The goal of sales is to earn customers to use your product or services. There can be various techniques employed to achieve the same. A salesperson as an individual has certain limitations. They can only invest some time and can reach only a certain number of people in a day. Additionally, hiring and paying a salesperson can take a toll on the entire budget.
A potentially innovative technique to market as well as sell the product or services is through Channel Sales. Despite its remarkable ability to reach a maximum number of people, it can be demanding. It is time-consuming and requires careful planning. This approach helps businesses escalate sales and raise profits without adding to their headcount.
What is channel sales?
Channel sales refer to how businesses associate with a mediator to sell their products or services to increase sales and capture a wider audience.
The channel sales success goes around gathering a wide variety of channels for the promotion and sale of the product. It yields more profit and steadies the business in the market as well as gather more customers.
To consider the channel sales approach as the strategy, it is essential to know the benefits and drawbacks of this sales model.
Benefits of Channel Sales
Adopting a channel sales model has fundamental benefits that you can consider:
- Built-in Trust: The channel partner is someone who already has an established presence in the market. In turn, it benefits you to make your product look trustworthy.
- Increased Efficiency: The sales channel can correspond to various mediators that can bring in the same profit equivalent to five to six salespersons with low investment.
- Rapid Testing and Experimentation: The scope of testing and experimentation increases when there are third-party partners. They let you explore new customer bases, products, promotions, packages and marketing campaigns with lesser risk.
- Customer Success: The focus on customer success is greater as partnering with third-party takes care of the other services that customers might need.
Drawbacks of Channel Sales
The channel sales come with a few drawbacks that make it a less absolute model for some businesses.
- Less Control Over Sales: The sales take place through third-party deals, so they conduct most of the sales process management. It gets challenging to take control in case of mismanagement. There might be a tentative timeline of the deal leading to frustration and unstable profit.
- Brand Risk: There might be a chance that the channel partner does not hold a good image in the market or mishandles the customers. In turn, it can affect the reputation of your product or services. Therefore, before dealing, it is vital to research the mediator.
- Reduced Profits: The partners are paid a certain amount when they bring in or close a deal. The profit is shared with them depending on the pre-planned contract. Nevertheless, it is inexpensive if the partner is reliable and provides you with the opportunity to grow and increase sales.
- Harder to Manage: It can be challenging to update your sales strategy, change your messaging, add a new product, or make any significant shift. You're not simply rolling out a change to one group — you're asking multiple external groups to adapt.
- Slower Feedback Cycle: Most of the customers are gained through the partners. They might be the ones taking feedback. Along with this, the data gathered might not be valid for several reasons, like an improper method to gather, analyze, collect data or biased interpretations. Thus, it can slow down the process.
- Potential Conflict: The business might choose to follow a hybrid model of sales that is direct and indirect selling. Consequently, the partner can start competing with the salesperson of the company. Therefore, it is necessary to establish clear rules that will help guide the product's selling through channel sales or direct sales.
Channel Sales vs Direct Sales
Direct sale is a traditional method for directly selling the product or services to the customers. In indirect sales, the company sells their products or services through a mediator like brokers, resellers, etc.
The companies using indirect channel sales might use direct and channel sales to generate profit, whereas, in direct sales, the sales team creates profit using a direct sales model.
How to Know Whether Channel Sales is Right for You
Before selecting a channel sales model for selling your products and services, it is vital to know about a few things:
- Company Size and Maturity: Large companies can integrate channel sales and direct sales, whereas small companies can partner with mediators with low investment to nurture their business.
- Product Maturity: The customers obtained through direct sales can be helpful to provide feedback in the initial stages of product development.
- Sales Process Maturity: The process of sales must be clearly defined, who are the investors, the average time length to close the deal, etc. If the process is not known, then it is wise to postpone the channel sales.
- Location: With multiple office locations, the channel sales model fits in perfectly.
- Revenue Needs: The need for profit determines the model of sales. If the money is required earlier, it is better to use direct sales as channel sales might take a significant amount of time to generate revenue.
Channel Partners
A channel partner is a mediator that helps the business to sell its products or services. There is a wide range of channel partners like affiliate partners, brokers, wholesalers, etc. The channel partners cater for the same prospective customers and presently have content that attracts customers. Although, channel partner offers a significant advantage the decision to select a few should be taken wisely.
