What is Channel Sales? A Complete Guide

By: Paul Bookstaber
Writer, Salesblazer
March 19, 2024 | 14 min read

Imagine you’re buying software. You hire a consultant to find the best software, purchase it through a reseller, and renew the license through third-party support. Now, imagine you’re a software company. You just found a buyer, sold a product, and landed a renewal — all without ever making a single direct sale.

That’s the power of channel sales, or selling through partners with partner relationship management software. It’s a great way to grow your business without spending more time and money on your sales team. Keep reading to learn the ins and outs of channel sales: why it matters, how we do it here at Salesforce, and how you can make it happen for yourself.

What you’ll learn:

• What is channel sales?
• What is the difference between channel sales and direct sales?
• What are channel partners? Types and examples
• Why use channel sales? Benefits and advantages
• Drawbacks of a channel sales model — and how to counteract them
• How to avoid and resolve channel conflicts
• How to build and execute a great channel sales strategy in 7 steps
• Case studies of effective channel sales strategies
• How to monitor partner program recruitment and engagement
• How to measure channel sales program success
• How Salesforce is reimagining channel sales

Channel sales (aka partner sales) is a B2B sales model where a company sells its product through partners. These partners come in various forms, from alliances to resellers to brokers, and they can step in to prospect, sell, and grow existing customers. Channel sales are indirect because the company doesn’t sell directly to customers.

To explain this concept in greater detail, it’s helpful to examine channel sales vs. direct sales to provide the complete picture.

A direct sales model means your company sells straight to the end customer. For example, you sell a service through your website or a product through your retail store. However, channel sales uses third-party sales teams to sell products instead.

Many companies use a mix of direct and indirect sales. They may have customers who prefer buying through a specific channel, while other customers prefer buying from the manufacturer. Below are a few examples to help illustrate this point.

There are many different kinds of channel partners, depending on your business type and where they step in during the sales process. Here are the most common types of channel partners:

• Alliances are partners that sell complementary products. For example, a software company might provide a cloud storage add-on through another tech company.
• Affiliate partners receive a commission on every sale when they promote a company’s products on their website. For example, Amazon Associates offers an affiliate program that allows eCommerce websites to link to Amazon products. Business owners earn a referral fee when customers click through and buy products on Amazon.
• Distributors buy directly from businesses, then market and sell to customers in their operating regions. For instance, a beverage manufacturer sells directly to distributors, who then sell to stores.
• Franchisees pay to use a brand’s identity and business model to sell its products. The franchisor is the original business.
• Resellers purchase products from the manufacturer to resell them, often adding features or services to enhance value.
• Independent brokers arrange transactions in exchange for a commission. Insurance companies often sell through a network of brokers or agents who build relationships directly with customers.
• Retailers sell goods to the public, often in small quantities. For example, condiment manufacturers sell through grocery stores or online retailers rather than directly to consumers.

The benefits of channel sales all point to one thing above all: revenue growth. Below are core reasons why partner-driven revenues are on the rise:

• Grow revenue by expanding into new markets faster. Partners can introduce your brand to customers outside of your existing circles and help you scale your business and increase sales faster than you could.
• Enjoy built-in trust. When customers already know and trust your partner, the partner’s credibility benefits you, too.
• Amplify your reach and enhance brand awareness. Based on their pull, partners can give your marketing efforts a gravity assist by hosting local events, webinars, or training customers.
• Reduce your margins. Indirect selling can powerfully boost your bottom line because it sidesteps many expenses associated with maintaining a direct sales team.
• Improve the customer experience. Channel partnerships can add value to your solution with complementary products and services. If your customers prefer to buy one complete experience, indirect selling allows you to serve them better how they want to buy without having to build it all yourself.

For all its benefits, partner selling comes with a few common pitfalls. Here are key challenges and how to overcome them:

1. Less control over customer experience

The partner represents your brand to the end customer, but you don’t control their interactions with customers. If one of your partners isn’t handling a deal correctly, this could impact your credibility, and you won’t be able to jump in and take the reins.

Channel sales always involve some risk, but there are ways to mitigate it. Choose your partners wisely, ensure they understand your business model and strategy, and have a robust onboarding process to ensure everyone is on the same page.

Ultimately, if you provide an excellent partner experience, that often translates into an excellent customer experience.

