It's a match: how and why you should defineyour ideal channel partner
Whether it’s your first time recruiting a channel partner or you’re aiming to capitalise on a new territory, it’s important to follow a process. While you may be tempted to jump straight into the ocean of potential partners, it’s wise to step back and thoroughly consider what you want and need from a new partnership.
Here, we speak to Sharon Eaton MBA, Managing Director of Biochannel Partners and Steve Vaughan, Senior Sales Trainer at george james ltd. about what makes a good channel partner and the ins and outs of defining your ideal one.
It’s a trap: the risks of not defining your ideal channel partner
“So many companies will fall into the trap of appointing the first distributor that comes along. They’ll go to a trade show and meet a distributor who is looking to add products to their portfolio," Steve reflects. "They are enthusiastic and you like them, so you shake hands. It’s reactive, not proactive and carries so much risk.”
Even if you are actively searching but have not defined your ideal channel partner, you can run into problems: “It’s extremely easy to get distracted and drift off track if you haven’t got a physical list of your requirements," says Sharon. “An ill-considered or hasty agreement can leave you vulnerable to a partnership that does not align with your organisation's goals and values.”
In turn, you can waste years of potential growth trying to motivate distributors who don’t have the skills or will to promote and sell your products. “It can eat up your time, damage your brand identity and even impact your bottom line," Sharon explains. So, while it might be tempting to skip straight to the appointment stage, following a process and defining your ideal channel partner will reduce your risk and increase your chances of forming a fruitful and long-term partnership.
“By clearly defining the attributes of your ideal channel partner, it takes out the emotional side and forces you to be more pragmatic and practical about what's going to work well. It helps you maintain consistent standards and appreciate the resources you need to make available for channel partners to be truly effective. It also helps you understand where you may need to compromise and the potential risks to your organisation,” advises Sharon.
How should you define your ideal channel partner?
Steve suggests it's useful to think about the process of channel partner recruitment as if you were hiring a new member of staff: “If you’re recruiting for a position in your company, you’ll likely have a defined process. Typically, you post an advert with a job and person specification containing your non-negotiables and desirables.”
He continues “Then, when someone submits their application, you check whether they fit your profile. Do they have your non-negotiables? A chemistry degree? More than 5 years in sales? Do they have some of your desirables as well? If it’s positive, you might invite them for an interview, delve further, and assess whether they’re a good cultural fit. Recruiting a channel partner is much the same; you draw up your ideal candidate, shortlist, interview and finally, appoint,” says Steve.
It is therefore unsurprising that defining a channel partner is similar to writing a job and person specification. Importantly, you need to include:
Non-negotiables: a list of critical criteria where the distributor must demonstrate they have capabilities.
Desirables: Alist of attributes that would be nice to have, but where you can fill in the gaps if needed.
So, what makes a good channel partner and what attributes should you consider when defining your ideal channel partner?
What makes a good channel partner?
Distributors often cover specific territories so “selecting a channel partner in a region where you already have adequate coverage can be counterproductive as they may focus on competing with each other rather than competing with your competition!” advises Sharon. Performing a gap analysis prior to starting your candidate search is essential to ensure you look for distributors that cover the right location for your product.
“Gaps may be entire countries or partially filled geographical areas so in some countries you might need multiple distributors. For instance, you may have identified a gap in the market in Germany, but some distributors focus solely on the south of the country,” says Sharon. “So if your product benefits from personal selling, then ensure that the company has qualified salespeople located in all your key areas.”
Just because a candidate distributor covers the right territory does not mean they’re reaching your target customers. “Your biggest gap between sales and potential sales might not be geographical - it might be end user type. So make sure your channel partner covers both the right territories and the right customers.” Comments Steve.
For example, Sharon explains that while some distributors focus on pharma and biotech customers, others concentrate on academia. "If you plan to target both markets, make sure your candidate distributor does too. Or, if you have the resources, add another distributor but ensure that each partner has clarity about who their target customers are.”
As an organisation in the science and technology marketplace, a channel partner with a compatible product portfolio is essential for several reasons. First and foremost, channel partners need access to your customers. If a distributor already represents products aimed at your target market, they will have a direct line to potential customers as well as an established rapport.
Additionally, there may be a gap in knowledge and skillset if a channel partner's current product portfolio is too dissimilar to your offering. Sharon explains that “a distributor whose business is 90% reagents and consumables may not know how to sell an analytical instrument with a million pound price tag – or vice versa. While you could provide training, you’d have to consider your time and resource investment. If you want to hit the ground running, it’s easier if your distributor already sells in a similar way.”
Your reflex might be to automatically exclude distributors who represent a competitive product but Sharon advises that they should be considered alongside other potential partners, including existing channel partners. “You could otherwise miss out on a really good channel partner. There are many scenarios where a channel partner who already represents a competitor might be the best choice. For example, the distributor may not be happy with their current partnership and be willing to drop the competitor in favour of you.”
Other distributors are willing to take on multiple competing products because they want to offer their customers a choice. “While most manufacturers prefer not to have to compromise in this way, it can sometimes be the best option. You can leverage off the back of their established customer base,” remarks Steve.
It may seem obvious that you wouldn’t want to enter into a partnership with a financially unstable organisation. However, it’s crucial part of your ideal channel partner profile. The process ensures you ask the right questions and carry out the right checks before you appoint a new distributor.
"As well as financial checks, it’s also prudent to ask about a candidate’s willingness to invest for growth. Are they willing to spend time and money on salespeople, demo units and trade shows for example? Remember, it’s a joint venture!” advises Steve.
Support and logistics
“You might find a distributor with talented, enthusiastic salespeople, but do they have appropriate support people?” asks Sharon. There’s a variety of support you may desire, or even require, from your channel partner; such as application, technical, service and installation support.
When developing the profile of your ideal channel partner, consider what your customers need. If the channel partner can’t fulfil all these needs, you need to evaluate alternative solutions. For example, if they can’t provide qualified technical support “how will this gap be filled? Is it feasible for you to do this on their behalf? Are they willing to hire someone to do this or to send their existing staff for training? Can you find another organisation to fill the service and support gap who could work alongside your channel partner?” Sharon questions.
It’s likely you have a strategic plan for your organisation so it’s pertinent to consider whether a candidate channel partner aligns with your strategic vision and business goals. “Before appointing a new channel partner, ask them about their medium and long-term plans. Does their vision of the future mean that they will be spending more or less time with your target customers talking about your products?” asks Sharon.
“For example, a manufacturer appointed a new distributor in America, who looked great at first; the product portfolio indicated that they were visiting the right customers and there was a good balance between relevant complimentary suppliers and salespeople.” Sharon expresses.
She continues “A year later, they had acquired 50 other manufacturers but hadn’t expanded their sales team; their vision was to invest in online sales and marketing. Strategically, it didn’t fit anymore with the manufacturer’s long-term goals and they had to go back to the drawing board and begin the channel partner search again. Needless to say, they learned from this and asked the right questions before appointing channel partners in the future!”
An ideal world
There are many more factors to consider when defining your ideal channel partner; from company culture and values to reputation, performance and legal compliance. However, writing down what you expect from a channel partner at the beginning of the process helps safeguard against unprofitable partnerships that drain your resources.
It’s key to remember that creating the profile of your ideal channel partner is an iterative process. The criteria for selection may need to be amended as your organisation's goals are re-defined, new product lines are introduced, or if market conditions change. It is therefore wise to continually measure existing channel partnerships against any updates to your ideal channel partner profile.
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