Channel Sales vs Direct Sales

What is Channel Sales?

Channel sales is the kind of process where a company distributes a product to the market, typically by segregation sales operations to focus on distinct selling vessels. For example, a firm may implement a channel sales model to sell goods and services via in-house sales departments, retailers, affiliates, dealers, or direct marketing.

Channel sales may include any type of third-party partnership that offers your company’s goods or services to the end consumer. Selling your goods or service through a network of channel partners may provide great leverage to your company.

Re-sellers, value-added providers, distributors, and other types of channel partners may provide a wide reach for your firm and get your goods or service in front of many prospective purchasers. It is also a very cost-effective way to enter into new markets as it spares your company the costs of maintaining a local operation.

What are Direct Sales?

Direct sales are another methodology of selling directly to customers away from a static, physical, or commercial location. In today’s modern world of direct selling, sales deals can be cracked via in-person demos, personal arrangements, and of course online direct sales.

A direct sales channel needs building and managing a whole sales team and department. The sales team requires to be close to your target-oriented markets so if your company plan to sell in multiple markets your company will likely need local sales teams and members which may add an additional cost and management overhead.

Channel Sales: Pros and Cons

The Pros:

1. Effective scaling:

If your company has an established channel sales strategy with the respective profit sharing, incentives,co-marketing, and other plans, your company can scale very significantly by adding more channel partners into that mix. One partner manager may manage multiple partnerships and that in effect may get in revenue that will require an entire in-house sales department.

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2. Low sales, marketing, and distribution cost:

The third-party channel partner mostly has an established presence and is well-known and trusted by local clients. So, your company can reach new clients at a very low initial cost and can enter new geographical regions and markets in a very cost-effective way.

The Cons:

1. Less predictable revenues:

Partners may not always share their full pipeline with your company and even if they do it’s hard to forecast profits when your company has no control over the sales stages. To a degree, this may be offset by a larger pool of third-party partners that have a larger total pipeline.

2. Less control over the sales stages:

Selling through third-party partners means that there is an intermediary between your company and the customer. Depending on the strategy, your firm may not even be part of the sales stages so your company has little or no ability to influence the end result of sales opportunities.

Direct Sales:

Pros and Cons

The Pros:

1. Direct Receiving of feedback:

Since your company is selling directly to clients, your company get a direct line of feedback from their customers like, about what customers like or don’t like in your goods or service and your company can make changes on the same..

2. Full control of the sales stages:

Your company has full control to evolve your sales process and stages and manage the pipeline without any interference from external parties.

3. No discounts:

Selling directly the products means that your company do not have to share the revenues and profits with a reseller or third-party channel partner.

4. Little or no reliance on external parties for profit generation:

Your company will have full control over the sales process, then pricing and all the components of the sales process..

The Cons:

1. Difficult to scale:

Scaling a sales department requires training, recruiting, and onboarding of new sales reps.

2. High barriers of entrance in new targeted markets:

Entering into a new market with a direct sales department means a new firm, a new office, and everything that goes with it. It is a quite expensive endeavor compared to entering a new targeted market through a network of local third-party partners and resellers who already have an established presence in the local market.

3. High Cost:

Managing and developing a sales department with sales members is quite expensive. Just like any other division or group a sales department comes with administrative and management overhead on top of the bonuses, payroll, and other expenses.

What do you mean by a Sales Channel Strategy?

A sales channel strategy is the method of engaging with third parties partners to build business partnerships to get a bigger and wider range market for goods and services. When your company utilizes a sales channel strategy in your company, then more clients can get their hands on your goods and services. Your company has to do some intensive research and make planning and plotting accordingly to implement your sales channel strategy.

To do this, follow these important steps:

Step 1: Estimate your current sales process of the product and services of your company
Step 2: Estimate your sales partners
Step 3: Empower and train your third-party partners to help your company to get more sales
Step 4: Recruit a channel sales manager or any other managers which have major work to do

Conclusion

Finding the right sales channel or a mix of channels often takes lots of time and experimentation. Contrasting markets may need a different approach for the same goods or service offering.

It’s also likely that some channels may be more or less effective at different stages of the process of your business. When your company is a smaller organization you may require support and reach of partners but as your company evolve and expand reach your company may have the ability to reach your customers directly and optimize your sales and distribution costs.

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