The single greatest challenge facing leaders of companies that develop products for the education market is — and always has been — distribution. Creating a sales system for any company is an expensive proposition. Your first step in that endeavor is to figure out what works. Most managers do that by identifying a small geography and trying various sale approaches. But before you bring any sales system to scale you need to determine what works, and at what cost. So read on, and also be sure to listen to my interview with STS leader, Glen McCandless, on STS Radio.
In the absence of sufficient capital to build out a complete sales organization many small and mid-sized companies choose the option of finding a partner or "channel" to reach buyers in the schools. They decide to look for resellers and/or independent reps. The attraction of using third parties to sell your product is lowered upfront cost, but developing these channels may be hard work. Getting partners "rolling" may seem like an uphill push.
In choosing channels, you must also consider, and build into your pricing model, what the potential earning will be for your partners. The potential for sales must be large enough to make it worthwhile for them to enter into the relationship. Typically, we recommend that average sales transactions under $3,000 aren’t suited to this type of system unless buying decisions are quick and sales can be closed very inexpensively.
Products selling at upwards of $3,000 are better suited for channel sales since the commission earned is often enough to encourage sales activity by the reseller. Note that while the product price may be $3,000, it’s the average value of the transaction that is the more meaningful number. A product may have a $3,000 per building price, but the average transaction may be three buildings. This brings the value of the transaction to $9,000, and makes the activity more attractive to the reseller or sales rep. You should also understand and expect that the channel partners will provide you with feedback on your pricing and packaging, and you should listen carefully to their advice, and then make your decision based on what will be the most financially beneficial for all concerned.
Identifying the right organizations to partner with has two inherent challenges. The first is picking the right partners. The second challenge, which can be harder, is getting them on board. But before we look at those two topics, let's be sure we are talking the same language.
Independent K-12 sales reps are individuals who choose one or two products which they sell to educators in defined geographic sales territories. Independent reps are not salaried. You cover their expenses. They may be responsible for generating leads. Independents are usually compensated for sales they make at about 25% of the list cost of your product. They usually do not invoice the buyer, but they are responsible for maintaining the customer relationship, including any work required to secure renewal business.
Education resellers, on the other hand, are businesses with multiple K-12 sales reps. Resellers often have larger sales territories than independent reps. They maintain the customer relationships, handle invoicing, follow up to ensure renewals, and are compensated 35% to 50% of sales. They buy the product from the publisher/developer at the discounted price and then sell it to the school or school district buyer.
Of course, how you structure these relationships may vary depending on your own organizational capacity do sales and marketing tasks. As you consider the roles, you need to look at the entire range of tasks — sales, marketing, training, support, and so on — and keep in mind that the percentage of discount or commission that the channel partner earns varies depending on who is taking on which tasks.
Picking the right channel partner requires research. Finding resellers with sales experience and relationships with your target audience is critical. You want to capitalize on the relationships they already have and to have them extend those relationships and the related credibility to your company and products. Experienced channel partners have a deep understanding of the dynamics in their local geographies, a distinct advantage over other channel models.
Whether we’re talking about independent reps or resellers, the best ones limit their product lines and focus their efforts on particular buyers or niches. Some specialize in math and reading. Others may specialize in special education products. Ideally, you find a partner who understands the niche you are seeking to develop.
Another important consideration for building a channel is the buying cycle for K-12 educational products. The cycle is clearly tied to the school calendar. Resellers and independent reps are not likely to consider taking on new products until they are gearing up for the next cycle.
Setting clear and realistic expectations is a critical success factor. Be aware that many resellers have been burned by developers who use a third party to build a base of customers and then take sales in-house with their own direct sales channel. On the flip side, developers have entered into outsourced channel relationships with resellers and independent reps and when the results fall short of their expectations they take the selling tasks inside to gain greater control. In working with resellers or channel partners, you should be very clear about your expectations and the results you expect. Set benchmarks collaboratively so sales goals may be met and exceeded.
To ensure a successful sales effort the sales team has to be trained to develop their selling skills and product knowledge. The reseller typically provides sales training but the developer/publisher is expected to provide product training and also to keep the channel partner up to date on product changes, including updates, extensions, repackaging and any special offers. To do this successfully, you must have a process for frequent communication. Beyond keeping the channel partner informed about product changes, communications should also include discussion about new sales approaches, sharing of success stories and case studies and any other information that might be gathered through the experience of all the resellers. What worked in Louisiana may work again in Illinois but an important part of the developer/publisher's job is to share this information and facilitate communications among the channel partners.
During the 20+ years we’ve been involved in developing channels for selling and marketing to schools a lot has changed. Selling used to be a more social interaction. Superintendents stayed in their districts for years. They weren't required to defend their buying decisions. The reseller’s relationship with the key people in the district was enough to sway decisions. Now, decisions must be defensible. District leaders change jobs frequently enough that relationships that you could take years to develop now only have a life spans of months, not years. The requirement for evidence-based decision making, issuance of RFPs and formal, complex purchasing processes have replaced the old trust-based models. Overall, we think this is a positive change. Decisions have shifted to higher levels for infrastructure products and are shifting back down for instructional products as accountability for instructional outcomes shifts down as well.
Keeping track of all the changes in the K-12 market is difficult and requires constant attention from developer/publisher managers to ensure that the chosen channels are reaching the right buying audience. And importantly, you must be sure as the market changes that you've got the right channel partners to do the job. Do not underestimate the effort it takes to develop channels and manage the channel process. If you choose an indirect model as your approach to selling to schools you must have the right partners at the right time and you must have someone in your organization who is dedicated and accountable for channel success at all times.