Reseller programs have been eagerly embraced by online entrepreneurs in recent years. Because of the intense interest, so many guides have been written about how these programs can be used by first-timers to build a new operation.
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However, reselling holds as much promise, if not more, for established businesses who are looking to expand. Reselling can be one of the most effective ways for any existing operation to diversify what they do and offer a more complete product to their customers.
I learned that firsthand using reseller programs to rapidly expanding my own business—Loganix.
In this guide, I’m going to show exactly how that can be done. First, an explanation of the reseller business model followed by a look at how I’ve used this model to drive new sales. Finally, advice on how you can use what we’ve learned to power your next revenue stream.
What is the Reseller Business Model?
To understand how you can create a profitable reseller model, you need to understand how reselling works. Fortunately, the term is pretty self-descriptive.
What is a reseller?
A reseller is someone who sells products that are sourced directly from a producer or manufacturer.
As a reseller, you don’t need to carry or manufacture any products yourself. You’ll also rarely have exclusive access to the products you’re selling. Your business plan depends on you being able to add improvements to the way the product is sold.
This isn’t as hard or as limited as it may sound at first. You can do this in several ways. For example, by…
- Targeting an untapped segment of customers more effectively
- Driving sales with more experimental marketing
- Packaging the product with other products to create a compelling bundle
The reseller business model can look a lot like the affiliate marketing business model detailed here. To be successful, you’ll need…
- A trustworthy partner who can provide the product in a timely manner,
- A customer segment that hasn’t already been targeted by the producer and;
- A commission that makes the venture worthwhile.
There are two business models at work when it comes to any reseller program. Whether you’re the producer or the person reselling the product, you need the relationship to work out in your favor.
What is the Difference between a Reseller vs Distributor?
While both focus on delivering a product to consumers, there are important differences between resellers and distributors.
Distributors will take possession of a product and then hold it while they are trying to sell it. Resellers will not hold any product. They will only facilitate the sale and then take a commission when the producer ships the item.
As a result of these incentives, distributors and resellers tend to behave differently. Distributors need to unload stock quickly to reclaim their space, so they tend to rely on tactics like markdowns. Resellers, on the other hand, have the freedom to move more slowly and are incentivized to maximize the value of each sale.
Distributors tend to be more aggressive when making deals with producers. They may demand bulk discounts or deals that allow them to return unsold merchandise for a refund. Resellers do not need to purchase the product, so they will usually market it at the MSRP, minus the cost of their commission.
Most large-scale producers cultivate relationships with both distributors and resellers. Distributors ensure that a successful product is always in supply for customers. Resellers are useful for targeting segments of the market that are missed by large-scale marketing campaigns.
Why You Should Become a Reseller
There are many reasons you should consider becoming a reseller or working with resellers. No matter what is involved in the operation, reselling is a low-risk, low-investment way to accomplish all of the following.
The Advantages of Being a Reseller
- Choose your own products
- Easily expand into other verticals
- Limit your expenses to what it costs to reach customers
- Choose the amount of time you want to invest, and pause when needed
- Negotiate your own margins
- Create your own packages of products
The Advantages of Working with Resellers
Our story, coming up next, is about how we made those incentives work for other people. Of course, we had our own incentives for wanting to work with them…
- Build relationships with partners who sell at a high volume
- Provide your products at full price with no loss at high volume
- Increase market exposure with no increase in marketing budget
Our Success Story: How Loganix used SEO Reseller Programs to Grow
Loganix began by offering a small suite of different SEO, web design and content services. As we fought to get the business to grow, we realized that our best relationships were with other agencies who were using our services to fill in the gaps of what they offered to their clients.
We leaned into that and developed our current model by focusing on agency clients and offering “white-labeled” reporting. If you don’t know, white-labeling is when branding is stripped from a product or report. Blank spaces are left behind so that the reseller can insert another brand before shipping it to their own client.
This presentation was the key to our reseller-focused business plan. It’s the extra feature that allowed us to multiply the number of orders we could attract by letting smaller agencies resell our product.
