Distributors, Resellers...Types of Channel Partners

Distributors, Resellers...Types of Channel Partners

There are many different types of channel partners including direct sales people, the Internet, distributors and referral partners who will simply recommend your products or services to their customers. What differentiates them from one another is the proportion of the end-sell price they absorb, the control you, as a supplier, have over their activities and how complex they are to support and manage.

In general, as the cost absorbed by the channel and the control you have over its activities increase, so too does the complexity of managing it. Consider the extremes; you have no control over a referral partner, but it also receives no payment from the end-sell price of the product. It's simple to manage. Direct sales people, on the other hand, require huge management effort, are expensive to fund and all of their activities are fully controlled by their employer.

No matter which type of channel you're dealing with, the commercial transaction falls into one of three categories. These distinctions determine the legal relationship the supplier has with the channel partner and are therefore of critical importance.

Representative transaction

The basic commercial contract (offer, acceptance, consideration, product/service delivery) is between the vendor and the customer. The rep never handles the goods, the invoice or the payment. After the transaction is completed he is rewarded by the vendor. In general, this payment is not visible to the customer.

Distributor transaction

The distributor transaction, on the other hand is entirely different and consists of two separate contracts, one between the vendor and the distributor, the other between the distributor and his customer. In both cases there are unrelated cycles of delivery, invoicing and payment, the only common thread being the product traded.

Referral transaction

In the referral transaction the partner has no commercial role at all and does not receive a payment. If he does, he is then a representative and not a referral partner.

Available Channel Structures

A channel is defined as any person or body corporate that facilitates the sale of a company's products or services for reward. In the case of unpaid referral partners, this reward has to be seen as an enhancement to the value they offer their customers. For all other types of channel partners, it's financial. There is a wide variety of available channel partners to choose from, but in terms of classification, they all fall into one of two categories: distributors who take title to the goods or representatives, who don't.

Consider the following examples:

Distribution

Catalogues

Internet Shopfronts

Distributors

Systems Integrators

Value-added Resellers

Private Label Partners

Virtual Sales Offices

Representative

Internet Auctions

Commercial Agents

Brokers

Representatives

The relative advantages and disadvantages to the supplier of each channel type are weighed up and explained in considerable detail on theGuide to Channel Management

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