2. Less knowledge about customers

With indirect selling, the partner doesn’t always tell you who’s buying. Your channel partner handles the customer acquisition, sales process, and often the after-sales support, meaning you could lack a window into the buyer's needs and preferences. This absence of customer data can make it harder to personalise your marketing strategy and develop strong customer relationships.

One way around this is to use product registration. When the end customer registers the product, you and the customer directly connect. That way, you can survey the customer to uncover unmet needs and ensure the partner provides a great experience.

3. A lack of agility

One disadvantage of channel sales is that it can be challenging to remain flexible and adapt your service to product updates or customer trends.

Suppose your business development team spots an opportunity in the market. In that case, you may have difficulty relaying this information to your partners, especially if they already have their system.

The key to overcoming this barrier is open communication. To foster a culture of collaboration, you must be completely transparent and have fast response times. In addition, listening to and accepting feedback from partners means they will be more likely to respond positively to your changes when you request them.

Channel sales aren’t always plain sailing. Conflicts between partners are surprisingly common and can happen for various reasons:

• Geography: Two partners might operate in the same geographic location and have similar local customer bases, introducing counterproductive competition and impacting supply and demand.
• Objectives: A manufacturer and its partners may have different objectives, leading to a dispute.
• Marketing: If a business owner wants to change their distribution channel or how they market their product, a partner may resist this.
• Pricing: Inconsistent pricing can cause discrepancies across channels, leading to price wars.
• Communication: A simple lack of communication can mean partners aren’t on the same page, causing disputes.
• Competition: When you use a hybrid of direct and indirect selling, sometimes your partners may feel like competing with your salespeople.

To reduce conflicts, create transparent guidelines for products sold through the channel versus direct sales. Outline your objectives and ensure every partner understands their goals, roles, and responsibilities.

Consider how you can align your partners on your strategy and ensure everyone finds your channel sales program fair and equal. Doing so will help to avoid price erosion and a lack of alignment on goals.

Avoiding channel conflict: examples

Men’s grooming eCommerce brand Harry’s avoids channel conflict by selling at the same price across every direct and indirect sales channel. This effectively eliminates any potential for price competition between different retailers.

In addition, Nike has an innovative approach: They offer exclusive products that can only be bought in-store instead of online. This draws customers to brick-and-mortar shops, meaning partners don't need to compete with other partners on price.

As you can see, the key to avoiding conflict is aligning your partners on a singular strategy. Achieving this requires training, open communication, and ongoing support. With that in mind, let’s look at how to create an effective channel strategy step-by-step.

When building a channel sales strategy, you can’t go wrong by defining your ideal partner, setting them up for success with thoughtful onboarding, and supporting them with resources as they go out and sell. Here are the steps to take:

1. Determine what kind of partner you need

Before you seek out your partners and begin your channel strategy, determine your goal and the type of partner that will support it. Then, choose a partner based on that profile. If you’re stuck, return to the “Why use channel sales” section above and identify the best partner based on your goals.

For example, if you want to enter a new vertical or industry, you’d want to find partners with existing reach in that space. Or, if you want to improve the customer experience after the sale, you’d want to find partners who can provide value-added services, such as product training and support.

2. Evaluate the joint value you and your potential partners bring to each other

Get clear on these key questions before contacting a potential channel partner or inviting them to contact you.

What can you offer potential partners?

Your partners will want to know what type of support and channel partner incentives you intend to provide, such as comprehensive training, access to sales and marketing tools, technical resources, a dedicated account manager, incentives, and rewards. Let them know the channel incentive they’ll receive when they work with you.

What’s your value proposition?

Here’s your chance to convey the value of the opportunity. Why would a partner choose to do business with you? Demonstrate the revenue that partners will gain from the collaboration over time.

What are your expectations of them?

Outline the details of the partnership, including the total timeline, the products they’ll sell, and service level agreements (SLAs) for engagement. Agree on shared goals and metrics to perform against, like completion of training or certification, leads generated or converted, and total revenue brought in.

3. Understand the roles of a channel sales team and begin hiring a channel sales team

Your channel sales program needs dedicated staff and your partners to support it. Depending on the size of your company, these positions may be spread across many or a few individuals. Here are some critical roles and responsibilities you’ll want to consider covering, along with the key skills required for each.

Channel sales leaders

Channel sales leadership is responsible for meeting partner revenue targets and improving pipeline health. They direct their organisation’s channel sales strategy. They need years (often decades) of experience in the indirect selling motion, deep knowledge of the partner ecosystem, and a strong grasp of the business and its products.

