When you crave a Coke, do you go their website to place the order?
Definitely not!
You rather go to the nearest convenience store and buy one. People like convenience. But of late, they’ve started to need convenience. Remember the 4 Ps of marketing? Product, Price, Place, Promotion? Here we focus on numero tres: Place.
When we buy products, we rarely make direct purchases. We opt for distributors and retailers who help bring the product close to us. And that’s precisely what channel sales is. It can help you improve your reach, refine your product placement, and help scale your business.
Want to know how? Let’s get started!
What is Channel Sales?
Channel Sales is a strategy where businesses sell indirectly using multiple third-party partners. Rather than selling directly to the end customers, they work with channel partners to distribute their product/ service.
As in the example mentioned earlier, a soft drink brand like Coca-Cola or Pepsi would mainly sell through marketplaces. Cartons of these drinks are sold wholesale to retailers, which are then resold to consumers.
These marketplaces may be physical or digital, but these brands are always available at the most convenient outlets. Resellers are just one of the many types of sales channels!
Here are some other popular sales channels:
- Affiliate Partners – They promote your products or services through unique links. The affiliate only earns a commission when customers make a purchase through those links.
- Marketplaces – Platforms that provide a place for multiple sellers to showcase and sell their products.
- Value-Added Resellers – They may provide additional services, customization, or integration to make your product more valuable to customers.
- Agents – They act as representatives of your product or service and connect with buyers to facilitate transactions like insurance agents, brokers etc.
- Dealerships – They have a direct relationship with the manufacturer and focus on promoting and selling that brand.
- Retailers – They sell products directly to consumers. They might have brought the product from a wholesaler or directly from the manufacturer.
- Influencers – They have a significant sway over people’s buying decisions can influence their audience’s opinions.
- E-commerce Platforms – They provide the online space for sellers to set up shop and sell their products.
- Distributors – They act as a bridge between manufacturers and retailers, ensuring products reach their destination efficiently.
There are many types of channel partners that can be a part of your sales ecosystem. But is channel sales the right option for you? Let’s understand how it differs from direct sales and should you employ this strategy.
Which is Better Channel Sales or Direct Sales?
A product with better distribution will always win over a superior product with poor distribution or customer access. It’s not fair. It’s not right. But it’s a reality!
– Stephen Davis, Managing Director, CXO Advisory Group
Direct sales is like the classic one-on-one approach. It’s when you or your team go straight to the customer. You might have your own sales force or maybe you’re doing it yourself. You’re the one making the calls, sending the emails, setting up the meetings – all to directly convince people to buy your product.
Now, channel sales, on the other hand, is a bit like having an army of allies out there doing the selling for you. Instead of you going directly to the customers, you work with intermediaries or partners. They take your product and sell it on your behalf, often reaching a wider audience than you could on your own.
So, which one’s better?
Well, it really depends on a bunch of factors, like the nature of your product, your target market, and your resources.
Direct sales can give you more control and direct feedback from customers. You’re in the driver’s seat. But it can also be more resource-intensive and time-consuming. Especially if you are a large organisation trying to target many different types of markets.
Channel sales, on the flip side, can help you scale up more quickly and reach markets that you might not have been able to on your own. Plus, you’re leveraging the expertise and networks of your partners. But it can also mean less direct control over how your product is sold and less direct interaction with customers.
Channel Sales works parallel to direct sales and allows for the branching of the sales process . A blended sales strategy with a greater focus on channel sales while still paying attention to direct sales is the best way to go about it.
Direct Sales | Channel Sales | |
Definition | The company sells products directly to the end customer with no middlemen | The company involves the help of channel partners like distributors to sell their products or services. |
Reach | Limited to the company's own resources and networks | Expanded through the networks and resources of channel partners |
Control | They have direct control over the product, customer interactions, pricing etc. | The level of control about customer interactions, pricing and more is less. |
Customer Relationship | It allows for personalized interactions and better understanding of customer needs | The understanding of customer preferences is limited since there is no direct contact. |
Examples | Selling through company-owned stores, website, or direct sales force | Selling through retailers, wholesalers, or independent sales agent |
Moreover, channel sales can work differently for B2B from B2C. Currently, B2B customers frequently communicate with suppliers through over ten or more channels (up from just five in 2016). With 35% of consumers willing to spend $500,000 or more in a single transaction, people are more willing than ever to make large purchases through distant or online sales channels. For B2B, distributors are beneficial, and integrating with other businesses can prove to help each business grow in a particular industry.
As for B2C, specific channels like retailers and resellers are more advantageous.
So, there’s no one-size-fits-all answer. Some businesses thrive with direct sales, while others find success through channels. And hey, some even use a mix of both, finding that sweet spot that works best for them. It’s all about finding what aligns with your goals and resources.
