changes.
Set up a schedule for check-ins, whether that’s monthly calls, quarterly business reviews, or newsletters. For instance, a quick webinar to introduce a new feature can make a big difference in keeping your product top-of-mind for partners. Open communication also gives partners a chance to share feedback or challenges, which helps you refine your strategy.
5. Use the Right Tools
Managing channel sales without the right tools can be chaotic. Partner Relationship Management (PRM) platforms like Allbound, Zift Solutions, or Salesforce PRM streamline everything—from tracking partner performance to sharing marketing resources and tracking sales leads.
For example, if a reseller struggles to close deals, a PRM tool can highlight where they’re falling short, allowing you to step in with targeted support. These platforms also simplify sharing resources, like sales collateral or training modules, so partners always have the tools they need to succeed.
FAQ: Channel Sales
What’s the difference between channel sales and direct sales?
Direct sales involve selling directly to the customer, while channel sales use third-party partners to handle the selling for you. Think of it like hiring a team to extend your reach.
How do I avoid channel conflict?
Set clear rules about who handles what. For example, you could focus your direct sales on enterprise clients and let partners handle small businesses. Communication is key here.
Are channel sales only for big companies?
Not at all! Small and medium-sized businesses can benefit just as much, especially if they’re trying to expand into new markets without a big sales budget.
How do I measure channel partner performance?
Use a PRM tool to track sales numbers, customer feedback, and engagement metrics. This helps you see which partners are driving results and which might need extra support.
What’s the biggest mistake businesses make with channel sales?
Rushing into partnerships without proper vetting. It’s better to have a few high-quality partners than a bunch of mediocre ones who don’t deliver results.
