Why effective channel marketing is critical for channel vendors

Why Effective Channel Marketing is Critical for Channel Vendors

Every day, thousands of companies around the world sell their products and services through independent or quasi-independent channel partners such as franchisees, independent agents, dealers, and value-added resellers.

Channel-based selling is a major feature of the economic landscape in most parts of the world. For example, in 2017, there were over 700,000 franchised business establishments in the United States, and those establishments produced $769 billion in sales. Franchising is the stereotypical example of channel-based selling, but many kinds of companies sell through channel partners, including:

  • Insurance companies that sell through independent agents
  • Financial services firms that sell through independent financial advisors and/or broker-dealers
  • Technology companies that sell through value-added resellers
  • Manufacturing companies that sell through independent dealers or retailers not only are indirect channel sales a significant part of the overall economy, many companies rely on channel sales for a sizeable portion of their total revenues. For example, many technology companies derive more than half of their total revenues from sales made through channel partners.

Companies that sell through indirect channels are often dependent on the marketing and sales efforts of their channel partners. Most channel vendors operate in a distributed marketing environment, which refers to a marketing model in which both a corporate marketing department and channel partners plan and execute marketing campaigns and programs. When channel vendors provide financial and/or other kinds of assistance to their channel partners to develop and execute channel marketing programs, the practice is commonly called through-partner marketing.

The defining characteristic of distributed or through-partner marketing is that the local marketing entities—i.e. channel partners—have both autonomy when performing marketing functions and the primary responsibility for developing and running marketing campaigns and programs. As we’ll demonstrate shortly, this characteristic is one of the primary reasons that channel marketing operations are more difficult to manage.

Many companies derive more than half of their total revenue from sales made through indirect channels, and most of these companies must rely heavily on the marketing and sales efforts of their channel partners.