The MSP ecosystem operates with various processes and key elements or players. Distribution channels are essential components in the entire MSP environment, which IT sponsors should understand. What is it and how is it necessary in your overall IT services and solutions? Are there other important tips and steps you need to know about this significant factor? What strategic planning do you need to use to maximize your channel to distribute and market your products?
What are distribution channels?
The basic meaning of a distribution channel is that it can be a business or intermediary in the entire marketing process. It primarily serves as a path or way by which the IT products or services pass to reach the end consumer or final buyer. As a crucial part of the downstream process, it is essential in getting your product to the target consumer.
In the MSP ecosystem, IT sponsors may partner with managed service providers (MSPs). MSPs may become the distribution channels to connect the IT products and services to end consumers. Thus, assuming the role of an intermediary that facilitates the marketing process. In regular marketing scenarios, the MSP is the retailer, wholesaler, distributor, or the Internet.
How does it work?
Having a much deeper understanding of distribution channels in the vast and oftentimes complex MSP ecosystem is a must. IT sponsors must understand that there are different pathways of getting their products and services to end-users. Through the MSP, these IT goods and solutions could reach their intended consumers.
However, these channels of distribution could be short or long, single or multiple, depending on the intermediaries. Your IT product may require different distributors based on its nature and that of your target market. In some cases, IT products and services may reach consumers through multiple MSPs.
The process can be short or long and the marketing strategies used to reach consumers increase sales. Thus, it is vital to know what channels and strategies yield the best results. However, it is important to note that more complex systems of distribution make it difficult for distribution management. Moreover, there are longer distribution pathways that lead to lesser profit especially with more MSPs necessary for the task.
Types of Distribution Channels
The type of channel you use for the distribution of IT products plays a crucial role in the overall results. Different types may achieve selective, exclusive, or intensive distribution. Furthermore, the channel length could require direct to consumer or multiple intermediaries or MSPs. Here are the different main types of distribution channels that IT sponsors should know and understand:
1. Direct Channels
Also considered the shortest route in reaching the consumers, this channel type allows access straight from the manufacturer/IT vendor. The IT sponsor may sell direct to this intended market and skip the intermediaries/middle persons. This type of channel is quite familiar and popular in industries such as industrial machinery, luxury automobiles, and computers.
Direct distribution channels are the ones that manufacture their goods and sell them using their retail stores. Some direct sellers operate their mail-order systems or departments. The trend of more emerging direct channels is an indication that more and more manufacturers prefer directly approaching their consumers.
IT sponsors may find this type of distribution channel a convenient, more profitable, and easier way. However, there are certain IT services and solutions that require the services of MSP partners. These partners play an important role in distributing IT services to clients and consumers easier and better.
2. Indirect Channels
Indirect distribution or selling of IT products in the MSP ecosystem is another marketing strategy. This process is when the IT sponsor would partner with an MSP to sell, distribute, and reach his IT products. The product moves from the IT vendor or point of production to the end-user or point of consumption. Moreover, the distribution process takes place through the help of an MSP or distribution network.
Under the indirect distribution channel are four levels of marketing the products and services. These could also be applied in the MSP partner and IT sponsor relationship, depending on the product involved.
âš« One Level Channel
There is only one intermediary in this kind of distribution where products or services are transferred to the target consumer. Take note that the title, as well as the risks, are transferred from the vendor to the MSP in the process. However, the IT vendor retains control while reaching much larger potential customers through this distribution channel.
âš« Two-Level Channel
As the name implies, there are two channels of distribution involved in this type of system. The IT sponsor may also choose to partner with two MSPs to connect and cover a much larger target market. In other marketing industries, this type that uses wholesalers and retailers is the most adopted channel.
âš« Three Level Channel
In this marketing scenario, the key players involved are the manufacturers, wholesalers/retailers, and the agents/brokers that connect the two. For instance, the IT sponsor may hire an agent to connect them to wholesalers and retailers in major areas. This type of indirect channel is suitable for vendors offering limited product lines to consumers over a wider, spread-out geography.
3. Hybrid/Multiple Distribution Channel
The adoption of multiple or hybrid distribution channels sprung from different factors. These include the emergence of more channel possibilities as well as customer segments. The system involves a single vendor setting up two or more channels in reaching out to multiple customer segments.
For example, the IT sponsor may cater directly to their end-user or customer segment one through direct channels. At the same time, they may use retailers and agents to reach another end-user or customer segment two. With hybrid distribution, the manufacturer could use its own sales force and other distributors to reach different sectors or markets.
Steps, Tips, and Strategies on Distribution Channels
One of the most daunting tasks of IT sponsors is to evaluate the best distribution channel or MSP partner. Your choice for an MSP partner can be a deal-breaker or a game-changer. Strategic planning is essential in the distribution of your IT product and services. Partnering with the right MSP to distribute your product is crucial especially if you are eyeing a new customer segment. They are also vital for expansion, new product release, or to aggressively boost your business.
Distribution Strategies and Tips
⚫ Assessing your Customer Segment’s Needs
A high-quality distribution channel strategy guarantees the delivery of important information and solution to prospects’ needs. IT sponsors should look into their end-users and identify where and how their buying preferences lie. Do your target consumers require training and education? Do they need more IT products and services on top of yours? Do you need to install or customize your products? Does your product require to be serviced?
⚫ Matching your Distribution Strategy to End-User’s Demands
There are different types of distribution channels available for IT sponsors to choose from. Moreover, the kind of product or service you offer may determine what type of channel would work best for you. You can either deliver your IT solutions directly using your own sales force. Or you can use an MSP partner to do the job and distribute the product to your target market. Other factors that would dictate the best strategic option are your product price and market size.
âš« Identifying your MSP Distribution Channels
IT sponsors want not just to launch their products in the market. Of course, you would want to expand and grow your business in the long run. You can go beyond the basic direct model to having an MSP partner. Look for a distribution channel that would help you achieve your business goals. Most importantly, your partnership must have aligned objectives to reach mutual success.
The best MSP partners are considered natural partners. It means these distribution channels already have existing relationships with your target consumers. Choose an MSP distribution partner that has already reached and established a connection with your customer base.
âš« Building your Distribution Channel
Setting up your distribution channel is a difficult yet rewarding task in the challenging MSP ecosystem. Partnering with the right MSP as your distribution pathway requires a careful and meticulous process. Use the right approach to sell your value proposition. Your potential channel partner should see and be convinced that this partnership is the best for them.
Establish your service and reporting requirements as well as your business goals. Train your MSP partner and make them feel that they are an essential part of the business partnership. Provide support and training materials to make sure that they can effectively distribute your products and services to end-users.
Final Thought
IT sponsors face a daunting and challenging task in finding the most effective distribution channels in the MSP arena. However, once you are successful in this crucial endeavor, the rewards are game-changing. The ultimate goal of having the best MSP distribution partner is to drive your revenue through them.
Your partnership is a two-way street, which means your success will be the victory of your partner as well. The ForzaDash community is one of the most effective ways of finding the ideal distribution channels for IT sponsors. Learn more about it and contact us today!