Channel sales managers

Channel sales managers are on the front lines. They’re responsible for building relationships with channel partners and direct sellers and opening up lines of communication between both to support collaboration.

Channel sales managers also need to understand the customer, the product, and the market to recommend new insights that grow revenue. Finally, they monitor channel sales metrics (more on that below) to optimise the channel sales program by overcoming issues and capitalising on opportunities.

Channel marketing managers

Channel marketing managers create materials and campaigns that partners use to market directly to your end customers. Channel marketers must be very clear on the value proposition of products and services and how to position them effectively.

Channel operations managers

Channel operations managers help partners become productive and successful by building scalable tools and processes. One crucial responsibility includes designing and managing the partner portal, where partners log in to access resources and get deal insights.

4. Recruit channel sales partners

Once you’ve defined your team, goals, and program structure, it’s time to recruit your partners. Here are two approaches:

Inbound recruitment

Inbound recruitment happens when potential partners come to you. For instance, you can set up a form on your website where potential partners can express interest in selling your products.

Then, someone inside your company can vet the application and determine if the partner is a good fit. This can be a cost-effective way to grow your partner network, but you may need to supplement this with outbound recruitment to attract the right partners for your needs.

Outbound recruitment

Another option is to identify and contact partners proactively rather than waiting for them to contact you.

For instance, many vendors rely on events like trade shows to highlight their solutions and attract prospective partners. These initiatives can be time-consuming and costly but may be effective in helping you find the ideal partners.

5. Onboard new channel sales partnerships

Remember that while new partners likely have industry experience, they may need to learn your product information inside and out or understand how to make it relevant for each region, industry, or target audience. That’s why partner onboarding is so important.

Onboarding also gives partners a first impression of your business and how easy it is to work together. Don’t wait for partners to request materials. Instead, guide partners through a step-by-step process and offer thorough training on sales must-knows, helping them ramp up more quickly.

At a minimum, your onboarding program should get partners up to speed on the following:

• Products and features
• Pricing structures
• Selling processes
• Goals of the partnership

Personalise the partner experience with relevant content and recommendations. Track onboarding to see a partner’s progress over time. If a partner plans to sell one specific product, don’t overwhelm them with specs on other products that aren’t suitable for them.

A learning management system (LMS) can help you manage and track the training process. For more about onboarding partners and personalising the partner experience, check out this Trailhead module.

6. Support your channel partners

You’ve brought new partners up to speed, but the race isn’t over. They need ongoing support throughout their involvement with your company. Below are some ways to show your support and set partners up for success.

Provide instant access to product resources

In addition to onboarding materials, partners need just-in-time information to help them address specific customer issues. These include product specs, marketing assets, and presentation templates. Make these resources available on demand to increase partners' productivity and reduce back-and-forth with your channel managers.

Offer support through peer groups

Be sure partners have a communication line open when questions arise. Consider offering an online sales community where they can find applicable success stories, ask questions of each other, and share best practices.

Provide market development funds (MDF) and prepackaged campaigns

Some partners don’t have a dedicated marketing department or resources for content production. Help your partners market by offering them prebuilt campaigns, trade shows in a box, or brandable content marketing.

7. Motivate channel sales partners

Most partners work with multiple companies — including your competitors. That means you want to stay at the top of your mind with your partners and motivate them to sell your products. Here’s how:

Create an incentive compensation program

Salespeople tend to be driven and competitive, so creating performance tiers for partners to attain can keep them engaged with your brand and excited to level up. One way to do that is through an incentive compensation program.

Be transparent about the benefits of each level, such as better margins or other incentives. Use dashboards and reports to create partner leadership scoreboards so partners can monitor their progress and tap into their competitive spirit.

Celebrate partner success

Highlight the big accomplishments and small wins of various partners. Whether it’s a mention in an email newsletter, a banner in your partner portal, or a speech at a partner summit, these shoutouts will make your partners feel proud and valued. Plus, the rest of your partners will be eager to see their names in the spotlight.

Know when to fold

One reason defining goals is so important is that it allows you to determine when the partnership is not working effectively.

Data can provide you with validation for a sometimes difficult decision to part ways. For example, you might agree on revenue benchmarks after a certain period and end the relationships if they are unmet.

Let's look at an example of how an effective channel sales strategy could look in practice.

