What exactly is an indirect sales channel?
“Direct sales” means your wellness business has its own sales force. “Channel sales” means you sell indirectly to your ultimate end user or customer, through another business — a “channel.”
Common examples of indirect sales partners include wholesalers, distributors, resellers, and franchisees. For example, corporate wellness providers that sell through insurance brokers are selling through a channel. If you sell EHR, PRM or analytics software through systems integrators to employers, health systems and large clinical practices, you’re selling through a channel. If you sell a nutritional supplement through a retailer, you’re selling through a channel.
Channel partners aren’t your employees. They don’t work for you, and you don’t own their lead lists. In general, they can sell whatever they want to whoever will buy it. Their salesforce typically has a portfolio of products and services that they sell to their customers. They may even represent competing programs and services. It’s up to them to decide whether your offering is a fit for any given prospect.
Is your challenge really sales? Or is it marketing?
Marketing develops interest in your products. Sales converts that interest into revenue. If you’ve truly done a great job marketing your wellness business’s products and services, so you’ve got a strong and well-recognized brand, you probably already have a strong lead list that your own sales force could work. If not, you’re probably just a step or two away from building that lead list yourself.
If familiarity with your brand is low, focus on marketing before you focus on sales. Your channel partner cannot make up for your lack of brand awareness and brand identity. They won’t generally be successful with products no one’s heard of. It’s especially important to be clear on your competitive differentiators, too. What truly sets your wellness program or product apart? Is your fitness chain known for old-school, no-nonsense, bodyweight workouts? Is your weight loss program already perceived as especially sensitive to body image issues? Or perhaps you’re known for successfully pulling off custom employee wellness programs.
If your brand identity is clear, and you’ve successfully made your target audience aware of that brand, now your sales channel can be successful. Otherwise, it’s too early in the process to be talking to a sales channel.
Some channel partners want an assigned territory and a list of leads that YOU provide. For example, perhaps you host a webinar on new self-care technologies for health systems. You capture the contact information for attendees and pass that along to your channel partner.
There’s only one reason to go indirect
You should sell through a channel ONLY when that’s truly the best way to reach your target customer. After all, you’re ceding an enormous responsibility to a bunch of folks you barely know. You’ll have limited ability to influence how they deliver your messages, and limited ability to develop longstanding customer relationships and recurring revenue from the prospects they sell to.
For example, it’s much more sensible for cardio and strength equipment manufacturers to sell through distributors to health clubs and fitness businesses. The product is not particularly complex, so it doesn’t require crazy amounts of channel training, and building a national salesforce to reach literally thousands of health clubs would be a non-starter for a single manufacturer. Moreover, the companies who sell the equipment directly to clubs are usually the same companies that maintain it. It’s a virtuous circle. It lets manufacturers focus on what they do best — product innovation — and lets distributors focus on the customer relationship, which is what they do best.
If the only reason you’re considering indirect sales is because you’re secretly afraid of sales failure and/or don’t want the cost and hassle of building your own salesforce, you’re making this critical strategic decision for all the wrong reasons. Remember — no channel partner in the world cares as much about your business as you and your employees do.
When you build your own team, you have control. Control over what you pay them, how they deliver your key marketing messages, how they acquire and develop leads, and how quickly your business expands. Investors see more predictable cash flows. Their loyalty and work ethic are likelier to be driven by your priorities. They’re likelier to understand and follow your rules for selling. They may be willing to settle for lower performance-based bonus multipliers or incentives in exchange for a permanent working relationship and reasonable quotas and the job satisfaction of building a business.
The down side: cash flow has to already be good enough to pay salespeople, and you’ll have to manage them. If you don’t have the capacity for that now, how will you manage to have it in the future?
Who does what, when?
Are they going to develop leads themselves and do all the heavy lifting during the sales process? Will they implement whatever the prospect ends up buying?
Or will they primarily identify leads and then bring in your experts to actually make the sale, and potentially to implement it?
Either model’s OK, depending on your business — but you need to be clear upfront on what you need and expect from each other.
Keep in mind that if they develop the leads, close the deal, and handle post-sales issues, THEY — not YOU — have the relationship with the customer. That’s fine today — but consider whether you’re going to want to manage that customer relationship yourself in the future. You may have a product two years from now that you’d like to sell direct to these customers, yet you may literally not even know the names of your end-user buyers.
Think two steps ahead before you commit to a channel sales strategy.
It won’t work on auto-pilot!
