The majority of science and technology companies go to market with a channel sales model. From start-ups right through to market leaders, it is well recognised that selling through third-party partners offers a stream of benefits. However, if channel partners aren’t selected carefully, a channel sales model can also carry serious risk.
Here, we weigh up the some of the advantages and disadvantages of using channel partners vs. direct sales for businesses in the science and technology marketplace.
Access: a growing land of opportunity
The science and technology industry is ripe with innovation and competition. Whether you work within the biotechnology, instrument, healthcare, manufacturing or life science sector, there’s always novel solutions coming to the fore. And this means competitors are everywhere.
In a land of competition and innovation, who is king? The one with access. This is where channel partnerships can be one of your business’s most valuable assets for promoting your product or service and driving revenue.
There are only so many selling hours in a day. But with an appropriate established customer base, a channel partner can give access to opportunities that your direct sales team simply don’t have the time for. Moreover, if your channel partner has already built a strong reputation in a certain niche or geographical location, they can grant you access to marketplaces previously beyond your reach.
“For most science and technology companies, the number of end users is so vast that they couldn’t possibly visit all of them with their direct sales team. Each distributor has a network of people who operate in a specific region so there’s more feet on the ground and in turn, more people with access to potential customers. By carefully identifying and qualifying channel partners, I’ve seen countless companies quickly and successfully access markets that would be nigh on impossible using a direct sales approach” – Sharon Eaton, Managing Director, Biochannel Partners Ltd.
Profits: a coin flip
As you scale, your direct sales team grows allowing you to hit up more sales opportunities. However, a growing sales team and the associated recruiting, employment and training costs can quickly cut into your margins.
Using a channel partner sales model can save you money onboarding a large sales team. And, as we’ve already discussed, you could increase your revenue by using channel partnerships to enter new markets. In fact, one channel manager and several channel partners could be way more cost effective than a team of sales professionals.
It should be noted that channel partners will share a piece of the profit made from closing deals. So while channel partners may increase your efficiency, you’ll make less from individual sales. Moreover, you’ll have to consider the time investment needed to ensure your channel partners are properly trained, have the right materials, and meet your expectations when representing your brand.
Reputation: trial by channel partner
The importance of your reputation is manifold. To begin with, a strong positive brand reputation can be helpful in attracting and retaining talented employees. Given the shortage of talent across the life sciences, biotechnology, healthcare, and related industries, your reputation is not to be taken lightly.
Reputation also has a massive impact on your bottom line. A positive business reputation increases business opportunities, reduces marketing costs, and attracts loyal and long-term clients. To cut to the chase, reputation has a significant impact on sales, and profit.
“Reputation is particularly important in the science and technology industry. The markets that you’re selling into are making the world healthier, cleaner, and safer – and nobody wants to make a mistake here. Additionally, science and technology companies are generally selling large ticket items. Think large revenue spend in terms of consumables or high-end scientific instruments. With high costs comes high risk. Therefore, buyers will be looking for a strong reputation and a safe bet.” – Steve Vaughan, Senior Sales Trainer, george james ltd.
Ultimately, the channel partners we select can either help or hinder our corporate reputation. If you select a channel partner with a poor reputation or low-quality customer service, you’ll look worse by association.
On the other hand, an excellent channel partner who is well known in the market will elevate your brand presence. Your product or service appears more credible because of your channel partner’s endorsement.
“Some manufacturer’s assume that their company’s reputation is the most important when it comes to making sales. However, if they are a relatively new or unknown company, the distributor’s reputation is arguably far more crucial. To put it crudely, you can piggy-back off the reputation of your established channel partners.” – Sharon Eaton, Biochannel Partners Ltd.
Control: from customers to compliance
Direct sales gives you full control over every aspect of your business. When you use a channel sales model, you relinquish some of this control to you channel partnerships; including sales and marketing messaging, reputation and branding to the level of service and support. For example, if your channel partner delivers substandard customer service, the customer will associate it with your brand and product.
If you think a lack of control over your company’s reputation is the worst of it then you will also need to consider the limited control you will have over regulatory and compliance issues. When working in a regulated area, as many science and technology companies do, it is essential you consider the lack of control you will relinquish.
On the flipside, channel partners can strengthen your regulatory compliance. With many specialising in specific science and technology markets, established channel partners may have more insight into compliance. They can guide you through the necessary process and provide expert insight when breaking into new geographical markets where regulations may vary.
Ensuring channel partners are properly vetted, sign legal agreements stating they won’t engage in corrupt practices and taking steps to monitor channel partner activity is one of the most essential considerations during selection and appointment.
“Working with a good channel partner will help you understand local markets, especially when it comes to culture, business ethics, and local regulation. So while you may relinquish some control, you could gain a huge amount of information about how to safely and successfully operates in different markets.” – Steve Vaughan, george james ltd.
The power of partnerships
Developing channel partnerships comes with major risks. Not considering these risks can put your company in very difficult situations; from diluted messaging and diminished reputation to serious legal jeopardy.
If we look at channel sales from a different angle, strong positive channel partner relationships can strengthen your corporate reputation, broaden your sales opportunities and crucially, maximise your profits.
“When you put the advantages and disadvantages of using a channel partner side by side, it becomes obvious that the disadvantages of channel partners can be mitigated or even turned into a positive if the manufacturer is diligent” – Sharon Eaton, Biochannel Partner ltd.
If you are looking to develop, grow and maintain a strong and profitable channel partner network, build trust with your channel partners or improve your working relationships then our mastering channel partner management and inspirational channel partner leadership open programs are designed for you.
Explore our channel partner open programs
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