Develop a channel partner program
Create a program that supports your channel partners in their selling efforts. Unlike a strategic alliance, channel relationships are typically one-to-many. The program you devise must have selling terms that entice many partners to want to sell your product, which typically means offering a discount off the retail sale price that’s typically charged. Discounts vary by industry and product, but 40% discount off retail for wholesalers and large distributors is common with system integrators, resellers, and consultants receiving anywhere from 3% to 35% off retail depending upon their level of involvement or quantity sold.
Avoid channel conflict
Each reseller or intermediary is going to be interested in the amount of money they can make from selling your product and will want to make sure you don’t:
- Undercut them by selling the product direct to the customer at a price below theirs
- Have too many resellers or distributors in a geographic region
- Use a particular distribution model (via web only, etc.) that limits their ability to sell to end users
With each intermediary wanting to reach customers with their own methods to extend their reach, channel conflict is something that may arise and will be an issue you’ll need to resolve.
Ongoing channel support
Once your channel partner program is defined, continue to educate them on new or complementary products, industry trends, and customer wins. You’ll also want to keep up your outreach efforts to recruit new partners to increase “feet on the street.” Knowing where to increase your marketing dollars and how best to incentivize your channel partners to attain larger sales objectives can be challenging.
Maximize your investment
Determining which distribution channels to pursue is important. Prioritize the distribution channels by assessing which ones provide the best return on investment, have the least amount of competition, or meet criteria such as geography served or available manufacturing capabilities. Is an open or closed distribution channel best? An open distribution channel serves more types of channel partners than a closed one where the number is limited by a criteria you set – such as certification level, occupation, sales volume, or other factor. The distribution channels and partners you select will ultimately affect your bottom line so these are not considerations to take lightly as you seek to maximize your investment.