Many companies use resellers to extend their sales reach without additional investments in a direct sales force. These guidelines can help you establish an effective reseller program.
So you’re a small but growing company, thinking about establishing some reseller contracts to push your products. Maybe you’ve decided to expand into a new market where you don’t have a presence. Maybe you’ve hit on a windfall – a company has come to you wanting to resell for you and they already have customers lined up! Or maybe you already have some reseller agreements in place that haven’t been as successful as you’d hoped.
There’s no denying that reseller agreements are a great way to expand your sales reach and market penetration without having to invest in a large direct sales force. However, unless planned carefully, the road to reseller agreement bliss can be paved with pitfalls. Suppliers often complain of resellers who don’t perform or who expect marketing dollars and sales leads handed to them without any return commitment. Resellers complain of suppliers who expect outstanding sales performance but offer little by way of incentives, support, and rewards. Both sides complain of opportunists looking for a quick sale, without any thought of long-term, mutual benefit. The key to success is to structure reseller programs with the right vision, goals and rewards. Here are some guidelines to follow when structuring your reseller agreements:
1.Keep Your End Customer in Mind: Understanding the needs of your end customers will make the job of forming profitable partnerships easier. Start with some solid customer research and then identify what kinds of resellers will allow you to reach market segments most efficiently while providing superior value to your clients.
2.Establish a Program With Clear Guidelines: Companies with successful partnering agreements put some infrastructure behind them. Your program should clearly define the types of partnerships you engage in as well as the requirements and rewards for doing business with your company. You should also consider what goals you expect to achieve from engaging partnerships:
*What percent of your revenue to you hope to gain through reseller channels? *What markets do you want to reach with your partners? *What need can the reseller fill for the customer that you can’t? *What value can you provide to your reselling partners? Put some serious thought in to this, put someone in charge of the program, and consult your potential selling partners on development issues. Companies with large, established partnering programs put nearly as much effort into marketing themselves to partners and supporting those partners as they do their customers.
3. Require An Upfront Commitment: Opportunists are everywhere and both suppliers and resellers often make the mistake of focusing on quick sales. Instead, spend your energy on partners who are interested in a long-term commitment. Additionally, don’t try to talk companies into reselling for you. Reluctant partners won’t do anything for your customers or your business. Start small with one partner who has an established business and a strong business model. Require training, certification, and forecasts to be sure they’re invested in selling your products and helping you grow. Include partners in business planning and offer to help them with their business issues. In return, reward them for their performance. Once your model is in place, keep in mind that quality of resellers is always better than quantity.
4. Offer Rewards in Return for Sales/Profits: Require partners to prove themselves before offering up money and leads. The best rewards are marketing dollars, product and training discounts, and support for the partner company. Partner programs with varying levels of performance and rewards work well as incentives. Most importantly, be consistent with your requirements and rewards, and don’t make better deals with certain resellers. Your other partners will likely find out and there goes the relationships you’ve been trying to nurture.
5. Build Strong Relationships: Your resellers may have agreements with other companies as well. How do you ensure that they focus sufficient efforts on your products? Make sure that you are the best supplier out there. Assign channel account managers to oversee those relationships and continually look for ways that you and your partners can help each other grow business. Resellers often complain that suppliers don’t understand their business model and make decisions that adversely affect them. To avoid this problem, make sure that your channel managers understand the partners’ business model and take that into consideration when modifying strategy.
6. Communicate, Communicate, Communicate: This is perhaps the most important rule in reseller agreements. Don’t forget about your partners and always err on the side of over-communication. Successful companies use regular newsletters, emails, telephone calls, site visits and even annual conventions to stay in touch with resellers and keep them motivated. Remember, these are your business partners and they should be kept abreast of new developments, marketing efforts, and sales goals. Invested partners want to understand your business and how growing business for you translates into profits for them.
7. Measure Performance: Along with clear goals and expectations, you need to measure partner performance to establish results and rewards. All companies use reseller revenue as a metric. You might also consider establishing a scorecard system to rank your resellers and let them know where they stand in relation to other partners. Additionally, you should gather feedback about your performance as a supplier through reseller advisory councils or satisfaction surveys. You want to know what your resellers are doing for you, but you also want to be sure that you are the best supplier they have in terms of relationships, service, product quality and value.
8. Review and Revise Regularly: Let’s face it, the business climate changes continually and a program you designed for partners two years ago may not cut it now. Successful partnering companies suggest reviewing the effectiveness of the partnership program every 1 to 2 years and making changes as needed. You can also use this as an opportunity to let your unprofitable partners go and bring in new resellers that can better meet your goals and serve the needs of your customers.
The bottom line is that resellers should be treated as both business partners and preferred customers. By building strong reseller relationships, you will only enhance the value and service you provide to your end customers, thus improving your long-term growth and success.
About the Author
Cynthia Bade is the principal of Carlson Bade Associates, a consulting practice that helps companies foster stronger customer and partner relationships to increase growth and profits.