What is a Value-Added Reseller (VAR)?

TL;DR

Value-Added Reseller (VAR) is a channel partner who enhances a vendor's product with extra services or features. They create a customized solution for end-customers. This adds value to the original offering. VARs are key to channel sales. They often use partner relationship management tools.

Key Insight

VARs are more than just resellers; they are solution providers. Their ability to integrate and customize offerings creates deeper customer relationships and opens new market segments for vendors. Vendors must provide robust partner enablement to help VARs succeed.

1. Introduction

A Value-Added Reseller (VAR) is a critical type of channel partner within a partner ecosystem. These partners do more than just resell a vendor's product; they enhance the original offering with their own services, software, or hardware. This creates a more complete and tailored solution for the end customer. For example, an IT VAR might bundle a software product with installation, configuration, and ongoing support, which transforms a basic product into a complete service.

VARs are essential for vendors looking to expand their market reach and provide specialized solutions because they act as extensions of the vendor's sales and support teams. Their deep understanding of specific customer needs allows them to customize products effectively, driving customer satisfaction and loyalty. Strong partner relationship management is key to success with VARs.

2. Context/Background

The concept of value-added reselling has existed for decades, with early examples including computer resellers who bundled hardware with operating systems and basic applications. As technology evolved, so did the complexity of VAR offerings. Today, VARs are vital across many industries. In the IT sector, for instance, they integrate complex software solutions, cloud services, and cybersecurity tools. In manufacturing, VARs might combine specialized machinery with custom automation software and maintenance plans. They fill a crucial gap between generic products and specific customer requirements, which allows vendors to focus on core product development while partners address diverse market segments with tailored solutions.

3. Core Principles

• Solution-Centric Approach: VARs focus on providing complete solutions, not just individual products.
• Customer Intimacy: They deeply understand specific customer needs and industry challenges.
• Value Creation: VARs add tangible value beyond the vendor's base offering. This value can be services, integration, or customization.
• Technical Expertise: They possess specialized technical skills to implement and support complex solutions.
• Market Specialization: Many VARs focus on niche markets or specific customer segments.

4. Implementation

Implementing a successful VAR strategy involves several key steps:

1. Define VAR Profile: Clearly identify the types of VARs that align with your product and market strategy.
2. Develop Partner Program****: Create a complete program, which should include clear incentives, support, and certification paths.
3. Recruit & Onboard: Actively recruit suitable VARs and provide thorough onboarding and training.
4. Enablement: Equip VARs with sales tools, technical resources, and partner enablement materials.
5. Joint Planning: Collaborate on business plans and market strategies.
6. Performance Management: Regularly review VAR performance and provide feedback and support for growth.

5. Best Practices vs Pitfalls

Best Practices:

• Offer Differentiated Incentives: Reward VARs for adding significant value, not just for volume.
• Provide Robust Training: Ensure VARs have deep technical and sales knowledge of your products.
• Support Co-selling****: Actively engage with VARs on joint sales opportunities.
• Streamline Deal Registration****: Make it easy for VARs to protect their opportunities.
• Communicate Consistently: Keep VARs informed about product updates and program changes.
• Seek Feedback: Regularly solicit input from VARs to improve your program.
• Support Marketing Efforts: Provide through-channel marketing materials and support.

Pitfalls:

• Treating VARs as Resellers: Failing to recognize and support their value-added services.
• Inadequate Training: Expecting VARs to sell complex solutions without proper education.
• Channel Conflict: Competing directly with your VARs for the same deals.
• Poor Communication: Leaving VARs uninformed or unengaged.
• Complex Programs: Overly complicated incentive structures or program requirements.
• Lack of Support: Not providing sufficient technical or sales assistance when needed.
• Ignoring Feedback: Disregarding VAR suggestions for program improvement.

6. Advanced Applications

For mature organizations, VAR partnerships can extend to several advanced applications:

1. Geographic Expansion: VARs help enter new regional markets without direct vendor presence.
2. Vertical Specialization: VARs develop deep expertise in specific industries like healthcare or finance.
3. Cloud Migration Services: VARs assist customers in moving on-premise solutions to cloud environments.
4. Managed Services: VARs can offer ongoing management and support as a recurring service.
5. Custom IP Development: Some VARs create their own intellectual property that enhances vendor products.
6. Solution Bundling: Combining multiple vendor products with their own services for complex integrated solutions.

7. Ecosystem Integration

VARs are central to the partner ecosystem lifecycle. In Strategize, they help identify market opportunities. During Recruit, vendors seek VARs with specific industry expertise. Onboard involves training VARs on product integration and service delivery. Enable provides VARs with tools for channel sales and marketing. Market sees VARs extending vendor reach through their own campaigns. Sell is where VARs close deals and deliver solutions. Incentivize ensures VARs are rewarded for their value-added contributions. Finally, Accelerate focuses on growing VAR capabilities and joint market share, which means their role impacts nearly every partner program pillar.

