It’s common to find manufacturers excel at designing, manufacturing, and servicing quality products within their target markets. Often these businesses are built with talent from technical backgrounds who excel at analytics, problem solving, and discrete business practices.
Manufacturers who are leaders in their market also recognize the need for equally successful market and sales expertise. While direct selling expertise is typically the default sales strategy, indirect selling strategies are often more cost effective with greater flexibility. Indirect selling strategies through channel partners such as distributors, resellers, and independent manufacturer reps can provide competitive advantages complementary to the superior design of the manufacturer products.
According to 2021 World Trade Organization report, “75% of world trade flows through indirect channels vs 25% flowing through direct sales.”
The key to longevity, for both manufacturer and channel partners, is acknowledging each other’s strengths and choreographing an effective execution strategy. It’s like choosing a dance partner. The relationship between a manufacturer and channel partner serves as the foundation for growth and profitability for their respective businesses.
Channel partners offer unique perspectives and insight in order to identify product needs.
While manufacturers have the expertise and capabilities to create products, they rely on channel partners to provide much needed customer and market knowledge. The strength of a channel partner lies in its thorough understanding of the wants and needs of each customer, its existing marketing network, and direct access to target customers. A strong manufacturing partner offers a talented team of engineers, a wide array of manufacturing capabilities and the resources to expand and change according to client needs. Working together to identify and build towards each other’s goals is critical to achieve mutual success.
Here are the top reasons why channel partners and manufacturers make great dance partners:
1. Channel partners are the premier knowledge sources within the markets they serve. They are often part of the communities they serve and often participate in regional trade and business organizations. They know the “pulse” of the markets they serve.
2. The channel partner opens doors for the manufacturer based on the relationships built through other product lines the partner represents. They see many more customers with a variety of needs, often solved by complementary products.
3. The cost of securing business through channel partners is a variable cost in comparison to a fixed cost with a direct sales force. Channel partners are typically rewarded on a “pay for performance” basis. In periods of market instability, channel partners are suited to weather the ups and downs.
4. Commercial contracting with manufacturers can often become complicated and overly bureaucratic. When manufacturers build their business around global markets, there is little flexibility in commercial and legal terms. Channel partners utilized in a buy/resell model can provide greater flexibility to customers satisfing their cash flow needs and risk tolerance.
5. “eles falam a língua.” Channel partners not only speak the local language, they understand the business customs. There is no need for a manufacturer to place a sales rep in every location around the world considering the uniqueness of each region. Channel partners provide their expertise communicating with and conducting business in the customer’s language.
6. Customers do not buy the manufacturer’s product alone, they buy everything required to put the product into practical use. Whether it’s complementary components, installation services, or a maintenance contract, customers expect these elements of the whole product to be provided. Channel partners often provide these elements or support the customer in acquiring the components, services, or talent required to gain the expected value from the manufacturer’s product.
7. Channel partners can identify holes in the manufacturer’s current product offerings and make recommendations regarding existing products that could be improved to better suit their needs. They are the feet on the street and can be your “eyes and ears” in the field. While the manufacturer has a good idea of how their products are implemented, channel partners hear customer feedback before anyone else.
8. Channel partners can take advantage of manufacturers’ innovative ideas and experience in designing, producing and launching a product. Since the partners see the challenges and opportunities customers face daily, they know the outcomes that customers are seeking. By combining the technical and innovative resources of the manufacture along with desired expected use cases and out comes customers are seeking, manufacturers and channel partners make great partners developing products and solutions together.
9. Working alongside a trusted manufacturer, channel partners gain the opportunity to take an entrepreneurial role in meeting a customer’s needs, distancing themselves from competitors who sell direct, offering everyone the same products. The channel partner can be the “last mile” in customization, tailoring, and creating solutions bespoke to the customer’s need.
10. Retention of channel partners is significantly better than retention of a typical direct sales employees. Numerous studies show average sales employee retention is between 18 and 24 months with a 6-10 month replacement period. By comparison, channel partners retention is much higher with an average retention of 5-8 years.
Manufacturers can build a significant competitive advantage by finding the right dance partner.
Manufacturers can build a significant competitive advantage by finding the right dance partner. Channel partners offer attractive benefits of operating, scaling, and profiting from a relationship where the skill sets of each the manufacture and the channel partner are maximized for the benefit of both parties.
Take advantage of aligning your channel strategy with the best practices identified in the Channel ACE model. Take a quick 10-minute survey to assess the performance of your channel strategy against best practices found in top performing channel selling organizations.
Navigant Associates is a global training, consulting, and research firm specializing in channel sales strategies utilizing 3rd party sales and service partners. We help sales teams design and transform channel sales strategies resulting in higher earnings and customer value.
We help clients recognize performance gaps, leverage best-in-class practices and build strategies that improve partner relationships, execution skills, ultimately satisfy more customers.