Buyer-seller relations can take on many forms, but it’s when they evolve into partnerships that they allow for the leanest supply chains and the highest profits. Such alliances, called channel partnerships, allow buyers and sellers to work together to find distributors and add the most value to their supply chain.
Suppliers around the world are finding new growth by making channel partnerships an integral part of their distribution strategy. Whether forming relationships with resellers, consultants or retailers, suppliers are strategizing ways to make the most of their distribution channels. Below find more information on channel partnerships, types of channel partners, how to find distributors, and ways leading businesses are finding success through channel partnership best practices.
Author’s note: buyers and sellers can take on many names depending on the stage of the supply chain. For the purpose of clarity, in this article any provider of products (i.e. an original manufacturer, product distributor or reseller) will be referred to as a “supplier” or “seller.” Any buyer of goods (i.e. a distributor, vendor or retailer) will be referred to as a “distributor” or “buyer.”
What Are Channel Partnerships?
Suppliers use a variety of distribution channels to both maximize and diversify sales as well as mitigate risk when looking to find distributors. The best distribution channel mix will balance active, hands-on channel partners with passive, more referral-based channels like referral partners.
A channel partner is a company that partners with a manufacturer or producer to market and sell the manufacturer’s products, services, or technologies. This is usually done through a co-branding relationship. Channel partners may be distributors, vendors, retailers, consultants, systems integrators, technology deployment consultancies, and value-added resellers and other such organizations.
Some common types of distribution channels include:
- Value-added reseller
- Systems integrator
Channel Partnerships: Considerations
Like any kind of strategic partnership, channel partnerships require careful strategic planning and monitoring in order to drive top results. In his channel checklist, Layton Harwell describes what suppliers must be conscious of when forming relationships with distributors.
1. Select the right channel partners
Before settling down with any distribution channel, suppliers examine market demand and determine how many and what kind of channel partners they seek when aiming to find distributors. Next suppliers will compare sellers’ go-to-market strategies to choose those that show promise of the most long-term success.
2. Share metrics
When it comes time to sign a channel partner agreement, suppliers should make sure to include the metrics they will use to measure their partners’ success. Over time, analyzing these metrics will help them determine where their channel partnerships are succeeding and where they could use more work.
3. When the vendor succeeds, the supplier succeeds
The channel manager plays a vital role in all channel partnership programs. It is the channel manager’s job to maintain relationships with distributors, keep them excited about selling the product or service at hand and help them identify new market opportunities. When the channel manager is able to help a distributor make more sales, the supplier has the opportunity for increasing sales and driving more revenue.
Helping distributors succeed involves both getting to know a their business and helping them sell. The latter Harwell refers to as “solution selling:” rather than merely explaining the benefits of a product or service, effective channel managers will make clear their products’ unique selling points, suggest proven selling techniques and, where applicable, provide materials that will help distributors make more sales. Here is an example: a channel manager of a greeting card publisher might ship a branded card rack to a gift shop partner in order to help the retailer increase sales.
“Gallup’s studies of business-to-business relationships have found that suppliers that create impact – those that are knowledgeable about their distributors’ business, give them valuable ideas, and help them reach their goals – develop powerful partnerships that improve performance. At a glance, working to create this level of impact might seem intrusive, but it isn’t. The most respectful thing any company can do is help another company succeed.”
Katz also suggests the following framework for suppliers to help their buyers achieve their goals:
More sales mean happy distributors, and happy distributors mean long-term partnerships and profits for suppliers.
Assess the channel partnering program when looking to find distributors
Suppliers should periodically analyze distributors’ sales by collecting and reviewing point of sale reports in order to determine which tactics are still driving success and which channels have dried up.
Case Studies: Buyer-Seller Collaboration
Modern communications technology and increasingly collaborative attitudes are making channel partnerships a logical choice for buyers and sellers around the world today. Here is how Wal-Mart, Procter & Gamble, Betty Crocker and the Hershey Company have reaped the benefits of channel partnerships.
Wal-Mart and Procter & Gamble
“Just-in-time” or “quick response” inventory and pricing is a great example of suppliers and distributors collaborating to strengthen the supply chain and increase sales. By electronically sharing up-to-date inventory and POS information, shifts in consumer demand can be identified and addressed efficiently.
A classic example of just-in-time (JIT) inventory in action is the channel partnership initiatiated between Wal-Mart founder Sam Walton and Lou Pritchard, then sales vice president of Procter & Gamble, in 1985. According to Pritchard, the two aimed to develop a partnership “built on trust and committed to a shared vision — meeting the customer’s needs while driving out excess costs in the system by changing it.” Using electronic data interchange, Procter & Gamble significantly improved on-time deliveries to Wal-Mart, which in turn drastically increased product turnover at Wal-Mart.
Soon after, other discounters, department stores and specialty chains established their own JIT channel partnerships. Today JIT processes are used across many industries including consumer goods, industrial goods and healthcare.
Betty Crocker and Hershey
Another common way brands find distributors is through co-branding relationships. Co-branding allows brands to collaboratively access a new market, and in some cases it allows one brand to expand its reach by piggybacking on a brand with a different customer base. For example, the Hershey Company has partnered with Betty Crocker to distribute its chocolate through Betty Crocker’s cookie and cupcake mixes.
Buyer-Seller Collaboration Drives Success
When buyers and sellers collaborate through channel partnerships, they open communications to create a leaner supply chain and, ultimately, increase revenue for both sides. Are you a buyer interested in forming a win-win partnership with a seller, or vice versa? Learn how Powerlinx can help you forge partnerships and find distributors for long-term success.
Image by Patrick