What Are the Advantages of Resellers vs Direct?
I'm Max Clark. This is 20 minutes max. And a little inside baseball here. Let me give you give you a secret. The secret is distribution and sales channels for products and services.
Speaker 1:So there's there's different routes to market. Right? There's, you know, there's, this idea of direct. You go to a website and you put in your credit card you buy it you're buying you're transacting directly with the organization for whatever the service or product is that you're buying and then we start talking about different channels and the primary channel for most technology sales is this reseller channel unless you're a fortune 10. You're not buying Cisco from Cisco.
Speaker 1:You're not buying Juniper from Juniper. You're not buying, you know, I don't care what services it just just name everything. You're usually purchasing through an intermediary and and even all the way up probably the fortune 500, sizing. Most of these things are purchased through an intermediary. So and that intermediary is a is a value added reseller of our could be a systems integrator, could be, you know, like, whatever they wanna call themselves.
Speaker 1:But what ultimately you know? And then okay. By the way, there's another tier on this thing too, especially if, you know, there's a distributor. Right? So there's, like, manufacturer, distributor, reseller, and then you, the customer.
Speaker 1:Manufacturer, distributor, reseller, and then you, the customer. Why is this important? When a manufacturer has a channel, has a reseller channel, and they have a direct sales they have a direct channel and they have an indirect channel. They have a reseller channel. That manufacturer is creating margin in order to pay distribution and resellers involved.
Speaker 1:Like, a reseller is not going to a distributor is not gonna stock and distribute their their their product or service. They're not gonna deal with the headache unless they make money on it. Now distributors make very low margin on a very high scale of business. Resellers typically add on another layer of service and add value. So it's not just margin because you're buying the stuff through them.
Speaker 1:Now some resellers only offer, you know, they're only selling you whatever the thing is. They're not adding any service. There's no incremental value, and they're just running on low margins. And you go to them because you don't care. You can do everything yourself.
Speaker 1:Most of the service providers that are in that space that are doing that thing, you know, they are making some margin off the product, off the sale of that product or service, and they're also making margin, you know, on on selling you their time and their service and their support or their, you know, whatever whatever it is that makes them unique. You know, maybe it's custom development if it's a, you know, CRM integration or whatever. The point of all this is is is thus, the manufacturer doesn't want to get into a I'm gonna use the manufacturers as, like, you know, again, top level entity. Manufacturer can't be in a situation contractually where their direct channel is competing with their indirect channel. So they end up with this this concept of channel parity.
Speaker 1:And what that means is, the price of the reseller is going to sell things for it to you at, you know, the reseller has to get be able to get the same price and be competitive with their with their direct side. Now why this is important to you is is again comes back to this idea of margin. The manufacturer is baking in margin for that reseller to operate. You know, it could be could be 40%. It could be 20%.
Speaker 1:It could be 5%. It could be 2%. Again, depends on what it is and how big of a check you're writing. Right? More commoditized, more commoditized, and, more dollar amount.
Speaker 1:Right? Margin decreases. So but this is this is this is the reason why. Right? So now if you're dealing and you're selling, you're talking to the in your inside teams, the direct teams, and they're telling you like, oh, we're gonna get you the same deal or need you a better deal or whatever these different things are.
Speaker 1:Just understand that that reseller in many cases has more margin to play with to provide you value both in the services that they're gonna deliver that the manufacturer can't do themselves as well as the ability to provide discounting to you and also tap into and this is my favorite bucket of things to tap into what we call, MDF. So market development funds, some people call marketing development funds, but MDF. MDF is a phenomenally fantastic bucket the manufacturer has available to them, which doesn't show up on on their p and l as a cost related to actually sign the service. You know, marketing is a separate thing. So if you're tapping into MDF and you can bring MDF into play, you can unlock all sorts of fun stuff.
Speaker 1:Right? Because now, you know, if you were to look at it on a straight line, you know, maybe they're going negative to actually do the deal with you, but it's worth it to them because, you know, they're they're getting other benefits out of it. Right? Anyways, I'm gonna before I completely go off into all the land here. The point is, if you're dealing with a manufacturer that has a direct channel and you think by calling them and dealing with them directly, you're getting the best deal, you're leaving a lot of money on the table.
Speaker 1:Even though it's not intuitive, using an intermediary, using a reseller, and bringing that reseller to the table, that reseller immediately has margin that they can compress, that they can use to give you pricing leverage. They can go back through distribution and to the manufacturer, and they can get concessions to drive that pricing further down. And they can also, in a lot of cases, bring MDF into into the party and and give you, pricing advantages there as well. So that's a little bit of inside baseball here. It's just something that, you know, if you haven't been through it, maybe you don't know about.
Speaker 1:Maybe you do know about and you're already doing this and this whole video was pointless to you. But if not, here's how you can, you know, find find extra percentage points. And, you know, I mean, if if you're talking about things like by the way, the other thing is is maybe the manufacturer has to have a certain scale in order for you to deal with them directly. And resellers will deal with you at smaller scale. Right?
Speaker 1:That's another tweak. Like, license counts. We can't talk to you unless you're licensing, you know, a 1000 units. Well, you can go find somebody else that's gonna license it to you for 10 units, for instance. Don't be afraid to talk to resellers.
Speaker 1:There's this idea of, like, that I come across of, like, you know, yes. I'm sorry. You're gonna have to deal with salespeople. But no matter which which route you go, you're gonna deal with salespeople. And, you know, tech sales is just the animal it is.
Speaker 1:Right? And then if you're an IT person and you're dealing with tech sales or if you're a finance procurement person, you're dealing with tech sales. Like, I get it. Been doing this a long time. You know, I've got I've got plenty of scars and stories I can share with you about crazy stuff that people have pulled on me.
Speaker 1:But the moral of the story is it is worth your energy to engage and deal with the reseller side because they are going to give you value that you're not gonna get otherwise. And you want that value. And that value is what is going to give you an advantage because every little advantage that you can get compounds. And these are the places where you can see outside outsized returns, you know, in terms of actual enterprise value for your business. So I'm Max Clark.
Speaker 1:That is way less than 20 minutes. You're getting off light and easy this time, but, little tip and trick and some inside inside baseball.