Cuemath case study

Indian education giant Cuemaths began as a small tutoring company in India but quickly transitioned to a digital business model powered by an intelligent sales channel strategy.

Cuemath recruits online tutors using a franchise-based system. Individuals can apply to become Cuemath Teacher Partners (CTPs) by filling out an application and paying a one-time fee of 9,990 rupees.

If the application is successful, Cuemath offers comprehensive training programs for its new tutors. Every partner is aligned with Cuemath's objectives and the brand’s methodology for teaching mathematics.

Once a teacher is certified, Cuemath pairs students with that tutor via the online platform. The teachers and Cuemath then divide the profit from the sale at a 60:40 ratio. Tutors can work as much or as little as they like and work entirely from home.

You can see why this approach is so practical. Cuemath profits during the initial onboarding process and then trains all new partners to become valuable sales reps for the brand. They then take a portion of every sale, indirectly allowing them to grow their revenue. This business model has allowed Cuemath to grow from an India-based tutor into an enormous global brand.

Creating an effective partner pipeline isn’t an overnight task. Reviewing your recruitment protocols and assessing your partners' engagement is essential. Doing so will allow you to improve your processes continuously. We suggest assessing the following recruitment and engagement metrics.

Program abandonment rates

How many partners leave the process before they complete your onboarding? And if lots are, at which point do they leave? Low conversion rates could indicate a problem with your training process or that you’re targeting the wrong type of partner.

Incentive program engagement

Assess how much or how little your partners engage with your channel sales incentives. This could indicate that your incentive programs could be more appealing or that your partners are disengaged.

Partner activity levels

Evaluate your partners' activity by checking their conversion rates, deal registrations, and the percentage of partners who engage with your internet marketing resources. This will give you a good indication of who may require additional support.

Partner satisfaction

Don’t hesitate to ask your partners for feedback regularly. Hearing concerns early is much better than waiting until a valued partner is gone.

Competition engagement

If you’ve created a partner leadership scoreboard, evaluate how different incentives and durations impact engagement. Doing so will allow you to fine-tune the scoreboard and prove it offers a good ROI.

Understanding how to track and use these metrics to refine your strategy is the key to a successful channel sales strategy.

In addition to monitoring the effectiveness of your partner program recruitment, you’ll want to track partner performance metrics to analyse how effectively each partner business is helping to grow your company’s sales.

To do so, you need to monitor metrics that track partner contributions to revenue and pipeline coverage (the revenue amounts represented by deals currently in the pipeline).

With that in mind, here are the most important KPIs to measure how well partners perform.

• Total revenue driven
• Partner pipeline for the year
• Partner pipeline for the quarter
• Average deal size
• Customer renewal rates
• Sales cycle length

Let’s take a closer look at each of these channel partner performance metrics and what they measure:

Total revenue driven

The simplest channel performance metric to track is the revenue your channel partners generate over a given period. This tells you the exact contribution your partner is making to your bottom line. You should also compare this attainment against forecasted expectations to review each partner's performance.

Total revenue driven can be used to justify investments in partner training, marketing development funds, and other resources to support your channel program. However, it shouldn’t be taken as the sole key metric for success because it ignores the customer journey through the sales pipeline.

Partner pipeline for the year

Your annual partner pipeline tracks the total value of every sale opportunity your channel partner has in their pipeline for the financial year. As part of this pipeline management process, tracking the leads generated by each partner and their deal registrations is essential, as these metrics offer a window into the partner’s active pipeline.

These metrics will provide the big picture of the long-term potential revenue your channel sales strategy can offer. They will also help with business planning and calculating ROI, allowing you to identify gaps hindering business growth.

Partner pipeline for the quarter

Measuring partner performance each quarter is equally important to gain more immediate insights into sales efforts. Doing so will allow you to determine if any emerging issues impact your channel partner’s sales.

Average deal size

The average deal size tells you how much your partner sells your product or service for. While this metric will give you a general indication of your expected return on investment, it’s primarily helpful for gauging your product's or marketing strategy's effectiveness.

For instance, if a partner doesn’t meet your expectations for this KPI, it could be a sign that customers are avoiding buying complementary products.

• Is this an issue with the pricing strategy?
• Or is there room for more training for your partner to help them with digital marketing and upselling?

Customer retention rates

Customer retention rates are one of the most overlooked but essential partner program KPIs to track because they reveal much about customer satisfaction and lifetime value.