8. Conclusion

Value-Added Resellers are indispensable components of a robust partner ecosystem, as they transform generic products into tailored solutions, meeting diverse customer needs. Their ability to add services, customization, and integration drives greater customer satisfaction and market penetration for vendors.

Effective collaboration with VARs requires a well-structured partner program, strong partner relationship management, and continuous partner enablement. By understanding and supporting the unique value VARs bring, vendors can significantly expand their reach and achieve sustainable growth.

Frequently Asked Questions

What is a Value-Added Reseller (VAR)?

A Value-Added Reseller (VAR) sells another company's product. They add extra services or features to it. This creates a better, more complete solution for customers. For example, an IT VAR might add installation and support to software. This makes the software more useful right away. A manufacturing VAR could combine machinery with special software and training. This approach gives customers a full package, not just a single item. VARs are key partners in many industries.

How do VARs add value to products?

VARs add value by bundling products with extra services. These services often include installation, customization, and ongoing support. For IT, a VAR might tailor software to a business's specific needs. They also provide training for employees. In manufacturing, a VAR could integrate new equipment into an existing production line. They might also develop custom control systems. This extra effort makes the original product more effective and user-friendly for the end customer.

Why do vendors work with VARs?

Vendors work with VARs to reach more customers. VARs have specialized knowledge and customer relationships. They can sell products to niche markets. This expands the vendor's market reach without large internal sales teams. VARs also handle customer support and customization. This frees up the vendor to focus on product development. It creates a stronger sales channel. Vendors can grow their business faster with VARs as partners.

When should a business consider using a VAR?

A business should use a VAR when they need more than just a product. If they require installation, customization, or ongoing support, a VAR is helpful. For example, a small business buying new accounting software might need help setting it up. A factory upgrading its machinery will need integration services. VARs provide these complete solutions. They save businesses time and effort. They ensure the new product works well within existing operations.

Who benefits from a VAR partnership?

Everyone in the chain benefits from a VAR partnership. The vendor sells more products. The VAR earns revenue by selling products and services. The end customer gets a complete, tailored solution. They receive better support and integration. This makes their purchase more effective immediately. For example, an IT customer gets software that is ready to use. A manufacturing plant gets new equipment that fits perfectly into their workflow. It's a win-win-win situation.

Which types of services do IT VARs typically offer?

IT VARs offer many services beyond just selling software or hardware. They often provide installation and setup. They customize solutions to fit a business's unique needs. Training for staff is also common. Ongoing technical support and maintenance are key offerings. Some IT VARs also provide cloud migration or cybersecurity services. These services ensure the technology works seamlessly for the customer. They help businesses get the most from their IT investments.

What role do VARs play in the manufacturing sector?

In manufacturing, VARs integrate complex machinery and systems. They don't just sell equipment; they make it work together. This includes installing specialized machines. They might develop custom automation software. Training factory workers to use new systems is also important. VARs ensure new technology improves production efficiency. They help manufacturers adopt advanced solutions. This allows factories to stay competitive and modern.

How do VARs handle deal registration?

VARs handle deal registration through a vendor's partner portal. They submit details about potential sales opportunities. This process reserves the lead for the VAR. It prevents other partners from pursuing the same deal. Deal registration also helps VARs get special pricing or support from the vendor. It protects the VAR's investment in finding and developing a customer. This system encourages VARs to actively seek out new business.

What is the difference between a VAR and a reseller?

A reseller simply sells a product without adding much extra. They act as a distribution point. A VAR, however, adds significant value to the product. They include services like installation, customization, and support. For example, a reseller might just sell a software license. A VAR would sell the license, install the software, configure it for the customer, and provide training. VARs offer a more comprehensive and tailored solution.

How can a business find the right VAR?

To find the right VAR, a business should look for experience in their industry. Check for VARs that specialize in the specific products needed. Ask for customer references and case studies. Evaluate their service offerings and support plans. A good VAR will understand your unique challenges. They will offer solutions tailored to your business. Vendors often list their authorized VARs on their websites. This is a good starting point for your search.

What are the common challenges for VARs?

VARs face several common challenges. Keeping up with fast-changing technology is one. Managing multiple vendor relationships can be complex. They must also train staff on new products and services constantly. Competing with direct sales from vendors or other VARs is another challenge. Ensuring profit margins while adding value can be difficult. Strong partner relationship management helps VARs overcome these hurdles. They must continually adapt to market demands.

Can VARs specialize in specific industries?

Yes, VARs often specialize in specific industries. This allows them to develop deep expertise. For example, an IT VAR might focus solely on healthcare or finance. A manufacturing VAR could specialize in automotive or aerospace. This specialization means they understand industry-specific regulations and needs. They can offer highly tailored solutions. This deep knowledge makes them more valuable to customers in those sectors. It builds trust and stronger relationships.