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What makes sales channel relationships work?

By February 13, 2020Strategy

Sales channel structures are inherently fraught with potential conflict. There’s a simple answer to making partner relationships work.

Sales channels are the lifeblood of indirect sales businesses and a boon to companies looking for access to new customers and aggressive market growth. In a survey conducted by CSO Insights, 63.5% of companies said channel partners contributed to their annual revenue. The World Trade Organisation estimates that 70% of the global economy operates through channel businesses. And yet, channel sales can be a sharply double-edged sword.

Ideally a win / win structure for suppliers, through extended reach, and for vendor partners, through cross-selling to existing customers, channel sales relationships are inherently fraught with complexities such as conflicting margin expectations and pricing practices, lack of information sharing and inadequate clarity on roles and responsibilities. And these traditional challenges have been recently exacerbated by heightened revenue demands, shifting buyer patterns and evolving sales management roles. Yet, like many of life’s most complex problems, the solution can be disarmingly simple.

Channel opportunities and challenges

Managing a direct sales team is a fairly straightforward brief – your products, your people, your hands-on responsibility to engage, coach, develop, support and lead your team to high performance. (Want some tips on being the best? Here’s an interesting infographic from Salesforce.)

Managing an indirect sales force, which can include agents, resellers, brokers, dealers or distributors, is another matter altogether. Writing in Forbes, contributor Ian Altman cuts to the chase of channel sales, “…you are making a conscious decision to have someone else take responsibility for selling your product or service.” The upside, no labour cost. The downside, lost margin. And his position on channel sales people is equally direct, “They will never be as passionate about selling your stuff as you are.”  Is that truth or dare? You decide.

The reality of channel sales management

The reality for channel sales managers is arms-length influence on partner sales practices and performance, but there is abundant opportunity to build productive partner relationships and drive revenue by applying more general management expertise. Writing in Harvard Business Review, Ryan Brier, MD, Channel Management Practice at Frontier Strategy Group comments, “Based on our research, the best channel managers tend to have more in common with great general managers than with great sales managers.”  He emphasises three most critical areas of similarity:

  • Strategic planning skills. In addition to thinking about competitive positioning in a specific territory, channel managers must have the strategic planning expertise to coach and collaborate with distribution partners to develop their competitive strategies.
  • Financial acumen. Sales managers are primarily concerned with direct customer issues such as contract profitability and payment terms, hitting revenue targets and currency fluctuations. Channel managers have a broader scope of financial responsibilities that include, among other things, demand forecasts, cash and inventory management, and monitoring the overall financial strength of distribution partners.
  • Coaching and enablement. The over-arching role of effective channel managers is to help distribution partners sell and service their product. This involves a thorough understanding of how the partner’s business works and how they can assist in developing customer solutions, meeting compliance requirements and smoothing logistics.  

Building channel relationships

It goes without saying that channel relationships are strategic and need to be managed with respect, care and consideration, bearing in mind the objective of creating mutual long-term benefit. The ideal, of course, is the perfect synchronicity of a co-destiny relationship. Atypical, to be sure, but a goal worth pursuing.  

More common, but nevertheless challenging, are solid sales partner relationships built on many of the same core elements as any other successful relationship in life: trust, commitment, two-way communication, transparency, and because disagreements happen, a mutually agreed process for resolving conflict.

In practical terms, here are the 5 basics of effective channel partner relationships:

  • Invest time in co-selling. The best managers in any business have first-hand experience working on the ground. Time spent out of the office and in the trenches helping distributors sell your products or services is a big relationship booster. Ask questions, advise on problems, go out for coffee and a chat about sport. Be human. Yes, time is money. Consider this an investment in the future of your channel partner relationships.
  • Promote together. Joint presence at trade shows or other promotional events shows commitment to the vendor relationship and lets you play an active role in lead generation. Plus, since no one sells your product like you do, partner reps get a close-up look at the nuances of your sales conversations.
  • Get active on social. Encourage and assist partners in developing a social media presence. Invite them to join professional groups and forums where they can join relevant conversations, answer questions, offer comments and generally network with colleagues and prospective customers alike. 
  • Create a best practices community. In the spirit of transparency and sharing, start an invitation-only online group for vendors, partners and customers to discuss best practices, share success stories, ask questions and get first-hand product information from multiple perspectives. This could evolve into a global source for 24-hour advice on industry best practices.
  • Co-invest in sales talent.  It’s the odd channel partner who wouldn’t like to have more salespeople pounding the pavement, but that’s an additional cost. So why not do a win / win deal and co-invest in sales reps dedicated to your brand? You pick up a certain percentage of the cost to company and set the terms of commission and incentives. It’s a mutual investment for mutual gain.

Ask, listen, act

Perhaps the single most critical success factor in any relationship is effective communication. The active listening and observing, the give and take of conversation, the silent message of a glance or a touch, are all woven into the fabric of a relationship over time. And within that repertoire, the single most important mechanic is listening. 

Active listening, giving complete and undivided attention to the speaker, is a specific communication skill that’s recognised as a powerful agent for individual change. And for channel managers, it’s a powerful source for developing solid sales relationships through a deeper understanding of partner concerns and challenges.  

Surveys are a channel management staple used across industries to gather feedback on issues ranging from partner engagement and satisfaction, to dealer needs, sales obstacles and operational efficiency.

Remember that survey data is only as useful as the integrity of survey design, the accuracy of analysis and the actual implementation of insights. So choose your survey partner with care.

By asking the right questions, listening closely to the answers, and acting on feedback, you’re on target to build long-lasting channel partner relationships that work.

Do you need to work on your channel sales partner relationships? Contact us to find out how we can help.