Recruit Resellers – How To
Once you have decided to sell through resellers you have to first decide which reseller types you wish to recruit. You must then a) put together your reseller program (for VARs and System Integrators), b) create your reseller kits (for retail and/or VARs/System Integrators), c) and then start recruiting–otherwise you have little to talk about. Trying to recruit resellers, before you “have your act together” will blow rare and often single opportunities–sometimes eliminating a chance to try again later. There is only one CompUSA, you blow it and big chunk of your potential mid-technical retail market is gone.
The Reseller Continuum
Resellers fall within a continuum. Typically, the more consumer oriented, lower price/margin, high volume your category (i.e., games, personal finance), the more you will target the mass merchants (Wall mart, Target), superstores/consumer electronics (CompUSA, Fry’s, Best Buy), and software chains (Babbages or Electronics Boutique (Egghead, Software, Etc. are out of business)). You will also target on-line and catalog resellers (such as NewEgg.com, Egghead.com, Buy.com, PCConnection, and Tiger Direct).
When your product is high value added, requires a lot of service and support, has lower unit sales, is custom developed, etc., then you would target the VARs and System Integrators, the regional dealers (such as the old Entre, Businessland, Computerland, etc.) and corporate direct (Corporate Software).
As described earlier, distributors are wholesale dealers who sell to other dealers. Most resellers (retail and VARs) prefer to order through distribution (some order direct, depending on the product and company size) for the following reasons:
- They have fewer phone calls to place orders (a few distributor calls instead of hundreds of separate vendors)
- The distributor will often provide better financing (allowing resellers time to sell the items prior to having to pay for it)
- They will warehouse inventory and manage returns (important for physical boxes or hardware–not important for SaaS).
The benefit that wholesale distributors provide to vendors is warehousing and inventory balancing (some resellers may return items, that other resellers will order), credit and collection for thousands of resellers, an established customer base of resellers that will order product, promotional programs to reach specific resellers (they know which ones are ordering competing or complimentary products and can help you target these accounts).
The disadvantage of using a distributor is you sometimes don’t know who is buying your product–so you can’t establish as direct a relationship. You know who the national’s are since you have to sell in and they can tell you what they ordered, but not the regionals and independents. In retail, I typically expect the nationals to take approx.. 1/2 to 2/3rds of the distributor inventory–however, it is the regional and independents that take the rest (although with the advent of the internet resellers, the ratio have changed), and they seldom require expensive co-op and MDF, so for your overall margin’s sake, it is critical to get these regional and independent resellers selling your product.
The other disadvantage of using a distributor is that they require margin, which increases your final street price. The average margin that a distributor will tack on is 3-8 points–although this can vary significantly by software, accessories, and hardware.
If you are going into retail you will need to further define which retail outlets will sell your products–which determines your target. Many of the retailers segment themselves by the type of product and price point that appeals to their intended market. For example, a mass merchant like Wal-Mart would cater to the sub $49 and less relatively non-techy audience–with most software being personal productivity and games within the $9.95 to $39.95 range (you will not see a $599 copy of Photoshop sold in Wall mart).
On the other hand, the consumer electronics superstore, Frys, caters to the techy (with qualified technical staff), and they supply everything from motherboards, power supplies and processor thermal paste, to consumer game software–both locations will sell the lower-end products, but only Fry’s will sell the high-ticket, specialized packaged software (like Photoshop).
Recruiting the national superstores is relatively straight forward. They have single national offices that you can visit, e-mail or call, with single buyers that handle your product category. You have to contact the buyer, present your product, pay extortion fees (MDF/Co-op), and you’re in (at least for the first month–and your out again if you can’t meet the minimum turns/location for that chain). The mass merchants have a similar process, but they are sometimes serviced via a merchandising firm such as Handleman’s. This merchandiser “owns” select shelf space (in inches) and it is their duty to select the best products to maximize revenue for the store (and them).
Regardless, the process is fairly straight forward with the national accounts–direct sales and relationships are king. I have gotten products into national retail locations simply because I know the buyers, and they know that I already know how to play the game…so we play. Some of the products I have gotten in have never made it past the door in multiple prior attempts. Having the right material together, proper packaging and relationships increases the odds that you’ll get this rarest of shelf space.
Regional chains, on the other hand, can be sold into similarly, but it may take more effort to ferret them out. The nice thing however, is that regional chains don’t seem to know how to play the MDF/Co-op game as well, so it is less expensive from an MDF fund basis–but more manpower intensive.
VARS and System Integrators
In contrast, VARs (Value Added Reseller) and System Integrators (VARs that can develop and integrate) are often highly specialized, very fragmented and you often have to market to them to pull them out of the woodwork. There are VARs that only cater to CADD, while others only sell into telcos, still others may concentrate on physical security enterprise software. Unlike the mass merchants, chains and superstores, you often have to find them one at a time (your biggest system integrators may have dozens of offices across the nation and hundreds of millions in sales, but many VARs are single shop locations). As a result, finding the right vertical resellers could prove challenging.
In addition, once you’ve found the right VARs, you may still have to train them and walk them through your product sales process multiple times before they can even close one deal. Sometimes it can take a good 6-12 months of concentrated effort before you have a trained and modest VAR/System Integrator reseller base.