A high customer retention rate is generally a green flag. It shows your partner is cultivating customer loyalty. A low rate of renewal indicates a high customer churn rate. If this churn rate is lower than average for your company, it could indicate the partner is overstating the benefits of your product, not accepting customers’ feedback, or failing to offer support post-purchase.

Sales cycle length

Track the cycle length of your partner’s sales efforts. This will reveal the average time it takes them to close deals.

For instance, you might learn that the negation stage takes longer than expected. This could indicate the sales partner is encountering objections and concerns they aren’t equipped to handle. This sales data is invaluable as you can use it to pinpoint weak points and identify opportunities to optimise the process.

The key to successfully tracking all of the metrics listed above is ensuring you have partner relationship management (PRM) software as part of your CRM software. This keeps all of your data and functionality in one place, making it easier to track performance and create individual partner goals.

To examine how Salesforce CRM is changing the game for business owners, let's hear what Ryan Nunez, Vice President of Partner Alliances at Salesforce, says about the current landscape and our commitment to reimagining channel sales.

Insights by Ryan Nunez, Vice President of Partner Alliances, Salesforce

More than 90% of our deals over $1M at Salesforce have partners involved. Big deals don’t get done around here unless partners are engaged. That’s because selling doesn’t just happen during the sales presentation.

It happens in all the little interactions before and after — from the huddle with the reseller in the parking garage to the back-channel phone call to the partner: “Hey, can this company deliver like they say they will?”

To ensure we influence all those conversations, we seek to build surround-sound deals, where prospects are surrounded by partners who help identify opportunities and drive the deal forward. Here are three examples of how we do that.

1. We lean on partners and channel sales to identify and increase customer value before and after the deal is closed

We’re considering how to excite partners to work toward adoption and business outcomes to keep customers. It’s requiring us to reimagine a closed deal as the beginning of something, not the end. The renewal date looms in the future, and we have to do everything we can to make the customer successful and get them to stick around and buy more.

So, we’re beginning to focus our partner sales program on the pre-and post-sale experience and incentivise our partners to keep growing our customers into the future. We’re progressing on this vision by defining new roles for partners who drive customer success, such as Partner Engagement Managers, Partner Solution Engineers, and Partner Sales Acceleration Leaders.

We’re also defining key milestones in the post-sale journey. At Salesforce, that includes post-sales handoffs and sharing a wealth of enablement materials. Tracking these milestones helps us know whether we’re on the right track and whether our partners are uniquely qualified to drive this success-minded motion.

2. We use a reseller portal to provide real-time updates on channel sales deals

We used to see our account executives need help gathering updates from reseller partners. Sharing information required multiple follow-ups and a pile of documents. So, we worked with our technology team to build a new portal — using Salesforce PRM software — that helps our sales team and partners collaborate more efficiently. This portal integrates with Slack to fit modern working methods and honour the reality that our sellers are constantly on foot.

Today, our resellers manage leads and opportunities directly through the digital partner community, and our sellers can see updates on their mobile devices. They can also see updates in fields for sales stage, close date, and partner comments.

Of course, some pre-built reports and dashboards give resellers a snapshot of their book of business, including insights into sales performance and trends. This makes identifying the best actions and jump-off points for new sales plays easy.

3. We evaluate partner involvement and channel sales opportunities during forecast calls

Every week, we meet with our account executives on forecast calls to understand the health of their deals.

During these calls, one of the most important questions we ask is: “How is the customer planning to implement this — and which partners are you talking to?”

For two reasons: if partners are not identified in a large deal, that’s a red flag. First, they bring in specific industry, domain, or market expertise. Second, they’re instrumental in expanding the view of our customer relationships, priorities, and obstacles.

So, we coach our sellers to examine existing partner relationships associated with the account and opportunity and identify partners they’re perhaps not talking to or who can be brought in to strengthen a customer’s plan to consume and use our technology.

To help the seller find partners, we have an inside partner team with field coordinators and partner alliance managers. They use Partner Finder and AppExchange to identify the best partners based on qualities like their industry and relationship depth, footprint on existing accounts, certifications in our technology, and whether they’re running similar sales plays.

This partner matchmaking helps us improve our pipeline health, deal size, and likelihood for success — bringing our biggest deals to life.

An effective channel sales program helps you grow revenue without growing costs. What could be better? You can reap the long-term benefits of indirect selling by thinking through each process step — from recruiting and onboarding, co-marketing and selling, to specialisation and success.