A few years ago, when I started working at Bindo POS, among the tasks I set out to accomplish was to develop a formal reseller program. While Bindo had worked with channel partners and resellers in the past, the relationships were not managed in a formal way. Developing a reseller program and working via the channel are consistently brought up as potential strategies to scale an SMB sales business – so, the thought process went, why not give it a shot? We saw that many of our competitors had reseller programs with partners across the globe. Companies like Lightspeed, Revel, and Lavu all employed individuals to manage these programs – so we figured that there must be something worth exploring in the channel.
A few years in, I’ve found that while we we’ve earned new business as a result of our efforts to recruit resellers, my time would have been better spent on other efforts. Here are a few reasons why:
- Another level of competition: Resellers have a lot of options, and if they’re doing their job well they are considering all of them. Resellers have the advantage of being a local resource for their SMB customers, but being local means they have a smaller market. With fewer potential customers the value of each sales lead is that much greater, so the smart reseller will have as many tools in their arsenal as they can manage to win new customers. There is no one size fits all POS system so resellers shop around. For a POS company this means there is competition not only for the end customer, but also for the attention of the reseller. The POS company must first convince the reseller that their product is better than others on the market, and then the reseller must convince the end customer of the same thing. This is not an easy task.
- The 80/20 Rule: It felt more like the 90/10 rule when dealing with resellers – that’s to say that 90% of resellers that I onboarded produced little or no results. Even though I spent a good deal of time answering questions, providing demo accounts, offering webinars and live demos, providing training, and negotiating terms – the large of majority of these efforts generated nothing. Some resellers were window shopping, others looking for another “Certified Reseller” badge to add to their email signature, and some just weren’t able to produce enough leads to close deals. As a result it took a whole lot of effort to bring on a single new end customer. At the time it did not feel as though my time had been wasted because my efforts were put towards developing lasting reseller relationships, but looking back it’s surprising what some of these resellers stated versus what they delivered. One reseller told me “I’m planning on flooding you with leads… Not sure you realize what’s about to happen here!”, and he subsequently sent me one lead which went nowhere quickly…he was in the 90%.
- “We’re still paying that guy?”: Resellers we work with earn a revenue share, where as long as their customer is using the company’s product, they get paid. This is good because it aligns their incentives with those of the company, and it rewards them for their efforts. However it also means that the company might be paying the reseller long after the reseller’s value-add has diminished. While resellers may provide ongoing customer support, their value-add is primarily around customer acquisition and initial customer setup. After the initial customer setup is complete the customer is likely to rely on the company, and not the reseller for support. A company could attempt to structure the reseller relationship so that the reseller is the primary point of contact for support, but doing so as a cloud based system is probably not practical. Cloud based systems are constantly evolving, and so is the knowledge and systems required to support them. So the company is left doing the majority of support, while the reseller turns on their cruise control. This “cruise control” model works in payment processing because the level of ongoing customer support required is minimal, but in POS it presents a challenge.
ISOs are easier: Whereas resellers want to get into the nitty gritty details of the product and vet it fully before even considering it as an option, many ISOs and payment processing reps are open to referring a lead after a quick vetting conversation. This means that we don’t have to invest lots of time at the outset, and can develop a relationship if we find opportunities that are worth pursuing together.
It’s not all bad. We’ve gained some great customers via reseller relationships, and continue to work with a number of resellers that I onboarded initially. With those resellers the work is done and there’s no reason for us to interrupt the relationship. For the time being, however, we’ve put a greater emphasis on referrals as the primary means through which we work with channel partners.