It may be the desire from day 1 to sell indirectly. It scales well, and gives huge advantages with local presence in the field. However, when starting a new business there is often a need to win the first deals directly. Then migrate to indirect sales to stimulate growth. Let’s try to look simply at how to start this process. It is a process that takes time, needs careful attention and as you will likely only do it once and you need to get it right first time.
Here are 3 key things you need to define when you start?
1 : 1 or 2-step indirect sales?
Key, right from the start, is to define the number of steps between you and the end-user. In a 1 step indirect sales model you provide the solution to a partner/systems integrator who sells to the end user In a 2-step model you provide your solution to a Distributor, who may or may not add value, who in turn provides the solution to their network of partners. These partners sell to the end user. The distributor may be considered to be a fulfillment partner who simply gives access to a market or network of partners. Or a VAD, a value-added distributor, who offers training, support, or added value to the product itself. Each step in the sales process needs to generate value and revenue for the parties to make it a successful business for all. As part of the process, to protect potential revenue, it may be a requirement to define targeted customers or geographic regions within the context of legal and cultural boundaries.
2 : Pricing model
If you have been selling directly you know what end users are paying for the solution. This might be an indicator of future pricing, but as you migrate to indirect sales this may be moving you into a new market with different price points. In any case each level of reseller will be taking a margin, and the more value they offer the higher their expectations will be. Lower margins may be compensated with higher volumes. Although from day 1 this might not be the case.
It is also important to make the pricing model simple and clear to everyone from your employees to the end user. Complexity pushes up the time and cost of sales and can put the brakes on accelerating sales growth.
Careful attention must be paid to discount rates and volume discounts for the reseller and distributor if present. There are often levels linked to the investment the partner makes and the perceived value they bring to sales. Often Gold, Silver etc are used to help clarify the relative positioning of partners and the benefits they obtain in relation to the investment they made.
3 : Support and training
The presence of partners in the field gives an option to provide support and training in local languages close to the end user. It also gives the partner the potential to provide higher margin services to the customer.
Deciding who offers levels 1, 2 and 3 support early and equipping each party correctly to deliver the required support has to be done early. This is closely linked to the training, but also the Service Level Agreements that your customers may require.
Training for partners, and end users has several aspects. These include how the technology works, how and what to sell, how to use and administer the solution. Once again simple and clear access and pricing is important. But also, you need to decide the delivery mechanism and whether you wish to subcontract or delegate this role.
What next?
Studying the market, the competition and the existing installed base will give much useful input into the process. Once you have decided on the approach it needs to be formulated into a legally binding contract to signed by both parties. To this, I would suggest in annexes, pricing details, sales targets, volume discounts, training plans, support details etc. need to be added. Knowing the rules of the relationship are key to future long-term success.
Now is the time to contact us to make this once only journey a success