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What is Channel Sales? How to create a winning sales channel strategy

A channel sales methodology allows your company to leverage the help of third-party partnerships to sell your company’s products and services. Channel sales methodology is widely used and is usually deployed as part of your company’s business growth effort. Channel can help your company to grow in three important ways:

To reach new consumers and clients who do not purchase in a direct way from the vendor, preferring instead to purchase from consultants or resellers.

To sell the goods through third-party partnerships or marketplaces and to managed service providers, which can offer package deals to end-consumers and clients and appeal to purchasers looking for different and various goods and service options and sales deals.

Channel sales strategy can help your company in finding new business in new geographic regions.

What is the meaning of the term channel sales (definition)?

A channel sales strategy involves using partners and third parties—such as affiliate partners, referral partners, wholesalers, managed service providers, distributors,  marketplaces or value-added resellers—to sell the products or services of the company. This method is quite in contrast to a traditional, and direct sales strategy in which your company’s sales department is solely responsible for selling goods to consumers.

Read More – What is a Distribution Management System?

What different types of channel models are there?

The good news is that there is no such one-size-fits-all approach to channel sales strategy so your company has plenty of options to explore. Here are some of the options open for your company (few may look more or less charming depending on your business):

  1. Referral partners
  2. Influencers
  3. Managed service providers
  4. Distributors
  5. Retailers
  6. Marketplaces
  7. Value-added resellers
  8. Agents
  9. Dealers

Companies both big and small may find third-party partnership through individual people and enterprise companies alike. SalesBabu’s own partner program is a great example of this.

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Direct Sales Channe hierachy

What are the advantages of channel sales strategy?

1. Enter into new markets and expand the product globally

A local third-party partner in a new geographical region knows the targeted geographical  market better than your company do, already has a large audience in your company’s preferred space and understands the business culture.

Taking benefit of this is the key when attempting to broaden and widen  your brand reach and acquire new sales leads, prospects and ultimately large number of clients and customers.

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2. Boost up your business (even if your internal resources are limited)

Allowing third-party referral partners to attract sales leads and get your goods in front of them can be considered a fast way to acquire new consumers and clients and boost up your business profit margin.

However, other channel sales third-party  programs may not always faster to set up than direct sales strategy. For example, value-added resellers may take six or seven months to a year to onboard fully, and most sales channel third-party partners will need frequent training as your product develops.

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3. Introduce your goods to different customers

Whether it is going globally or getting your goods in front of a specific geographic region, partners can help your company in any circumstance. Retail firms commonly rely on sales channel strategy to expand their brands.

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4. Boost your firm’s reputation and name recognition

There are also third-party equivalents, such as Amazon Web Services and Samsung AppStack, which are the marketplaces that mainly sell software and apps from channel partners. These digital channel partners make benefit in a number of ways:

  • Their goods have a wider audience.
  • They can save on online administration fees and costs.
  • Their own company’s websites get backlinks from well-known firms.

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5. Save a good amount of money on shipping, distributing, and web hosting

Dealing with shipping and distribution is often tedious and consumes lots of time of your company, not to mention very costly. 

Through certain intermediaries and channels, your company can offload these costs on your company’s partners that already have the existing infrastructure, supply chain,  good and an established presence in your target geographical  market.

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What are the challenges of channel sales?

Although sales channel strategy has the potential and the capacity to transform an up-and-coming product of the company, but there are still a few potential challenges to consider.

1. Revenue sharing means having fewer profit margins

Through sales channel strategy, different thor-party channel partners obviously take a good cut from your sales profits. Whether it may be around 10% or  25%, or 50% (and sometimes even  more), losing out on profit margins that would otherwise be all yours from direct sales to  customers can sting your company. 

That said, your company is likely to save more money in the long-run way when it comes to ongoing client support and account management. After all, 75% of something is always better than 100% of nothing.

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2. Less control over your firm as a whole

For a startup company, you can train the sales department of your company, but you can not completely control what your indirect sales or third-party partner force says or does when they interact with target clients across various touchpoints.

While your company should obviously try to work with people whom you can trust, having your firm’s reputation tied to a third party may be stressful. If third -party partner can slip up or make a mistake, then your company may have to deal with the consequences by proxy.

3. Reduced time spent directly with consumers or clients

From feedback to goods recommendations and beyond, your company’s existing clients are a treasure trove of insights. Less face-time with your clients and end-users means less time your company is taking in understanding their unique and customize needs, challenges,desires ,and pain points —especially as third-party channel sales partners are even unwilling to allow a vendor’s salesmen to contact their clients directly.

4. Numerous Organization and Priorities

Channel Sales partners have their own set of priorities to be fulfilled. Difficulty here is that such a set of priorities do not go well with the priorities of the organization which diversifies over a period of time. Such a situation may arise even when the organization is making an effort to promote a specific product or trying to get into a specific market or convincing the channel partner to follow a particular sales process, the channel partner may not be willing to process the pertinent activities. Scenarios like this become pivotal for the organization to accept what partners’ priorities are rather than indiscriminately delaying tasks and making use of the resources to deliver the desired business results.

Channel Sales Advantage

Effortless Scaling

Channel sales advantage refers to the benefits and opportunities gained by a company through the use of channel partners or intermediaries to distribute and sell its products or services. Rather than selling directly to end customers, companies may choose to leverage various channels such as wholesalers, distributors, value-added resellers (VARs), retailers, and online marketplaces to reach a broader audience and expand their market presence.

There are several advantages to employing a channel sales strategy:

  1. Extended Reach: Channel partners often have established networks and customer bases, allowing companies to access markets that may be difficult or expensive to reach on their own.
  2. Market Expertise: Channel partners possess knowledge about local markets, customer preferences, and industry trends, enabling companies to adapt their products or services to meet specific market demands.
  3. Cost Efficiency: By leveraging existing distribution channels, companies can reduce the costs associated with establishing and maintaining a direct sales force, such as salaries, training, and infrastructure.
  4. Focus on Core Competencies: Channel sales allow companies to focus on their core competencies, such as product development and innovation, while leaving sales and distribution tasks to their partners.
  5. Scalability: Channel partnerships offer scalability as companies can quickly expand their market presence by adding new partners or entering new geographic regions without significant upfront investment.
  6. Customer Relationships: Channel partners often have established relationships with customers, providing companies with access to valuable customer insights and feedback.
  7. Flexibility: Channel sales strategies provide flexibility for companies to adapt to changing market conditions and customer preferences by adjusting their channel partner mix or go-to-market strategies.

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However, it’s essential to manage channel relationships effectively to maximize these advantages. This includes selecting the right partners, providing adequate training and support, aligning incentives, and maintaining open communication channels to ensure mutual success. Additionally, companies must carefully balance the need to empower channel partners with maintaining control over branding, pricing, and customer experience to protect their brand reputation and maintain consistency across channels.