If you had all the money, time and talent available to you, would you still sell through Channel Partners?
Follow me as I blog my way through my book: 99 Questions to Jump Start Your Partner Channel Brain.
I’ve asked this question of hundreds of business owners over the years. Reactions fall broadly into two categories:
1. The NO Group
They say things like:
“If it was possible to get rid of these stinkers I’d do it in a heartbeat…correct that…less than a heartbeat.”
“Putting us in direct conversation with our clients without a middleman to louse it up? Are you kidding? Of course I’d love to go direct.”
“For the margin our Channel Partners pocket on each deal, I’ve been thinking about it for years. Just can’t bring myself to the decision. But if I were just starting out today, I would never even consider the channel route.”
2. The YES Group
This group weighed in with comments such as:
“It’s pure foolishness to think we could ever cover the market on our own without the benefit of a channel. I don’t care how much money you dump into advertising.”
“Our products are typically bundled with many other pieces in the customer’s [product] puzzle. We’d be making it harder for customers to buy our solution. Just staging the inventory would cause a real hassle for customers.”
“Our Channel Partners are privy to too many product discussions that we’d be excluded from. We’d never make our numbers if we went direct…that I can promise you!”
Polar opposites to say the least.
But when I evaluate the background of the people in these two groups it probably comes as no surprise that Group 1 (channel non-believers) are folks with little in-the-field experience or those haling from finance/accounting/bean-counter jobs.
Surprisingly, Group 2 (channel believers) includes former Group 1 people who got religion (i.e., field experience) somewhere along the line.
Not that there isn’t an argument to be made for Channel realignment and regular evaluation, Channels play a vital role in the customer food chain.
Advocating for the Channel
To support this notion, here are just some of the reasons for a channel:
- You simply cannot afford your own sales force. This is especially true for startups. Even SaaS application startups opt for channels.
- Infrequent purchases where it doesn’t make economic sense to regularly service customers who only buy from you once every year or so.
- Bundling opportunities. Your products are purchased with others.
- Just-in-time inventory staging. Frequently, Channel Partners ship only when their customers need the inventory, sparing the customer from the requirement for warehouse space.
- Competitive g2. Channel Partners provide a needed backchannel to you for industry gossip and goings-on.
- Breadth. Channel Partners provide market coverage that would take years to duplicate, especially in international markets.
B2C and B2B Channels
Just to close out this question I thought it might be helpful to provide you with a list of companies and markets with my comments on their go-to-market approach. Hope you find some surprises in the list.
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Consumer Products and Services |
Comments |
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Lawyers & Doctors |
At first blush, I was going to say there is no exception—that professionals like doctors and lawyers always sell to their clients directly—but with the number of referral services and HMOs, I don’t know if I can make that universal case anymore. |
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Groceries, food |
Other than farmer’s markets (many of which are really not run by the farmer), you probably bought your last bag of Doritos and eggs from a grocery store. |
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Homes |
Realtors sell the bulk of real estate. Only a fraction of homes are sold by the owner. |
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Automobiles |
Even though auto dealer sales reps rank the lowest among sales reps at-large, car makers choose to sell their autos through dealerships. |
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Brewed coffee |
Yes, Starbucks owns all their stores… unless you don’t count the Starbucks in urban areas where they’ve partnered with local, social advocates; the Starbucks in Target stores, the Starbucks at airports and sports facilities; and the Starbucks beans sold through, guess where, your local grocery store (which were distributed by Kraft until recently and now are distributed by Acosta). |
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Business Products and Services |
Comments |
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Semiconductors, chips |
Between 20-40% of the world market is supplied through electronics distributors. |
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Business consulting |
The majority of consulting is sold direct. |
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Information products |
It’s estimated that at least 50% of all online courses, like those from AdWords guru Perry Marshall, are sold through Affiliates. |
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Microsoft software |
A whopping 95% of Microsoft’s revenue comes through Channel Partners. No joke! |
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Office supplies |
OfficeMax, Staples, Office Depot…. Need I say more? |
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Business insurance (medical, disability, property, casualty) |
Almost without exception, if you’re looking for insurance for your business, your building, your Directors & Officers and employees, an independent broker is your contact. |
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Shipping |
Yes, FedEx, UPS and the Post Office sell direct, but all those shipping centers—even the UPS Stores—are franchise operations. |
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Office furniture, like Steelcase |
Even the top dog, Steelcase, sells exclusively through dealers. |
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SaaS software, |
No doubt, the base/core application is something you subscribe to directly from Salesforce.com, but very few companies would ever buy SFDC for it not for all the awesome add-on applications available through the AppExchange. It’s said that Salesforce.com has created the perfect ecosystem and mix between direct and indirect channels. |
John Fox
@b2bmarketing
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