What Are the Benefits of Channel Sales?
1. Expand your reach
Channel sales not only helps you reach a wide variety of prospects, it also helps you target the right customers and address their unique needs.
The channels partners know their markets inside out. Using their expertise, you can tailor your approach and product offerings to fit those market segments. They are also like extra hands to your sales team with a solid credibility.
2. Save expenses
Channel Partners have huge existing customer base. This saves up on the marketing cost, as they are working on promoting your product in the market. Logistically too, they handle the implementation or shipping process, warehousing etc. They help you expand your reach without eating into your operational costs.
3. Focus on refining your product
With Channel sales you can spend more of your time and money developing your suite of products and services. It significantly cuts down on the time you spend strategizing your selling and expansion into various markets. It’s a win-win, you focus on making your product the best it can be while at the same time it reaches a wider range of customers.
4. Quicker time to market
Channel sales is essentially a shortcut to reaching wider markets. When your partners vouch for you, it becomes easier for new customers to trust and adapt your product. They know the right audience and pulse of their established networks and customer bases.
5. Increased brand recognition
Consumers are more likely to purchase from brands that they are already familiar with. When you go the channel sales way, you can instil confidence in your product. You can increase the brand awareness of your product without putting in much marketing efforts and budget.
Although channel sales offer many advantages, how do you know it’s the right move for your organisation? Let’s look at some drawbacks of channel sales to help you make an informed decision.
Is Channel Sales Right for your Business?
1. Losing out on 100% control
It’s not easy to directly interfere with the sales process if third parties are conducting them. You can often lose track of what’s happening, and fixing issues requires much transparency. Channel partners may not prioritize your brand’s interests or may not deliver the level of service expected by the you. This can lead to inconsistencies in customer experience. Assessing your sales KPIs can also become a challenge.
2. Complicated channel management:
Transparency is not always offered when you have multiple partners to work with. Keeping complete notes of every sale is complex, and measuring sales efforts is even more challenging. Without efficient channel management, it can be difficult to track marketing efforts, ensuring adequate training and support, and managing conflicts among channel partners.
3. . Loss of revenue
Partners take a cut from their sales, so you must be okay with the trade-off. Depending on the partners and their margins, you might lose 20-50% of the revenue per sale to the sales partner. You will need to analyse your ROI to ensure the partnership is worth it.
That’s why it’s important to assess whether you are ready to take a leap towards channel sales. Let’s understand how you can do so.
Setting Up a Channel Sales Strategy
Let’s walk through the steps involved in setting up a channel sales strategy and then evolve it into a multichannel approach.
1. Understand your business
Is your business ready for a channel sales approach? Do you possess the bandwidth for it? Are you ready to start scaling up and increasing distribution?
This depends on your business type and what currently drives your sales. You can consider channel sales if your processes are well-defined and can be replicated anywhere. You can also consider channel sales if your target audience is generic and if you can sell products/services to similar people in other regions.
Small businesses and local emporiums must offer uniqueness to expand sales through multiple channels. However, they can still use channels like online e-commerce platforms or social media outlets to drive traffic and funnel sales.
Partnering with the right partners could help develop your sales strategy into a more standardized and replicable one to transition your business into a blended sales mode. So, there’s something in here for everyone.
2. Identify your ideal channel partners
Determine the types of channel partners that align with your business objectives. This could include distributors, resellers, value-added resellers (VARs), or other types of intermediaries.
Look for partners that have a similar target market, share common values, and have a good reputation in the industry. Consider factors such as their reach, expertise, and existing customer relationships.
3. Develop a clear value proposition
Clearly communicate the value proposition of your products or services to potential channel partners. Highlight the benefits they will gain by partnering with your business, such as increased revenue, market expansion, or access to innovative products.
Articulate how your offerings meet the needs of end customers and why your products are better or different from competitors’.
4. Create a channel management system
Establish a robust system for managing your channel relationships. This includes setting up clear communication channels, providing necessary training and support, and defining roles and responsibilities.
Develop a structured onboarding process for new partners and establish sales key performance indicators (KPIs) to measure the success of the partnership. A well-defined channel management system helps in maintaining consistency and efficiency across the network.
5. Monitor and optimize
Regularly monitor the performance of your channel partners and the effectiveness of the channel sales strategy. Analyse sales data, track key metrics, and gather feedback from partners and customers. Identify areas for improvement and optimization and be proactive in addressing any challenges that may arise. This ongoing evaluation process ensures that the channel strategy remains aligned with business goals and adapts to changes in the market.
How to Choose the Right Channel Partner
1. Find partners aligned with your target market
Can your partner understand your target audience and deliver your products/services directly to them? If so, then they’re the right channel partner for your business. Try to find those channels connected to your audience but require some assistance in understanding and maintaining. If your partners can help you reach new markets that align with your values, seal the deal.
