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Partnerships 101: What is Co-Selling?

Co-selling is when two companies work hand-in-hand at nearly every step of the sales process, sharing the revenue that results from the sale. 

There are two main varieties of co-selling:

In a tech or integration partnership, co-selling often includes two software vendors selling each of their solutions to the same customer at the same time in partnership (also called "solution selling"). An example of co-selling may include a data warehouse and data visualization tool selling their solutions together with both sales reps participating.

In a channel partnership, co-selling often includes a reseller partnering with a vendor to sell a solution to a customer. In this model, sales teams at both companies identify customers who can benefit from their joint offerings and work together to close deals.

Co-selling isn’t a new sales approach, but in this competitive landscape, it can be more effective—especially when scaling your business. Co-selling can unlock new markets and new organizational efficiencies. Here are the basics on co-selling and how it can help your company drive more value from its partnerships.

In this post we’ll cover:

  1. Why is co-selling important?
  2. Examples of co-selling
  3. Best practices for co-selling

Why is co-selling important?

The SaaS industry has exploded, with nearly 7,000 of these companies in the U.S., according to Crunchbase.

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More entrants into the market means more competition for sales. However, the traditional sales process is long and inefficient, with cold calling, cold emails, and sales teams slowly moving qualified leads down the funnel until they convert into customers.

Software companies can use this “direct” sales method at first. But to truly scale, they eventually need to embrace “indirect” or channel sales. 

To accelerate the sales cycle, software companies have worked with a variety of channel partners, including value-added resellers (VARs), managed service providers (MSPs) and systems integrators (SIs). These partnerships usually focus on re-selling, with the sales partner interacting directly with customers and the software provider delivering backend technical support pre- and post-implementation. 

“You get all of these ambiguous benefits that help you scale the company without realizing it,” says Stewart Townsend, a channel sales consultant. “A service organization that outsources to skilled people can sometimes do better than you can.”

But this church-and-state wall is slowly beginning to crumble, as more companies turn to co-selling to foster more collaboration among sales teams across their partner ecosystem. 

“Selling is hard, especially when you as a SaaS tech startup are thinking about scaling in new geographies and new markets,” says Houman Asefi, a SaaS sales strategist and startup advisor. “Co-selling is all about leverage. You are essentially leveraging [your partners'] existing relationship and expertise.”

Several factors are driving more co-selling partnerships in the industry, says Shawn Ragell, partnerships and channel marketing lead at Close, a CRM for startups and small businesses. 

“There are endless solutions on the market and buyers are armed with more information on those products than ever before. With that increased amount of competition, software sellers need to look for any approach they can use to get an edge over a competitor,” he says. 

Ragell says more companies are contracting out services like sales and marketing, and with this shift “comes a rise in co-selling as those agencies have a greater influence on the software purchasing decisions of the businesses they are contracted by.”

He adds that co-selling gives companies a competitive advantage for two main reasons: collaboration and control. 

Collaboration:

“In a co-selling relationship, two sales teams can work together to provide the best possible solution to the customer. The co-selling partner might understand the prospect better because they created the relationship while the vendor understands their own product better than anyone,” Ragell says. “That combination is powerful. Co-selling also gives software vendors more control over how their solution is being presented. If a reseller doesn't have an expert-level grasp on the product, you run the risk of there being a disconnect between what is being pitched and actual product features.” 

Control:

Since co-selling requires a higher level of engagement in the sales process than a reseller relationship, companies also can align their go-to-market strategy and messaging, especially if they are offering a complex enterprise solution with a traditionally longer sales cycle. 

Co-selling can be more profitable and less time-intensive than re-selling in terms of closing deals. One Concur study found that 77% of companies who engage in co-selling have seen a direct or indirect increase in their profits since adopting this model. Nine out of 10 companies surveyed also said that re-seller models require a greater time and financial commitment than co-selling. 

The bottom line: co-selling is an effective way to scale, which is why everyone from startups to industry behemoths like Microsoft are embracing this approach.

Examples of Co-selling

Microsoft launched its co-sell partner program in 2017, empowering its sales team to sell partner solutions built on top of Microsoft technology. 

By the end of the program’s first year, Microsoft had 9,000 participating partners and by early 2019 the company had generated $8 billion in partner revenue.

marketplace-co-sell

Partners in the program work directly with Microsoft on joint deals, collaborating with Microsoft’s field sales team to sell either hardware, packaged IP applications or solutions, or managed services. The process begins by identifying qualified leads among Microsoft or its partners’ customers. The lead is then shared and accepted, and both companies work together to pitch the customer, sell them on the value of their combined offering and close the deal.

Microsoft has done this successfully with several partners. OSIsoft, a company that focuses on real-time data management, has closed 12 deals through Microsoft’s co-sell program. DataStax, another data management company, has grown its pipeline 140% through this co-selling partnership.

The inbounding marketing company HubSpot, which has nearly 2,000 partners, also has grown its brand through partner sales and co-selling arrangements. Depending on the deal, some partners can share in the revenue when they sell a complementary subscription service to an existing HubSpot customer. 

As Microsoft and HubSpot both demonstrate, co-selling can lead to larger deal sizes and may be necessary to maintain growth as your company reaches maturity. Vikas Khorana, co-founder and chief technology officer of Ntooitive, an AI-driven sales enablement and revenue operations platform, says there’s also another tangible benefit of co-selling: It can help customers get more value out of each company’s solution, which ultimately could increase loyalty and retention. 

“Co-selling recognizes what companies are looking for in today’s market and provides them a cohesive package to help solve what they are looking to fix in the most efficient and cost-effective manner,” Khorana says. 

Best Practices for Co-Selling

Creating an effective co-selling partnership isn’t as simple as identifying leads and crafting a winning sales pitch. These partnerships often fly or fail based on how you select a partner in the first place. 

“B2B SaaS companies should always strive to have a better understanding of their ideal co-selling partner profile in the same way that ideal customer profiles are closely monitored,” Ragell says, adding that before entering into a co-selling partnership, his company considers:

  • primary lines of business
  • ideal customer profiles and the overlap with our own
  • past or current work with competitors
  • experience with our own product
  • weight of their influence 

Asefi says it’s crucial for companies to think about the type of customers they want to acquire and the lifetime value of these customers. It’s also important to properly manage channel conflict, continually communicate and be committed to not competing with your partners. 

Partner sales teams “should be viewed as an extension of your own field sales team,” Asefi says.

Khorana says both companies should clearly define the terms of sale and permission structures at the outset. (See our post on partner agreements as a starter)

“Plan how to deal with a solution seeker who has difficulty with one company’s tool in a solution, and map out the full extent of how the overall relationship works,” he says. “These terms can be confusing, and are ever-evolving. Ensure that every party to the solution is educated on what co-selling is, and what other sales strategies (like reselling) are called and why they are different.”

Khorana adds that it’s also critical for both partners to think long term. 

“Consider whether your organization has a plan to enter the space of your co-selling partner. Are you planning to develop a similar tool? If not now, could you enter that space at a later time?” he says. “It’s important for both prospects to be honest about their plans. Solutions require synergy and cohesiveness. Invest time upfront to see whether the partnership can coexist not just now, but in the future.”