Our business model worked by…
- Identifying SEO resellers (Our key partners)
- Shifting our services to emphasize the needs of our new key partners (value proposition)
- Creating a dashboard to organize and deliver services (customer relationships and distribution channels)
- Tracking to ensure our profit at volume (cost structure and revenue streams)
Identifying SEO resellers (Our key Partners)
As the first step in our business model, we needed to discover our customer base. We were concerned about finding a sufficient number of resellers to justify the model because SEO reselling can be complex. After all, these services often need to be customized for the client receiving them.
We already knew that some agencies (by request) advertised our services as part of their marketing packages. Then, they placed an order with us when their client requested that specific service.
In order to develop our customer base, We just had to turn that practice into a process where they could access the services they needed in a timely and safe way.
Shifting our services to emphasize the needs of our new key partners (value proposition)
Most businesses who participate as SEO resellers are also involved as agencies. That’s why they can so easily produce the information needed to provide custom services (such as the customer’s keywords, goals, and properties).
Knowing that we shifted the way we offered our services to cater to this type of customer. Instead of getting what they wanted by approaching us and working out a deal, they could simply select this type of arrangement at checkout.
In order to meet and appeal to our ideal reseller agency we…
- Introduced and advertised white-labeling as a standard service
- Provided agencies with significant savings through a coupon
- Standardized and partly automated our key activities (SEO services) so that they could be repeated at a larger scale
Creating a dashboard to organize and deliver services
To ensure close customer relationships—and to make sure that we can fully supervise the distribution channels that delivered services to these clients—we created our own dashboard.
Instead of delivering services to our clients by email, we encouraged them to log on to a dashboard they can use to monitor all of their services at once. This was welcomed by clients who had us handling 20+ different orders at once.
We were able to build closer relationships and to help agency clients feel more comfortable trusting us with high volumes of work at one time. While our first dashboard was a great learning experience, the volume made it practical for us to move to an established platform
that could serve our clients even better.
Tracking to ensure our profit at volume
One of the positive consequences of standardizing our services and making them highly repeatable is that we were able to more effectively control costs. As we moved into high-volume work, we needed to implement more advanced tracking to ensure that our volume discounts weren’t costing us more than we were bringing in revenue.
This tracking made early mistakes (such as stacked discounts) easier to identify immediately and correct.
The results
Our model produced nearly immediate results. In a single quarter, using our coupons and improved compatibility with resellers, we were able to…
- increase revenue from agency resellers by 108.80%
- increase total transactions from agency resellers by 63.30%
- increase our avg. order total among agency resellers by 27.86%
Our model continues to undergo development, but the model we’ve mapped out so far has allowed us to achieve a massive amount of growth.
But what about the risks?
There are some risks to outsourcing that are helpful to understand from the perspective of both resellers and providers.
The true risk with outsourcing is the threat of losing credibility. A client may ask ‘if you’re hiring someone else for this, why don’t I just work with them?’
White-labelling is it’s own solution here. It protects the outsourcing agency from having those kinds of awkward conversations. Their clients have no reason to doubt that the agency performed the work itself.
The ones providing the services to resellers must be equally concerned about their reputation. If resellers are advertising the services through spam links, or aggressive appeals that are badly-positioned, it could damage the brand.
These risks should be taken seriously, but they’re also easy to control. Keep your client’s confidence if you are approached by 3rd parties. You are not obligated to share any client data. In the other case, you have every right to refuse service to a client who won’t respect the integrity of your brand.
How to Use a Reseller Program to Grow Your Business
Now you understand what resellers are, what they’re motivated by and how a reseller business model is executed in the SEO industry in particular. This model can be adjusted to apply to either general or highly-specialized services. Even only one service.
All it takes is understanding the specific needs of reseller clients, developing distribution channels that meet those needs and shifting your profits to work by volume.
Business resources:
- What Is a Business Model? 30 Successful Types of Business Models You Need to Know
- The Complete Guide To Business Development
- Business Strategy: Definition, Examples, And Case Studies
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
- What Is Market Segmentation? the Ultimate Guide to Market Segmentation
- Marketing Strategy: Definition, Types, And Examples
- Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
- How To Write A Mission Statement
- What is Growth Hacking?
- Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
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