Basic definition of the channel

A sales and distribution channel comes about when a company chooses to replace (or sometimes supplement) its direct sales force (i.e. the people who sell straight to the end customer) with indirect organisations. These organisations can be value-added resellers (VARs), managed service providers (MSPs), distributors or partners, and together they create that company’s ‘channel’. The result is that the people who end up selling the product are not employees of the company that makes the product.

The channel I speak of here refers specifically to the IT industry, but you will find that organisations in most product-based industries (e.g. food and drink) sell through distribution channels.

Who operates in the channel?

These are some of the terms you need to know if you are going to deliver channel marketing or channel communications.

The vendor

This is the company that actually makes the technology, such as Apple or Microsoft. The vendor will usually have a channel manager (or a whole department), dedicated to recruiting and supporting channels.

The distributor

This is the organisation that buys products from vendors, warehouses them and sells them on to resellers. The role of the distributor can be really important, as they often develop the skills and expertise to support the VAR and they manage a variety of products from a number of vendors so that the VAR only has one point of contact and can deliver an integrated suite of products and services.

The VAR

The value-added reseller (aka channel partner or reseller) takes the products from the manufacturer or distributor and sells them to the end user. Unlike a regular reseller that just sells the product on (think of Tesco, selling Cadbury’s chocolates exactly as they come out of the Cadbury’s factory), the VAR adds extra features to the products before selling them on. For example, if a VAR was working with a start-up, they might sell Dell computers with a bundle of other services and products, such as installation and setting up an office network. That’s the value they add.

The end users

The businesses or people at the end of the distribution chain that actually use the product in the end. Note that even if the end users are consumers, the channel through which they are reached consists of a series of businesses, making channel communications a B2B PR discipline.

Why would a vendor choose a channel strategy?

You might be wondering why a vendor doesn’t just build its own salesforce and sell direct to its end users. Well, many do, but choosing the channel (either exclusively or alongside an internal sales team) offers a number of advantages:

  • Many vendors don’t want to get involved in the nitty gritty of implementing their technologies at the end users’ offices (for example). They want to focus on making and improving their technology, but let someone else handle the support calls and onsite set-up. VARs, many of which are consultancies rather than just ‘business technology stores’ can dedicate time to providing advice, support and consultancy services (and make a profit in the process).
  • When expanding into new markets it is much easier to partner with a reseller who already understands the market and already has the networks and infrastructure to sell to and service it, than it is to set up a new division or a new office.

Why would a reseller choose to work with a vendor or distributor?

If you’re a business IT consultancy, you probably don’t have much time to invent, test and promote your own computer, storage solution and operating system, and if you did, you’d have to be exceptionally good at it if you wanted to seriously compete with what’s already out there. Instead, you would rather help businesses to use those technologies that they already want to use. And by partnering with vendors (usually through distributors), they get:

  • Recognised brands (with all the marketing and promotions weight that goes with that).
  • Training and education.
  • Leads (many vendors don’t sell direct at all so pass their leads on to their partners).
  • Exclusivity (some vendors offer partners exclusive partner status in certain territories or markets).
  • Support in servicing their clients.
  • They also enjoy an extra layer of support from the distributor, which usually holds a bit more clout with vendors (the distributor is usually a major ‘customer’, representing many resellers so can get the vendor on the phone for support much quicker than a single reseller who buys one or two pieces of kit a year).

What are the issues associated with selling through the channel?

Channel dynamics are different from those within other businesses, and if you are going to be communicating with ‘The Channel’, you need to understand some of the pressures facing people who work within it. Here are a few things to consider.

  • The vendor has to give a cut to its channel partners (or they wouldn’t want to take on the effort of selling its technology). Resellers usually choose to represent vendors when they think this will help them improve their margins or market share in some way.
  • The reseller is not obliged to work with a single vendor (although some vendors only recruit partners that will support their technology exclusively) – they can offer both Dell and Samsung solutions if they want, for example. This means the vendor has to make its offering appealing to its partners – either through better margins than competitors or by helping the reseller win clients.
  • Sometimes the vendor also sells to the end user directly, which makes them a competitor to their own sales channel. Take for example the big Apple store on Regent Street in London, where the vendor (Apple) sells straight to consumers (anyone who wants to buy an Apple product). But then just round the corner on Tottenham Court Road, is a smaller technology store that has been certified by Apple (and has a big ‘Apple Certified Reseller’ sign on the door) to also sell those products to the same end user.
  • When a VAR represents multiple vendors, they are under no obligation to give equal sales and marketing effort to their vendor partners. In fact, they usually focus on selling the ‘hot product’ of the moment.
  • The vendor has to accept that the methods of selling are entirely up to the VARs, leaving the vendor in little control of the customer experience.
  • Usually, vendors train their VARs in how to sell, implement and use their technologies.

This post originally appeared on the B2B PR Blog – to read it in its entirety, click here.

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