Recruiting VARs and System Integrators
The first step, once you have identified the type of VARs you want (by size, certification, vertical expertise, accounts, etc.), is to source your reseller type and build your database. This can be done from the following sources:
- List rental companies. One in particular to check with is www.ComputerMarketResearch.com (worldwide list with demographics). Chanimal also has a list of VARs – see Chanimal Store.
- Vertical reseller trade pubs. Often have multi-vendor postcard sized card decks
- Reseller only pubs (i.e., VAR business) – list rental, pub mailings and advertising.
- Vertical trade shows
- Hire a training/rep firm
- Wholesale distribution
- Retail or VAR Vision
- VAR Xchange – in all it’s variations (sometimes they have vertical events (like “Security Xchange”)
- Advertise in reseller trade pubs and collect the respondent names
- A reseller-centric trade show (like SoftShow of the old Merisel days)
Specific approaches to consider include:
- PR. Always lead with PR, it is 1/7th the cost and 15 times more believable. Resellers tend to sell what they know about and what gets good reviews. You will need to submit your press releases for first looks, product for reviews, etc. in order to get the massive buzz that can happen via the press. To prove this out, at one company we received apx. 4 times the reseller and customer inquiries from our press, than from our entire display ad campaign. Go to the PR section of Chanimal for more details.
- Newsletter Sponsorship. Publications like VARBusiness have one of the largest reseller databases and send weekly e-mail newsletters that have a “sponsor” listed on the top. Usually these sponsors will advertise a seminar or something generic. It appears that most sponsors do what everyone else does (following the sheep)–which seemed pretty useless to me. I suggested a direct response to the VARs to get something free the last time I used this list. I wrote the following copy for one of the companies I worked with (limited to 6 lines of text):
“Sponsored by Acme Software First 50 replies gets Acme Database software FREE Develop custom web database applications in days, not months. No time consuming ASP or PHP code—point, click, & publish. Winner “Best Database of the Year” PC Magazine 2005. Reg $349. Only $99 until Dec 31st. Be one of first 50 and get it free! www.acmesoftware.com/specials/advisor”
We had over twenty VARs download the software and apply to be resellers within two weeks. Click here to download a sample PDF of the VARBusiness newsletter (notice the sponsor on the top).
- Display Advertising. The advantage of PR is that it is cheap–the disadvantage is that they don’t always relate your key benefits and messaging as you would prefer. They also don’t always provide contact information. Display ads allow you to position your products and run reseller promotions for investigation. You can also announce promotions to local and regional resellers that already sell your product, but you aren’t aware of them, via display ads.
- Direct Response. Direct response can be via mail, Fax, or e-mail. This is especially effective if you have a reliable list of prospective resellers (like a list scraped from your competitor’s Web site). The only problem is that resellers get bombarded with direct response and your info could get lost in the pile. One approach that has worked for me is direct mail 5 1/2 by 8 1/2 sized four color postcards–the reseller can see the offer and promotion without even having to open the envelope (better make it compelling). I have also had terrific response and ROI from card decks (like VAR Business)–specifically since they are relatively inexpensive. Of course these card decks use even smaller postcards–but it is the same concept (a compelling offer is required).
- Reseller store-by-store visits and tours w/seed copies. If you have your own sales force they could call on the local VARs to review the product and recruit the reseller. Or, you could hire one of the national rep firms such as Channel Sources or The Distribution Network, or training firms such as MarketStar, Channel Force or Channel Partners. Click on the LINKS section and go to Rep Firms for their websites. These training firms cycle through most of the nation’s top VARs on a quarterly basis–sometimes in the form of tours with other complementary vendors. Having helped start the largest of these firms, and having cycled through thousands of resellers, the reception is terrific and effective. Especially when the resellers have distribution incentives and can purchase cheap ($10 to $20) NFR seed copies.
- Roadshows. I setup my first roadshow by recruiting 4 other vendors for a 1/2 day demonstration to 3 cities. In the morning we invited VARs, and had customers in the afternoon. We had over 150 resellers at our first regional event (at a hotel), and immediately booked for 15 more cities. We ended up seeing over 800 new VARs during this 8 week event–recruiting about 70%. The tour was effectively paid for by our four participating alliances–since we sponsored the event. Great ROI and results.
- Trade Show attendance. In the old days, many of the trade shows were reseller only, where you could hang out a sign and recruit resellers. Most today are end-user shows. Even still, bring the sign to recruit resellers–some of your best ROI will be from resellers that eventually sell your products. There are still some specialized reseller events such as Retail and VAR Vision, and Xchange. Retail & VAR vision used to be the brainchild of Micky D, now it is part of Gartner. Xchange is run by CMP publications. Both of these events invite top Retail and VAR decision makers to view your presentations–and allow you to network and recruit resellers.
- Promotions via distributors. Distributors have a complete list of direct fax, e-mail, spiffs and promotions to contact the resellers you want and promote to them. See your distributor’s packages for ideas of what they can offer.
- Telemarketing. Companies such as Sunset Direct call on end users and resellers with a massive database and provide NFR copies, information, etc. to get you connected. or, you could have your own team call into accounts to contact and recruit resellers.
- Alliance cross-marketing. Your alliances of complimentary products are always an excellent source for resellers. You can contact their authorized VARs and offer bundles and promotions–knowing that their resellers are already familiar with the space.