You've decided to expand beyond your direct sales team and build an indirect channel.
Great.
Now comes another question:
Do you need resellers or agents?
Both can dramatically expand your sales reach, but they operate differently—and choosing the right model depends on what you're selling, how you want customers to buy it, and who you want managing the commercial relationship after the sale.
Start With the Transaction
The easiest way to understand the difference is to follow the money.
In a traditional reseller model, the reseller purchases your product at a discount and resells it to the customer. The reseller typically owns the transaction, invoices the customer, collects payment, and earns margin on the sale. Depending on the solution, the reseller may also manage deployment, ongoing services, add-ons, upgrades, and renewals, giving them a significant role in the customer relationship beyond the initial sale.
In an agent model, the agent helps identify, develop, and close the customer opportunity, but typically does not take ownership of the product or service. Once the sale is made, you take the lead in delivering the solution. The customer contracts directly with you for the product, deployment, implementation, billing, and ongoing support, while the agent earns a commission for originating and helping close the business.
That distinction sounds simple, but it has a significant impact on your channel strategy.
When Resellers Make Sense
Resellers are particularly effective when you have a product or service that can be packaged, priced and sold repeatedly through a relatively standardized process.
Think products with SKUs, established pricing, predictable configurations and a repeatable sales motion.
That doesn't mean reseller products have to be simple. VARs and systems integrators can sell, configure and deploy highly sophisticated technology.
But the more independently a partner can quote, sell, fulfill and support your offering, the easier it becomes to scale a reseller model.
There's another advantage: customers may already want to buy from the reseller.
They may have established credit, procurement processes, service agreements and long-standing relationships with that partner. Instead of asking the customer to onboard another vendor, your product can simply become another solution available through a supplier they already trust.
The tradeoff is that you're giving the reseller a larger role in the commercial relationship.
The reseller may own the invoice, handle add-ons and renewals, bundle your product with other solutions and become an important interface between you and the end customer.
For many products, that's exactly what you want.
For others, it isn't.
When an Agent Model Makes Sense
Suppose maintaining a direct contractual and billing relationship with the customer is important to your business.
Or perhaps your solution requires significant vendor involvement during discovery, configuration, implementation or ongoing service.
An agent model may be a better fit.
The agent brings something incredibly valuable: the customer relationship.
They identify the opportunity, make the introduction, help position your solution and may remain heavily involved throughout the sales process.
But once the customer buys, the transaction remains directly with you.
You handle implementation. You invoice the customer. You provide the underlying product support and customer service.
The agent can—and often should—remain involved with the account, particularly for expansions, renewals and new projects. But the underlying commercial relationship remains directly between you and the customer.
That’s one reason the agent model is often used in categories such as telecom and recurring technology services. Master Agents and Technology Services Distributors (TSDs) enable their agents and technology advisors to represent a broad portfolio of suppliers and solutions. The agent brings the customer opportunity to the appropriate supplier and helps facilitate the sale, while the customer ultimately contracts directly with the selected supplier for delivery, billing, and ongoing service.
Margin vs. Commission
The economics are different too.
A reseller typically makes money through margin. You provide a reseller acquisition price or discount, and the reseller makes money on the spread between its cost and what it charges the customer.
An agent typically makes money through commission.
For recurring products and services, that often means an ongoing residual commission tied to the customer's monthly billing. Some programs also include upfront incentives or SPIFFs.
And this is where channel design becomes especially important.
If your business benefits from recurring customer revenue, don't think only about what you're willing to pay an agent to acquire the customer.
Think about what will keep that agent interested in the customer after the initial sale.
A strong recurring or renewal commission gives the agent an economic reason to keep your customer happy, identify expansion opportunities and bring you into the next project.
If all of the agent's economics disappear after the initial transaction, don't be surprised when their attention moves somewhere else.
So Which One Should You Choose?
Don't start with "Do we want agents or resellers?"
Start with a different set of questions:
How does our customer want to buy? Who should invoice them? Who should own the ongoing commercial relationship? How much involvement do we need during the sales and deployment process? And how do we want our partners to make money?
The answers will usually point you toward the right model.
And sometimes the answer is both.
A company might use resellers for standardized products and transactions while using agents for recurring services, more consultative offerings or opportunities where maintaining the direct customer contract is important.
The objective isn't to force your product into a particular channel model.
It's to build the channel model around how your product is actually sold, delivered and supported—and how your customers prefer to buy it.