Companies are always looking for ways to sell more products and close deals faster. Many organizations are turning to Value-Added Resellers – or VARs – as one of their channel marketing strategies to help them achieve these goals. Having a full understanding of what a VAR does, the challenges they face, and the opportunities to support these relationships will help organizations get the most out of their VAR partnerships.
Value-Added Reselling is nothing new, but in the constantly changing world of modern sales, the strategies that lead to success with VARs require frequent evaluation. That’s why we’ve put together this information to help you decide if VARs are right for your company and how to optimize those relationships.
What is a Value-Added Reseller?
A Value-Added Reseller (VAR) is a business that purchases a product from other companies – usually within the IT industry – and adds value by bundling it with additional products or for the purpose of reselling.
The added value can take on multiple forms depending on the VAR company. Some typical value-adds include creating unique software products to go with a piece of hardware, setting up a product, or offering professional services.
What does a VAR do and how do they work with partner companies?
One of the most common ways VAR companies work with partner businesses is by creating applications for specific hardware products and selling both as a turnkey solution. In this example, an Original-Equipment Manufacturer (OEM) would have created the hardware while the VAR business adds the value of the application.
Another common VAR strategy has been to sell a product and include professional or training services like consultation, strategy, design, or implementation to add value to their customers. While many VARs continue to use versions of these two models, the industry has changed in recent years, forcing VAR businesses to construct new strategies.
For example, VARs of the past could help their customers navigate the software products they’ve purchased as an added value. They’d walk them through the technological make up and product features. These days, however, most customers don’t require such services. That “value-add,” therefore, is not really all that valuable to the end-users.
This has led to a new trend with VAR business models. Today, most VARs look to add value to the original product by offering long-term solutions that help their customer base increase revenue.
Let’s look at an example to make this a little clearer. Say some engineers create an awesome piece of accounting software, and they want to sell it without becoming a full-blown SaaS (Software as-a-Service) company. They could pair up with a customer-focused VAR with teams dedicated to implementation, customer experience, and technical support. The VAR buys the software and bundles it with their various solutions to add long lasting value to the customer.
What’s the difference between VARs and Channel Partners?
VARs often only make up a part of an organization’s partnership strategy. Another common strategy involves “channel partners,” and while these share some similarities with VARs, it’s important to understand their differences as well.
Channel partners usually have a more vested interest in the parent company than VARs. They function more in the traditional sense of “partner” in that they come alongside the parent company to build something larger together.
VARs are more independent. They still function as partners, of course, but in a different sense. They share goals and some strategies, but the value added by a VAR comes from the VAR business itself, not necessarily in partnership with the parent company.
The difference is subtle but crucial. Channel partners basically come alongside the parent company to build something together while VARs purchase something from a parent company and add value so they can utilize the product of the parent company but remain their own entity.
Sales challenges VARs are facing today
As the modern sales experience continues to evolve, so too must the modern seller (or reseller, in this case). New difficulties will always arise, but recent trends point to a few specific challenges partner companies should be aware of for their VARs.
1. VARs now must compete with vendors that are engaged in direct sales
Many vendors have recently tried to cut out the VAR middleman by focusing on direct sales, forcing VAR businesses to reposition themselves as they compete with OEMs.
2. Customers expect price transparency
Hardly any customer in the digital age will even have a conversation with sellers if they don’t know prices. With online comparison sites or review platforms, VARs must have a keen sense of their competitors’ prices and find ways to beat them.
3. Software has become easier to use and more intuitive
This challenge specifically affects VARs that position themselves as solution providers. A few years ago, the need for training and setup left a big hole for VARs to fill. Today, most software companies make it very easy to learn their programs, forcing VARs to come up with new value-adds they offer.
4. Cloud computing and hosting solutions have moved from private to public
The VAR business model that offers customers storage on a private cloud is no longer as effective today. Many large and small businesses have moved to public cloud hosting options that are much less expensive and incredibly easy to use. These companies simply just don’t need the cloud computing add-ons that many VARs used to offer.
5. SMBs are focused on growth and enablement
SMBs have one major concern that fuels everything they do: growing and scaling their business. Successful VAR businesses, therefore, will align their value-adds with this goal and show how they can help potential partner companies close more deals with greater efficiency.
Enabling your value-added resellers and partners to close successfully is no easy task. A starting point is looking at supporting your partner lead management systems.