On Channel Partners and Independent Sales Reps

In our never-ending quest to find the most effective (and inexpensive) way to sell our products, sooner or later we begin to think about using Channel Partners and/or Independent Sales Representatives (CP/ISR).  I mean, after all, having your own sales force is expensive – you have to pay your reps salaries whether they sell something or not, commissions when they do, and expenses every day.   In addition you need to have at least one level of management to supervise their activities (usually more.)

On the other hand, Independent Reps and Channel Partners are, most often, compensated only if they sell something.  Sure, their commission rates are higher than those of your “captive” reps but, they don’t require expense reimbursement, benefits, or a tremendous amount of supervision or overhead.

Almost seems like a no-brainer, doesn’t it?

Like most things that seem simple, the devil is in the details.  It is quite possible that these alternate sales channels will be very efficient and effective for you.  However, there are considerations that should be taken into account as you determine if they are right for your company and business philosophy.  Let’s take a look at a couple of the most important ones:

Control

You “own” your salaried sales force.  You can dictate and monitor how much time they spend on activities you feel are important to your organization’s success.  They can only present your product(s), and you can ensure that the product messaging is delivered consistently.   Management is usually “hands-on”.

With Independent Sales Reps/Channel Partners, you can really only monitor their performance relative to their contractual obligation to you.   They typically provide representation for other companies’ products, and will determine how much time and effort they put into each one.  Management is usually “arms-length”.

Motivation

Captive sales reps are motivated by a number of different things: money, recognition, security, promotion (career path) and perks.  All of these can be provided and managed by your company.  Competition takes on personal importance when between members of the same organization.

Independent contractors are motivated by money alone.  The reasons that they do not work within companies typically involve their desire to not be involved with what they perceive to be corporate politics and restrictive structure.  They prefer to operate out of their own self-interest and to determine where they can make the most money for the least amount of work.  They are competitive, but only with themselves.

From this analysis, one might assume that I prefer the “captive” sales rep option.  In fact, that is not true.  Either model can be viable if managed correctly.  Since the vast majority of organizations have experience with their own internal sales force, I thought it might be valuable to review some of the key areas to concentrate on as you contemplate engaging ChannelPartners/Independent Sales Reps.

Gaining Mindshare

Assuming that CP/ISR’s represent multiple products, the challenge is getting them to focus more time on yours.  For you, this is a sales opportunity, and, like in all sales opportunities, the key element is to look at your proposition from the “prospect’s” point of view.  What things are important to the independent representative?

  • Money – Can you demonstrate how the return on investment of their time makes it cost-effective to focus on your product?  How will you show that they are paid fairly, accurately, and in a timely manner?
  • Easier, faster sale – Since the CP/ISR is commission only, what can you offer that will enable them to move your product rapidly through the sell cycle – marketing, lead gen, technical/product information support, etc?
  • Hassle-free implementations – These folks live by their reputations.  Can you demonstrate how your company stands behind them to ensure consistent smooth delivery and/or implementation?
  • Reliable customer service – Unless you contract with the CP/ISR to provide customer support, they may not have the time (or inclination) to provide it.  What can you offer to help ensure customer satisfaction?
  • Effective Training – providing effective product training is a given.  What else might you offer that will enhance the CP/ISR’s ability to be successful?  What about enhanced sales skill training provided at your company’s expense or subsidized based on attaining pre-defined metrics?   (I’d like to suggest SMART Selling, of course, as well as programs for demonstration skills, phone skills, etc.)   This additional type of  training provides benefits to both sides of the equation as well as building loyalty.

Effective Partner Management

Like any sales representative, the CP/ISR requires management focus.  However, based on the Control profile above,  these folks don’t like being managed.  An effective Channel Manager will balance the company’s need for revenue production with the CP/ISR’s needs.  This position is a combination of sales and management.  Sales, from the standpoint of maintaining the partner’s mindshare; Management from the standpoint of ensuring that the partner is performing at a level that will meet your company’s revenue goals.  The underlying challenge is to make sure that the partner recognizes the value of the Channel Manager, and that the Channel Manager effectively builds a strong relationship with the partner.

One very important tool to maintain communication is the use of a CRM.  The responsibility for the CP/ISR to keep the CRM updated should be part of the negotiation prior to appointment.  However, to facilitate this discussion, the effective Channel Manager will select a CRM that is simple for the CP/ISR to use and identify the benefit for the CP/ISR in using it.  Such services as pre-loading company-generated leads from marketing programs and  industry/territory prospect databases with key personnel email addresses and phone numbers will go a long way in showing the benefits of using the CRM.  Don’t forget to provide CRM training to your independent contractors.  Without the agreement and ability to use the CRM, your company will have no effective way of managing your sales pipeline.

Last, but certainly not least, developing a territory plan and listing the key prospects on which a CP/ISR will focus should also be negotiated as part of their contract, along with revenue production required to retain their contract.  Within this plan, the CP/ISR should be asked to list what they need in terms of marketing and/or support in order to be successful.  The plan should be short and not cumbersome to complete.

As you can see, these are the same concerns that you have to address under any sales model.  The difference is that you have to handle the independent contractor as you would a customer in order to get the representation you need.

I hope that this helps you as you contemplate the most effective deployment of your sales organization.  As always, your comments, ideas, and suggestions are welcomed.


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6 Responses to On Channel Partners and Independent Sales Reps

  1. Barry says:

    I’ve just started using independent reps for sales. I know it can get quite technical on the amount of resources that a company can provide for an independent rep. Do you know if the provided use of a company crm would at all effect their status as an independent rep as apposed to an employee?

    • That’s a good question, Barry. In my experience, the use of a company CRM does not have any impact on the status of an independent rep. The use of the company CRM can be made a condition of the distribution agreement, however, the most difficult aspect will be to convince the IR to actually use it. Most independent reps carry multiple products, and are reticent to divulge all the information on their activities. Additionally, they may balk at having to enter information into a system for each company they represent.

      If you want them to utilize your CRM, you have to figure out “what’s in it for them”, otherwise it’s just a clerical task. Remember, IR’s are independent for a reason – they don’t like working for organizations. I hope this helps.

  2. Dell McDonald says:

    Are there any specific skill sets you look for in IR that sell to schools? Or do you find that as long as they have a sales background, industry experience is agnostic? Where do you typically source for these IRs that sell to the education industry?

  3. Very well written and well thought out article!

  4. Very well written and well thought out article!

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