What makes a good channel partner?
A good channel partner possesses specific characteristics that can make them an ideal fit for the business. Here are a few qualities that you can look for:
- Complementary to Your Product: The channel partner is an intermediary to bridge the gap between what you are contributing to or helping customers use the product more efficiently.
- Aligned With Your Market: The partners' customers should benefit from the product offered by your business.
- High Technical Expertise: Technical support might be necessary for the partner to sell the product. Therefore, it is essential to determine if the partner has relevant training and technical knowledge.
- Similar Sales Process: The sales process of the partners should be identical to the one's that your business follows.
- Manageable Commitment Level: It is better to determine the commitment level for the success beforehand as it provides your partner clarity about the process.
Sales Channel Examples
1. Resellers: A reseller buys the product from the manufacturer and then sells it back to prospective customers.
2. Affiliate Partners: An affiliate partner endorses the product. Individuals, businesses, or website holders paid a particular amount for every sale they produce.
3. Distributors: Distributors reach the customer directly. Sometimes, they act as mediators between the manufacturer and the end customers.
4. Wholesalers: Wholesalers are channel members who purchase the final product from the company. They sell it to a retailer, and the retailers sell the product to the end-customer.
5. Value Added Reseller (VAR): Value-added resellers are the companies that sell the product with an added feature or service. Mainly, it involves purchasing and reselling in the electronics or IT industry.
6. Independent Retailers: An independent retailer is a person who owns a business without having any association with other brands.
7. Dealers: Dealers sell products straight to the customer. They differ from retailers as they represent an already recognized brand.
8. Agents: Agents act as a mediator who promotes the deal between the manufacturer and customer, supporting the negotiation process.
9. Consultants: Channel consultants assist in the formation and productivity of sales channels. They are an expert individual who aids in making the process of sales channels to run smoothly.
Sales Channel Strategy
The channel strategy should line up with your business's overall sales strategy. Firstly, state the purpose of the program. It could be a statement that specifies what the program proposes to partners. Here are the ways to prepare a channel sales program:
1. Prepare relevant, helpful content to attract partners.
The relevant partners should be attracted to work with you. To do so, you should prepare appropriate and valuable content. It is wise to spend some time screening, qualifying, and understanding partners. Focus on quality over quantity and focus on sales growth.
2. Pay attention to the partner's needs.
Once the prospective partners are identified, the next step is to understand their needs. The deal will not take place unless the partner is benefited from it. The partner should be provided advantages like allowing them to offer additional services or increase the value of their product.
3. Select a structure for the channel sales partnership.
The structure of the channel sales can be divided into three parts. The first one focuses on joint sales in which you can sell the product along with your partner to add more value to customers. The second way is selling through your partner. A partner who is selling a product similar to yours would be appropriate for the partnership. Lastly, your partner has complete control over the product. They integrate your product into their own. It depends on your needs.
4. Motivate your channel sales partners.
Channel sales can be a complex process. The mediators are the base of the entire process. Hence, they should be constantly motivated to sell your product. To ensure that the sales partners sell your product confidently, you should have the best resources.
Money acts as a huge motivator. You should provide the partner with enough remuneration for the efforts they put in. You can also consider employing sales incentive programs for partners to trigger more sales.
5. Communicate often with your partners.
Communication helps to strengthen the relationship between you and your partner. They will be more dedicated to the program. At the same time, any issues can be resolved quickly, and both of you will be up to date on your ends. Consistently keep a check on your partner. You can connect through social media platforms like WhatsApp groups or periodic emails.
6. Offer additional rewards.
Additional rewards help to keep the partners interested and motivated to work. It enables to reinforce the specific desired behaviour. You can offer benefits like marketing support, exclusive events tickets, access to premium features, feature in your newsletters, etc.
7. Use a sales channel partnership platform.
You can keep track of your profits generated by your sales partner, especially for a multi-channel partnership.
Conclusion
The channel sales program requires a considerable investment regardless it can bring significant changes to your organization. You will develop a beneficial relationship in the market, increase your profit and reach new customers simultaneously.
