Are Channel Sales Dead? (Or Just Grossly Under-Utilized?)
You may have heard rumblings from the old guard that selling software through the channel isn’t what it used to be.
This is true. No one is really going to argue that point. While channel selling used to be an effective way to reach prospects and amplify sales reach, in today’s market, the internet has changed the game. There are fewer degrees of separation between a vendor and a seller to navigate, and as a result, relationships don’t require the same coordination via a channel partner in order to be built and leveraged.
That doesn’t mean that the channel sales model is dead, however — only that the role of channel selling in software sales is evolving. Those changes may reduce the number of companies channel selling truly makes sense for, but it is still a viable option worth evaluating regardless of your company’s firmographics. After all, channel sales models can provide a significant boost to a customer acquisition process by making it more productive and efficient.
Channel Sales: Dead or Just Under-Utilized?
According to the 2013 Pacific Crest Venture Capital SaaS Survey only 1% of companies with $2M to $60M in revenue use a channel sales model as the primary mode of distribution, and only 12% use a mixed sales model. This indicates to me that channel sales models may be under-utilized in the current B2B software market.
I hope this statistic does not discourage startups and expansion-stage companies from considering selling via the channel. There is significant value in evaluating all your sales channel options, and several advantages to using a sales model with a channel component.
3 Key Advantages to Incorporating Channel Sales
- It gets your product(s) in front of new prospects that you may not be able to get in front of. If you identify a good partner, this can be a great way to accelerate market penetration.
- It allows you to get your product in front of more customers. Some of whom would not be accessible without the brand of a channel partner.
- It lowers customer acquisition costs. That is because the channel partner will shoulder the sales team costs, allowing you to focus those resources on other aspects of the business.
3 Cases When Channel Sales Make Sense
A channel sales model or mixed sales model may make sense for companies selling:
- Product(s) that require a lot of training, installation and support. Getting a customer up and running on these types of products can tie up lots of resources, which can prevent you from leveraging those resources to sell to other customers. Channel partners can help in that regard, just keep in mind it also increases the investment time to get the channel partner up and ready to sell your product.
- Products that are not sold on product differentiation alone. Resellers typically sell multiple products and sometimes competing products, so they will not be able to sell your product as well as you are able to do so in most situations. So complicated sales will typically be less effective via an indirect sales process.
- Companies that have a product that is in a stable state and not going to be rapidly changing. This will lower the costs of keeping resellers up to speed on your products.
Bottom Line: For a Select Few, But Worth Considering
The reality is that channel sales models are only relevant for a fraction of expansion-stage companies. The key is properly evaluating the option of channel sales, as it can be a great model if it makes sense for your business. It is important to remember, however, that the effectiveness of any channel sales model is highly dependent on the quality of the reseller/distributor and the team who will be working with them.
Keep that in mind when evaluating your product and vendor ecosystems so you can properly identify the types of worthwhile partner sales channels available to your business.
If you have not seen the 2013 Pacific Crest Venture Capital SaaS Survey, I recommend you check it out. There are many great insights on the trends in how SaaS companies are structuring their go to market and customer acquisition strategies.