There are two strategies for selling products: Direct Sales and Channel Sales.
Whether channel sales strategy is the best model for a business depends on various factors such as the nature of the product or service, target market, industry dynamics, and organizational capabilities. Using intermediary channel sales involve distributors, retailers, or value-added resellers, to sell products or services to end customers.
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 during the course of a successful direct sales program, multiple organizations opt to implement channel sales into their planning. Some businesses, based on their nature, may even depend solely on channel sales. Here are the apex reasons why organizations may implement a channel sales approach:
#1: Cost-Effective Sales and Marketing
Compared to balancing an in-house sales team, channel sales provides a worthy reduction in overhead expense. If another entity already has physical stores, staff, and inventory, a considerable amount of the selling expenses can be alleviated. Channel sales has also leverage the investments created by channel partners in forming their businesses and client bases, enabling organizations to alleviate or enter the market without sustaining the complete expense of running their independent campaigns.
#2: Enhanced Efficiency and Effectiveness
Among the channel sales system, a channel sales manager can collaborate efficiently with several channel partners, supporting them in selling products and preparing comprehensive sales plannings. This reduces the requirement to hire multiple sales representatives. A single channel sales manager can efficiently perform the responsibility of several sales reps.
#3: Scalability Made Simple
Once a channel sales program is introduced and a proven strategy is in place, it tends to become proportionately straightforward to onboard additional channel partners as required. Such a process is rather much streamlined as compared to recruiting additional sales personnel, which would require higher expense, more training, and improved oversight. Relying on product performance, you can effortlessly scale up or down the number of channel partners.
#4: Reduced Risks
Channel sales describes a relatively low-risk approach to exploring and examining latest markets because of their minimal costs and increased efficiency. Companies can experiment with latest products, packages, promotions, and campaigns with the help of channel partners with rather less potential risk as compared to striving for similar ventures through direct sales channels.
Conclusion
Eventually, there’s no one-size-fits-all answer. For a business, the best sales model depends on a careful analysis of these factors and a strategic alignment with the overall goals and resources of the organization. It’s also worth noting that hybrid models, combining elements of both direct and channel sales, are common and can offer the benefits of both approaches.
