Challenges of the Indirect Channel Model and How to Overcome Them

Challenges of the Indirect Channel Model and How to Overcome Them

Nichole Gunn

indirect channel model

In today’s business world, the constant pressure to improve revenue has led to an increase in the number of companies leveraging an indirect channel model. And it makes sense: it’s faster, cheaper and easier than direct sales.

But that doesn’t make it a walk in the park. As you build your network of channel distributors and resellers, you’re likely going encounter many different challenges along the way.

Luckily, you’re not alone. We have compiled a list of the benefits and challenges an indirect channel model poses, and solutions to help you along the way.

Faster, Cheaper, Easier: Why People Choose Indirect Channel Model

With the indirect model, you’re leveraging sales resources already in place. There’s no need to start from scratch; they’ve already got an established foothold in your desired market. The result? You can shave the amount of time to enter a new market down from years to days.

Plus, your new market partners already have an existing infrastructure in place. And they cover those carrying costs; not you. Sales groups? Check. Marketing? Check. Current customer information? Check. This makes the overall operating expenses significantly lower for a vendor.

And the easy part? You’re selling yourself to a single entity. Once you do that successfully, they are the ones who take on the responsibility of selling to new customers. And they’ve already got an established list from which to work.

Sounds good, right? Maybe a little too good?

That’s because there are three challenges to successfully implementing the indirect channel model. And they aren’t insignificant, either.

Challenge 1: Communication

You are leveraging someone else’s sales and marketing resources. In fact, there’s a good chance you don’t even know who those people are. When onboarding your new channel partners, you likely had a handful of contacts at best. And none of those are the people directly responsible for your business’ success.

This poses a communication challenge. How can you tell a sales force what you want them to know and how you want them to sell when they aren’t yours?

The solution: Ensure you have open pathways of communication to the front lines. Understand the tools you have access to and craft communications that align with your goals and resources. You’ll need to steal mindshare and generate enthusiasm. To do so, your communications should be regular, clear, concise and informative.

Challenge 2: The 80/20 Rule

The Pareto Principle (aka- the 80/20 Rule) is the idea that 20% of your base accounts for 80% of the effects.

Example: 80% of your profits come from 20% of your customers. Sound crazy?

In fact, your sales data probably reflects an even wider disparity. It’s not unusual for just 5% to 10% of customers to make up 90% or more of your profits.

They are your most valuable customers. And they are also your most demanding. Large accounts frequently demand superior pricing and extra concessions. This preferential treatment eats into profits, making it harder to increase additional revenue from those accounts.

Now what?

Well, it’s likely that your best partners share similar features. By knowing what those features are, you can go out and recruit more like them. In other words? You’re not trying to get a bigger slice of the same pie; you’re trying to increase the size of the entire pie.

Challenge 3: It’s a Business and a Relationship

Your customer lifecycle is basic: reach, acquisition, conversion, retention, and loyalty. Sadly, your partner relationship doesn’t work that way.

You aren’t trying to incent a purchase; you’re trying to generate and maintain an excitement about your product. You need them to sell, market and support it on an ongoing basis. You are fighting for time and mindshare, and it requires ongoing relationship maintenance. And without it, a lucrative sales channel can go cold in an instant.

The best way to nurture things is through a planned, systemic approach. Building on your communications strategy, you need to provide them with regularly updated content and value. Why your product? What’s new? What’s changed? What should get them excited? And how can they sell it better?

Providing what they need to better equip them for success means your business is more likely to break through the noise and gain attention.

Need Advice on Overcoming the Challenges of Indirect Channel Model?

We are here to help you! Extu has decades in the industry and can work with you to implement a strategy harnessing all those years of experience.

Get in touch with our team of experts today and let us help you overcome the challenges that come with implementing the indirect channel model.