2. Ensure technical expertise
Choose partners who fully understand your business and have the know-how to explain it to potential customers. You need partners who are well-versed in your field to be reliable to consumers. If not, can they be educated quickly? Can a slight push from your end create a significant acceleration? If your partners can work independently, they’re helpful to your sales funnels.
For example, integrating with SaaS partners who understand the product and help in the implementation process can be useful to your business.
3. Screen partners for commitment
Ask yourself these questions as you screen your partners:
- How motivated are your partners to work with you?
- Is the deal you’re offering competent?
- Is this a mutually beneficial partnership?
Depending on the job they have to carry out, you’d need people who can commit their time to your organization. Ensure you’re offering enough incentive for them to give their 100% each time. If your partners are satisfied with your terms and conditions, they will likely go on to close more deals.
4. Assess ROI before committing
Certain partners may be well established and would ask for a higher revenue share to go through with the partnership. Evaluate the ROI thoroughly. If the costs are sustainable for your company, and you see improved results via this partnership, then take the chance. You want to get the best deal out of your sales channels, so ensure they don’t crumble down on your business.
How to Improve Channel Sales Productivity?
1. Assess the market
“Be strategic about the partner you choose. If you want to sell in a new region, map your strengths against the new market and onboard partners accordingly”
-Angela Anthony, Partner Manager at LeadSquared
It’s not easy to sell to a completely new market. Analyse the market share of your customers and gauge where you can make a dent. It can be a certain industry or product feature or anything that sets you apart. Look for channel partners who complements you or know your new target audience very well.
2. Communicate and get feedback
“The most important thing in any channel partner business is building relationships. Be transparent and have a two-way communication with your partners.”
-Angela Anthony, Partner Manager at LeadSquared
Establish clear and consistent communication channels with your channel partners. Regularly update them on product launches, promotions, and any changes in policies or strategies. Encourage feedback from your channel partners. Understand their challenges, concerns, and suggestions. By actively listening and responding, you create an environment of trust and collaboration.
3. Enable partners with collaterals
“It’s essential to tailor the resources and sales pitch according to the region and industry they are a part of. Segmentation is very important to drive a clear strategy”
-Angela Anthony, Partner Manager at LeadSquared
Once you onboard a partner, provided them with different resources like sales decks, cold calling pitches, videos, battle cards etc. This ensures that the partner is as equipped as your salesperson to sell your product/service in a new region. There is a cost of acquisition attached to each partner, make sure to analyse the ROI before that.
4. Nurture partner relationships
“Indulge in co-marketing activities and have lucrative incentive programs to encourage your partners and reward their performance.”
-Angela Anthony, Partner Manager at LeadSquared
Provide personalized support to your channel partners. Understand their unique challenges and offer tailored solutions. Building strong, personalized relationships fosters loyalty and encourages long-term partnerships. You can also implement incentive programs to motivate and reward high-performing channel partners in the form of bonuses, discounts, or other perks based on achieved sales targets.
5. Provide proper product training
Offer detailed training programs for your channel partners to ensure they have a deep understanding of your products. This includes technical specifications, use cases, and any unique selling points. Provide easy access to resources like product manuals, videos, and FAQs. This enables channel partners to quickly find the information they need.
6. Have a dedicated support team
“Have bi-weekly meetings to discuss the status, any feedback or grievances they might have. Having a regular touch-in with a partner is a must.”
-Angela Anthony, Partner Manager at LeadSquared
A prompt and helpful support system ensures that challenges are addressed swiftly, minimizing disruptions in sales activities. Regularly assess the performance of your support team and gather feedback from channel partners about their support experiences.
Collectively implementing these strategies can significantly enhance channel sales productivity. You can foster strong partnerships and maximize the potential of your distribution network.
Is Channel Sales the Way to Go?
As we’ve established, channel sales have pros and cons and is well-suited for certain businesses. It can help scale your business and push your market share further. An omnichannel presence can help boost your customer engagement and retain them for longer.
Whether you’re a B2B or a B2C organization, using channel partners can improve your visibility to close more deals. However, you might lose revenue shares and will lose some control over your process. If you can’t afford these caveats, you may need to hold off on channel sales for a while.
FAQs
Channel sales in B2B markets help their product reach the right customers. These channels can be resellers, distributors, referral partner and consultants to help businesses match with the right solutions.
Channel partners are businesses or individuals who collaborate with companies to market, sell, and distribute their products or services to a wider audience.
A channel sales manager is responsible for building and maintaining relationships with channel partners. Their main goal is to implement sales strategies, provide support, and ensure mutual benefits for both the company and the channel partners.
