Updated: Aug 12, 2020
In today’s maturing imaging market it is getting more and more important to find new sources of revenue. One way businesses are approaching new revenue generation is by creating micro sales channels. Selling through sales channels is traditionally left to large corporations and manufacturers, however, this same technique is being adopted by small to medium businesses (SMBs) and value-added resellers (VARs).
To explore how SMBs and VARs can utilize this same technique at the micro-level lets first define what is a sales channel. A sales channel is simply an agreement between two companies, one that supplies a product at a wholesale cost and the other that marks the price up, and resells it. Printer and imaging dealers are the main sales channels for most printer and copier manufacturers. Using SMBs and VARs to reach local markets is standard practice across the globe for manufacturers of most products.
Now how do we apply the sales channel technique at the SMB and VAR level? A good example is to study is Samuel Adams. Samuel Adams microbrewery used an adaptation of their giant competitors' brewing techniques to create small-batch craft beers that appealed to their local market. The problem was distribution. The big three A/B, Coors, and Miller, had large distribution channels wrapped up with their mass distributed products. What Samuel Adams did was utilize micro sales channels to get its products into local establishments and create revenue streams that went unnoticed until it was a force it’s competitors could not stop. Samuel Adams carved out a niche in a market by offering products, craft beers, which complimented local restaurants offerings, provided a unique revenue stream for the restaurant owners. This brought new customers into the restaurants which in-turn created more sales for Samuel Adams. This allowed both businesses to tap a market that is mature and where new customer acquisition costs are high. Samuel Adams is now the most successful craft brewery in the United States and Yuengling and Dog Fish Head are following in their footsteps.
Similarly, printer and copier dealers can create micro sales channels by partnering with non-competing local companies that provide products and services to a customer base they would like to reach. A good example of this is to work with a local ECM software company. In the Tampa Bay area, we have multiple midsized document management software companies who service the area whose customers are the type that a printer dealer would want to target and visa versa. Building an agreement with one of these software companies to resell each other’s products opens the door to untapped customer bases for both companies. Marketing dollars can now become a joint venture as well as sales efforts and in effect, each company is increasing its marketing footprint and its sales forces with very little capital. This not only reduces the cost and risk of entering new markets it speeds upmarket entry turning previously non-profitable market expansions into new sources of income.
This is especially true for those wanting to enter into the managed IT business. A few of years ago I wrote an article on the barriers of entry to the managed IT market space. It discussed the high risks, large capital expenditures, and strict customer requirements for 99+% uptime guaranteed. The only real answers to entering the market at that time were to invest a minimum of $2,000,000 for infrastructure and a new sales division or acquire a pre-existing managed IT company. As we have followed the market these choices are still valid and our industry is watching the large players buy up managed IT firms across the USA.
With a micro sales channel, SMBs and VARs can offer managed IT services without any of these large expenses. The costs of creating a micro sales channel agreement with a local managed IT firm are some marketing dollars, a few dinners with the executive staff, legal expenses to craft the agreement, and cross-training the sales teams to sell each other’s products.
An additional benefit of creating micro sales channels is to open the door to win-win mergers to create one larger force in the market place. This is exactly what happened to one of the first managed print service software providers. As they struggled to find additional sales revenue as competitors entered the market, they reached out to several companies that sold complementary software to printer and copier resellers. Within two years they merged with one of these companies and have created a national presence for themselves. The owners and executives of both companies now have a much more stable, robust, and profitable company generating revenues that were once just the entrepreneur's dream.
Many entrepreneurs in the United States and abroad are using this strategy as the backbone of building revenues and tapping existing customer bases and are having quick success. Chinese manufacturers use this technique on a global scale to not only sell print cartridges, parts, and toners but a myriad of other offerings as evidenced by Alibaba.com’s multi-billion dollar IPO in the past months. Having an international presence I am contacted on a regular basis by manufacturers in China asking me to resell their parts, cartridges, and compatible toners in the USA. Although I am not in the printer resale business, if I were, I would add their complementary products to what I was already selling and use their marketing plan to help me do it. What would be my start-up costs, in the thousands of dollars? Why are they contacting me? The same reason you should contact those who sell complementary products, to tap a customer base they have and you want.