Except for a few software and hardware vendors who sell super-expensive products to the largest enterprises, a large percentage of B2B tech companies use the Value Added Reseller (VAR) channel. Not all heavily but to one extent or another. So how do you best go about doing this successfully? Do you simply create a great product, throw it to the channel, and sit back and collect the money?
If only it were so! Unfortunately, many tech companies new to the channel find out that you will fail by taking the term “reseller” in the VAR label too seriously. For those with experience in the VAR channel, you know it is still incumbent upon the vendor to create end-user demand for their product. And yes, you need to market to the VARs as well. You will, of course, take whatever “push” you can get from the channel. But counting on VARs to push HARD is a huge mistake. You must have an active pull-oriented promotional program aimed at your ultimate end users for a realistic chance at channel success.
One-Step vs. Two-Step Distribution
Some of what’s discussed in this article can become a bit more complicated if you decide to use what’s known as “two-step” distribution. By this, I mean that your product flows through a distributor before going onto a VAR. The details of this type of distribution are best left to a different article. This article assumes a single-step distribution strategy. This means your products flow directly through a VAR from your company. The majority of what’s discussed in this article applies to either form of distribution strategy. Any differences would be slight.
So what are the best marketing approaches to support channel sales activities? It depends of course, on the specifics of your product, market, price point, etc. But let’s take a quick look at some popular promotion methods that are used in conjunction with channel sales. I’ll break it down into three basic categories:
End-user demand creation
As stated above, this is first and foremost the most critical activity for channel success. Unfortunately, most new players in the channel don’t understand this initially. Many have to learn it through a painful hands-on lesson! This experience sometimes leads to outright rejection of the use of the channel, due to spectacular failure.
My next point may feel counter-intuitive. It doesn’t even matter so much whether you establish end-user demand for your products by selling directly or via the channel. The important thing is, with few exceptions, there needs to be serious interest in your products at the end-user level. BEFORE entering the channel, if you want to attract and sell through VARs successfully. It’s almost always necessary to be successful in selling directly to end users before you can hope to have a successful VAR channel for your products.
Create enough demand for your product, even if you’re selling directly. VARs will hear about your product and want to sell it (assuming it fits with their business). Many will then CALL YOU. Almost any end-user marketing method that fits with your product type and budget can be used to create this demand. But here are some commonly used promotional types:
- SEO (Search engine optimization)
- PPC (Pay per click) advertising
- Press relations
- White paper marketing
- Targeted online banner advertising
- Direct mail, both traditional and email
- Social media marketing (Twitter, Linkedin, Facebook, etc.)
- Trade shows
- In-bound activities such as expert Blog content
VAR recruitment
In addition to creating end-user demand, you’ll want to market directly TO VARs when starting your channel-building activities. Reach out directly to get them interested in actively working with you and your products. An important point to remember is that the VAR channel is quite large and generally segmented into many vertical categories. So however you approach them, don’t waste time (yours or theirs!). Contact only VARs who are doing business in your target end-user segments. Here are some common recruitment approaches:
- Direct email through available VAR lists
- Phone campaign using available lists
- Internet research with a direct email or phone approach
- SEO-optimized Channel/Partner section of your website
- Trade Shows (VARs frequent them, and it’s a great opportunity for personal contact)
- Have a highly successful product with strong end-user pull (VARs will find you!)
Cooperative marketing with the VAR channel
Lastly, you’ve created end-user demand and recruited enough VARs to have a “channel program”. What’s next? You need to establish standard methods of working with your new partners to create and fulfill demand. VAR programs come in all shapes and sizes depending upon the market. I’ve seen a wide variety of promotional opportunities included in these programs. One of my favorite “getting started” methods is to offer to pay for, and even execute a direct mail/email campaign to the VAR’s end user base. This campaign can blind with respect to you, the vendor, if necessary. This introduces you and your product family as a new partner of the VAR, with no cost or even any effort borne by the VAR.
Beyond an introduction, you of course need to flesh out the components of your channel program. Below are some promotional activities that are very commonly included in VAR programs:
VAR Channel Program Nuts and Bolts
- Co-op advertising/promotion with the vendor provides funding for approved VAR-executed promotional programs up to a set percentage ( typically 3-6%) of that VAR’s sales of your products
- Free or discounted demo units or SaaS demo accounts
- Special pricing to support large opportunities
- Co-selling along with your in-house sales force
- “Deal registration” to limit channel conflict
- Additional discounts for completing product training, certifications, or maintaining premium support levels
Co-branded product literature and other use of the vendor’s logo - Website and catalog listings of authorized or “preferred” VARs
Rebates for volume sales (but generally not recommended–fraught with danger) - Vendor-funded introductory direct mail campaign
Much more than can be discussed in a short article goes into successfully marketing and selling through a VAR channel. But that’s my quick primer on successfully promoting your products for sale through the VAR channel. Many of you have experience in this area. Post a comment or a question to activate a discussion.
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Good read. I’m interesting in your opinion on how/if the VAR channel will evolve as we all eventually move to a cloud model. Does the VAR channel exist on the IT supply chain in the future?
A very interesting question, and one without a definite answer. My opinion is that the VAR channel doesn’t go away, but it will morph into a different form. VARs since the beginning (when Computerland and competitors split into tech retail and VARs), and tend to be very entrepreneurial and adaptive by nature. They are service organizations and will adapt to the new needs–and there will always be needs–app customization, integration, custom solutions not provided by the standard app folks. Individual VARs may not be available to change and will fade away, but not the channel as a whole.
If we look at the VAR in the Telecom world they are a prime example of how key VAR’s have had to morph and adapt their world with the changes in Phone technology over the last 8 years or so. In the past you may have had 2 distinct VAR’s servicing an organization. One for their IT needs and a completely separate VAR dealing with the phones.
As networks grew and INTERNET connectivity became a reality a VAR needed to jump into either typical IT and Network space or the IT VAR had to move into the Telecom space.
Now with IP phones being the lions share of new phone systems sold a VAR had better be able to work in the combined space because the old segmentation of voice verses data is all but gone in the market. The voice VAR from the past suddenly had to develop data network design and implementation skills as well as in some case the ability to handle outsourced projects. Gone is the world where the PBX was a entity that did not have to play at the users desktop level and connectivity. Many of the Telecom VARS have made the transition or Morphed into both worlds successfully while some have gone by the wayside or have been acquired and key talent retrained for today’s technology which continues to evolve. If a VAR is to survive they will need to be at the lead of the learning curves and continuously evolving.
Excellent points, Jim.