Small, fast-growing wellness businesses like the idea of indirect sales because they can go after more and bigger deals by tapping into the resources of their channel partner. So far, so good — but these relationships can run into a variety of problems:
- Your partners push your products to unqualified prospects in hopes of quick sales — but the closure rate on deals is low.
- Your partners may not understand your products all that well — leading to customer dissatisfaction or missed opportunities.
- Unethical partners may falsify sales or set up shaky deals in order to get bonus compensation that has to be backed out when the actual revenue from that deal falls short.
- Partners sell so well that they outstrip your ability to deliver in key markets, potentially degrading your service reputation and jeopardizing your brand.
- Partner performance falls short, but you find it difficult to extricate yourself from an exclusive agreement.
Does this mean you shouldn’t go indirect? Nope. Just realize that these relationships need forethought, planning and day-to-day management to work well. They don’t run on auto-pilot.
Exclusivity and channel conflict
If you agree to exclusivity, make sure the agreement protects you. For example, you can build in specific performance commitments. If they fail to meet those performance levels within, say 180 days, you have the unilateral right to end the agreement. You can also build in a “no fault” termination clause that allows either entity to terminate the agreement for any reason with, say, 60 days notice.
You’ll also want to consider possible channel conflict if you agree to exclusivity. Say you have a small direct sales force of your own. Will they still be able to sell deals in the same geographies where your channel partner is selling? What if your direct sales team contacts a customer where your channel partner already has a prior relationship? Does your agreement stipulate that you can’t undersell your partners?
Be picky when you choose channel partners
Your healthy living offering is well-marketed, well-defined, and appeals to a clear target market: medically based outcomes-oriented fitness and fueling plans for people with diabetes. Great, right?
Not if you’re selling it through a retailer that tells prospects that diabetes can be cured or reversed with nutritional supplements! That message undercuts your program’s credibility and appeals to an entirely different target audience. We’ve actually seen a business with a well-conceived and well-marketed low-carb, Paleo-style diet plan and balanced weight-and-cardio exercise program make this exact mistake. They got the marketing right — but the sales strategy wrong.
Many channels are simply not worth having. Is your “partner” really just adding you to paid directory listings for stress reduction programs in the widely-unread back pages of a trade journal? Are they just calling companies at random and leaving tired voice messages to “call me back if you want to offer on-site massage therapy to your employees”?
You always have to educate your sales channel
Whether it’s your own team — or an indirect sales channel — you always, always have to train and educate them on your product. What’s special? What’s different? And what are the nuts and bolts of how it works? You’ll need to arm them with buying guides, and competitive comparisons, and customer case studies.
You can’t avoid this responsibility by using a channel partner. In fact, in many ways it just makes it harder. You never have 100% of their attention, because they’re selling multiple products and services. Most channel sales agreements include a requirement that the channel partner invest “X” hours/year per rep in training them on your product — but what that really means is that they gather them up in a room or on a webinar so that YOU can train them.
Skip this step at your own peril. Without ongoing channel training, the unique benefits of your brand will vanish.
Don’t forget logistics and customer support
How many new clients can you really implement in a month, or a quarter, or a year?
Do you have the phone or email capacity to answer questions in timely fashion?
Does your storefront have the physical capacity to handle the predicted influx of new customers?
Can you make even a ballpark prediction about how many new customers the channel will bring?
Do you have the operational capacity to move into markets where a physical presence is important?
Is this really the best choice?
Many wellness businesses see reseller and other indirect sales channels as an opportunity to offload the work of developing a sales funnel. They figure that their channel partners (who don’t exclusively sell their products and services, remember) will make up for unfinished homework in marketing and business development.
While it’s true that your indirect channel can increase your reach, if you haven’t done that homework, they’ll probably be contacting prospects who don’t know who you are, don’t see the value in your products, and have a profound misunderstanding of what your health, wellness, or fitness business does.
A productive sales channel requires multi-channel integrated marketing, lead development, and a solid sales and business plan with a realistic understanding of the financial opportunities and operational risks of growth. Get these elements in place, do some judicious research into your partners’ ability to deliver, and your wellness business can take its game to the next level.
Latest posts by Don Muchow - Radial (see all)
- Is Your Wellness Business Getting Suckered? - March 8, 2015
- Can Graded Exercise Testing Predict Risk of Death? - March 3, 2015
- The 2015 Diet: Hold the Sugar, Pass the Eggs - February 25, 2015