There are two strategies for selling products: Direct Sales and Channel Sales.
As an entrepreneur, if you’re trying to find out which is a scalable model that will grow with your business, channel sales could be just the answer when you need a low-risk and quality sales model that can be effectively adjusted as your business grows.
Especially, it is effective if you’d like to prioritize growth in your business outside of your sales team. Many organizations utilize channel sales at some point because it is an efficient means to explore potential target markets at a lower cost. If that sounds appealing to you, let’s learn what channel sales are, the pros and cons of channel sales, and some of the top channel sales strategies to get started.
What Is Channel Sales?
In the Channel sales model, a company uses a third party to sell your product for you. Channel sales are the direct opposite of direct sales, where you have an in-house team that sells directly to customers, either online or through your own location. There are many companies that sell through channel sales to help reach their desired target market.
An example of direct sales versus channel sales is Samsung mobile. If you go to the Samsung store or the Samsung website to buy their newest phone, then you are using direct sales. However, if you were to buy their newest phone at Amazon or any local store, you would be using one of their channel sales to purchase the same product.
When you look at industrial manufacturing companies, this is another example of companies that grow through channel sales. Manufacturing companies will sell their products through channel partners that will in turn sell these products directly to consumers.
Consider buying a new air conditioning unit for your home. Most homeowners will buy this unit from their local market and repair company. The manufacturing companies of the AC unit are selling through channel sales, and the repair company is considered a channel partner. Below we will explore more of what a channel partner is.
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What Is a Channel Partner?
A channel partner is a company that does business partnerships with a manufacturer or producer to market and sell its products and services. With channel partner models, it can help teams grow both sales and loyalty. The channel partner helps to work as an extension of your team. There are three main types of channel partners, such as – independent dealers, distributors and independent sales representatives, and these relationships can be long-term, mid-term or short-term depending on your team’s needs, strategy and scope of the project.
When to Use Channel Sales?
Channel sales can be efficient and robust, but only for the right kinds of products. This sales model can be highly effective if you use it in a proper manner. It is necessary to keep in mind these key factors when deciding whether or not channel sales suits your team and your objectives.
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When Your Product Is Mature Enough
The product’s success will depend on where it is in the product life cycle. If your product is new and you are working out the kinks, direct sales will allow you to get the quick feedback you need to improve your product quality. Until your product is more set and settled you may want to wait to choose a channel sales strategy.
When Your Product Is Easy to Market
Is your product complex and full of intricate parts that need to be explained to a potential customer? Or is it a pretty simple product that can be sold fast? A channel sales strategy is probably not for you yet, if your product requires more research or requires a lot of touchpoints to understand.
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When Your Sales Process Is Well-Researched
In channel sales, it’s important to have a well-planned and developed sales process where you can quickly and easily explain buyer identity, challenges, buying triggers, average sales cycles, etc. These all are key to making sure your channel partner sales strategy has everything that it needs to efficiently identify and sell to your buyers.
When Immediate Revenue Isn’t a Top Priority
Because you’re doing a collaboration with another organization, the length of the sales cycle is likely out of your hands and it can use a lot of time and energy to get a system started. Channel sales is a good long-term investment, but not if you quickly need revenue.
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4 Advantages of Channel Sales
Even with a winning direct sales program, many organizations opt to include channel sales in their strategy. Depending on the business type, some may choose to solely utilize channel sales. Here are the few top reasons that organizations may implement a channel sales strategy:
#1: Channel Sales – Lower Sales and Marketing Costs
Compared with running an in-house sales team, channel sales costs much less in overhead. If anyone else has a brick-and-mortar store, employees, and inventory, much of the selling cost can be mitigated. Channel sales also take advantage of the cost and effort the channel partner has put into building a business and client base for the business. Therefore, channel sales can be a way to expand or break into the market without spending as much to run your own campaign.
#2: Channel Sales are More Efficient & Effective
In the channel sales system, a channel sales manager can easily work with various channel partners to assist and help them in selling the product and collaborate to build out their overall sales strategy. This wipes out the need to hire multiple sales reps. A single-channel sales manager can take the place of five or six sales reps.
#3: Channel Sales are Easily Scalable
Once you have established channel sales program and settled down on a proven procedure, it is quite easy to bring on additional channel partners as per the need. This is easier than bringing on additional salespeople, which would cost more and require more training and oversight. You can scale up channel partners, or scale down if needed, depending on how your product is selling.
#4: Channel Sales – Have Lower Risks
Channel sales are a relatively low-risk way to assess and try out a new market because of the lower cost and increased efficiency. A company can try new products, packages, promotions, and campaigns with a channel partner without potentially risking as much if you were to try it in your direct sales.
