How To Build A Successful Sales Channel

Mark Suster posted about channel sales today.  Nice post, as always - I think of all the VC blogs I read his provokes the most desire to respond, so he clearly picks topics well.  If you don’t read him you should.  Or just subscribe to my VC blogs list on Google Reader.

I’m English originally, so sharing success stories can seem a bit like unseemly bragging, but it’s relevant.  Channel building is hard.  I think the main problem is the belief that the sales people in the channel give a crap - not only about your product, but about what their biz dev folks tell them.



I took over “alliance marketing” for an “enterprise mobilization” company in 2002.  There were a couple of hundred companies funded doing mobile middleware who each got a customer and pretty much all crashed and burned, between about 1998 and 2003.  This was almost one of them.  In the year I worked for the company the entire sales team (multiple teams churned through) generated zero dollars of sales.  I joined the company with a baby on the way needing to make a paycheck.  The CEO was under fire from above (board) and below (I am still friends with the CEO so I’ll leave out those details).  Suffice it to say that the main channel I was supposed to be handling turned out to be a relationship where the first call I had with them was a VP at a giant in the industry threatening to sue us for calling ourselves a partner.

What did I do?  I got out there and listened.  I gatecrashed sales events - this channel had 5,000 pairs of feet on the street - literally hiding under tables at times to avoid senior management.  I found out what seems obvious in hindsight:  a sales person who knocks on the doors of businesses selling them $50-a-month phone plans, albeit lots of them, doesn’t fit well with a six figure enterprise sale.  Uh-oh.
So, we’re not a partner with a large carrier like I was led to believe when I turned down the cushy job with the UK gov’t and took this one instead; the salesforce we want to use as a channel cannot comprehend the product; baby’s coming REALLY soon.  Bugger.

Lesson 1:    Fit the salesforce

Phones sales people cannot close six figure sales.  They sell $50 monthly plans for a living.  We had done a small implementation of the platform that I pushed to be broken down and sold along an ASP (nowadays we say SAAS) lines at $12-a-month per subscriber.  Not $200,000 a pop.  This makes it a complementary sale for the phone company sales rep.  The CEO gave me the resources to build this out as a side product, and later pivoted to make this the entire company when we started getting real traction.

Lesson 2:    Don’t assume the high-level relationship translates. 

I worked the ground game.  I showed up in every regional office and trained their data sales teams on our product.  They’d been instructed only to sell official partner products, and explicitly not ours.  But I was there.  I held hands.

Lesson 3:    Close the first deals yourself

I created a simple pitch that any sales guy could take into their prospects - “if I can show you a way to put this phone in the hands of each of your employees, to pay for the phone, to pay for the service on the phone, and to still save $2-3,000 per employee per year is that worth an hour of your time”.  It’s simple.  We gave a credit-card sized ROI calculator showing this to every sales rep.  Then I WEBEXED every single sales appointment that the reps could set up - sometimes at 4am to get a 7am East Coast pitch, and I walked them through the signup process at the end telling them to get out their credit card and sign up now.  We had a 30% (yes thirty!) with this approach.  I personally closed the first 200 companies this way.  Sales guys remember this.  They don’t want you in every deal, once they’ve seen the close they will do it themselves.

Lesson 4:    Create heroes

The sales force had quotas.  Sell so many voice plans, sell so many data plans.  By being there for the data sales guys we helped them support their voice sales guys in the field.  The data sales guys made the voice guys win new business, hit their quotas, take an extra check home to the wife.  They were heroes.  And they loved us for it - they didn’t give a crap what higher-ups said, they were selling our product and not competitors.

Lesson 5:     Numbers speak for themselves

The main take-away:  we made our product complementary to the core product of the channel. We made it priced in a way that the channel was used to selling.  Then we went further than all of our competitors in supporting them.  I was on airplanes 2-3 days a week.  I saw 30 states.  But in six months we had market lead, growing to more than 50% market share, and the carrier made my company their protected partner in that space with preferential billing.  Why?  Because they had to ask “where are all these data sales suddenly coming from?”  At first they didn’t like the answer and tried to get the guys in the field to sell a competing product.  But sales people want to get paid.  You make them get paid you win.

One last thought.  Our competitors gave cash “spiffs” and non-monetary gifts to sales people who sold their products.  We gave nothing.  Sales Managers told us “our guys won’t sell your product, they’ll sell this other one because it spiffs them”.  They were wrong.  Making people successful wins every time.  Oh, and our product started out with less features & functionality than our competitors - in many ways old-school thinking would have called it an “inferior” product.  But we were lean startup / minimum viable product before we’d even heard those terms.

Channel building is hard.  Very hard work.  Most of the time you’ll fail.  But it’s not rocket science.  However I’ve not seen many successes that don’t follow the above formula.