When we are looking to increase sales, companies most of the time often focus much of their energy on growing their direct sales channels, like by developing their eCommerce store or direct sales teams or eCommerce store.
However, manufacturing companies that only focus on these income streams (income directly earn through direct sales) may be leaving the most significant amount of revenue on the table. Companies should also take a notice of using channel sales as a way to effectively increase sales and grow revenue margin.
What do Channel Sales Mean?
Channel sales are nothing but a different method of selling goods and a company distributes its product through several different channels. These selling processes can be done directly through its own sales department, as well as through third-party partnerships.
Operating a channel sales strategy can be as easy as like another method of selling. In this process, your company’s brand increases its sales without any significant upfront costs. It can also diversify income sources leaving businesses less reliant on a single method of making a profit.
There are also downsides to this strategy as well. Brands or companies that use channel sales strategy will have to give up a certain percentage of revenue and some important and basic control over the sales process.
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What benefits of a Channel Sales Strategy?
Using a channel sales strategy partner may also cost your company less upfront. In the above example, the company does not have to pay for new staff or a sales department, even does not have to cover the price of opening shops, and can not have to spend as much on marketing area.
2. More Sales
When your company is using a channel sales partnership, your company may be able to take advantage of its present reputation, distribution, and consumers.
3. Brand Recognition
Choosing the best channel partner with a large consumer and customer base and a good reputation can help your company in little-known brands and build a positive image. For this effectively, the company has to be careful about the channel partners they choose.
4. Trust Your Channel Partner
Even though your product is comparatively new when your sales partners are already well trusted known people within the industry, any such team doesn’t need to work so hard to maintain your brand’s worth. Such products will be regarded as more credible as a result of such endorsements.
5. Dedicated Manager
Either you can bring on board your own sales team or a single manager can boost up the revenue, while only asking for a fraction of what a business will pay to a sales representative. A responsible professional is pivotal to keep partners motivated and engaged.
6. Promote Experimentation
Build a strong relationship with the channel partner as it is a company that you deal with to sell your products. Such partnerships allow you to experiment into multiple markets, new products, and different marketing methods.
What are the Drawbacks of a Channel Sales Strategy?
1. Lower Profits
While many different methods of channel sales strategy will have less up-front costs, your company has to share the profits margin brought from the sales of your goods with your third-party partner. This means your company will end up bringing in less profit per sale than you would otherwise.
2. Less Control
Having a third-party partnership will take control of much of the sales process and stages mean the company may lose control. If sales are not going well perfectly, for example, your company may have no right to adjust and control the sales process.
3. Potential for Brand Damage
Channel sales strategy can also harm your businesses if your third-party partners don’t treat consumers and clients of your product well or if their company is involved in a controversy.
4. Identification Risk
Even in a small growing company, if you want to keep a good reputation, it’s important to keep in touch with someone who is renowned for better customer service. Any bad reputation can lead to damage to your own goodwill.
5. Difficult to Diversify
Among many factors to consider, one of them is that it can be hard to introduce a crucial modification to the sales strategy, but it can be introduced. Just by keeping in touch with your team members and interacting with them, a business can easily introduce the alteration.
6. Channel Partner Dispute
During exchange for bringing and closing the deals when the sales team and their partners compete for the same clients, things may turn ugly. Hence, in such cases managers might decide to get rid of their partnerships in order to reserve the entire commission for themselves.
How to Find a Correct Channel Partner
Finding a suitable and best third-party channel partner is an important part of ensuring the success of any sales channel method. These are the following points while finding the correct channel partner:-
1. Is the third-party Channel Partner a Good Fit for Your Company
If your business is going to be associated or involved in a partnership with another brand, your company must better make sure if it is a good fit for the company or not. Think about the brand value and reputation of the partner and if they are likely to add value to your company.
Your company must also think about the people the partner can introduce to your company.
If your company works with any reseller that typically sells goods to discount stores, your goods are going to be associated with other discount brands. And of course, there is not any wrong with that if this is a good fit.
2. Look at the Various Channels Your Competitors are Using
First, look at the different and various types of sales channels your competitors are using. While your company may not be able to get exact information about how successful each and every channel is, if a business has been using the channel for a while, then they are likely to be benefitting from it.
Once your company has identified different channels, then you can either seek the same places to sell your product or, if there is any conflict of interest, then approach similar companies.
3. What Value or Expertise will the Third-Party Partner Bring?
It is very much important to consider the value the sales channel third-party partner will bring to your manufacturing or service company. If they do not bring any such value, your company may be better off making sales on your own side.
In certain cases, the value the third-party partner brings will be obvious. For example, exporters may be able to get your company’s product in front of an entirely new geographic market, and something that would be very difficult (or costly) should your company attempt to do it on your own.
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4. Do not make Pause at a Single Channel
There is no reason to make a pause at a single channel. Instead, your company shall use as many as possible of different sales channels to fit to help grow your brand. For example, a cosmetic company can sell directly its product through its website, or through its third-party eCommerce sites, and through resellers as well so that resellers can sell the product to local retailers.
Ultimately, if the third-party sales channel is adding some value and your company has the capacity to support and can able to manage the channel, your company can use as many as you see fit.
Channel sales are very much a useful way to grow your company’s revenue streams. While there are downsides as well, such as a loss of control over your sales process and the fact your company will have to share a certain revenue margin as well, in some cases, the upsides significantly outweigh the negatives.
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