Selling products requires two strategies namely: channel sales and direct sales. If you need to incorporate a scalable model that can grow with your company, then channel sales may just be the answer you are looking for. This is especially true if you require an efficient sales model that is low risk but can be effectively adjusted depending on the growth and success of your business.
In addition, if you want to prioritize the growth of your business and not just your sales team, then channel sales are the more effective choice. Many companies use channel sales at one point or another since this is an efficient way to explore possible markets but at a much lower cost.
Does this sound intriguing to you? If yes, then you’ll want to know the channel sales meaning and what can be some of the best channel sales strategies that you can choose to employ in your business.
What are Channel Sales?
Simply put, channel sales are the use of a third-party to sell your product, service, or solution for your business. It is the exact opposite of direct sales, which utilizes an in-house sales and marketing team that sells your product, service, or solution. Whether these are sold online or in a certain locality, these are all possible so long as you are awarded the right to sell those products, services, or solutions.
To cite an example of channel sales and direct sales, check out how GE is being sold. If you buy one of their refrigerators from Lowe’s, then you are buying from a sales channel of GE. In contrast, if you buy from the GE website or company directly, then that falls under direct sales.
Product Features That Boost Sales Success
Channel sales can serve as a powerful marketing and sales strategy for your product, service, or solution. However, the degree of success may depend on the item you are selling.
Here are some features that you should consider before deciding if it’s the time to get channel sales or not.
1. Product Maturity
The product life cycle where your product is classified under will dictate its success. If it is still fairly new and you’re in the process of making improvements to make the product perfectly functioning as it should be, then direct sales will enable you to have feedback quickly so you can make the proper changes to enhance it. It is best to use the channel sales strategy after you’re sure that it is already working at its best and that no changes are expected.
2. Easily Marketed
Is your product, service, or solution complicated or have complex functions that require more than the basic explanation to potential users or clients? Is it possible to sell it easily and fast? Have you prepared enough walkthroughs or how-to-use videos or audios for your end-users who may need one? If your service or solution needs research or several procedures to fully understand it and it’s functions, then using the channel sales strategy is not yet the ideal choice for your marketing and sales.
3. Well-Planned Sales Procedure
Channel sales require a well-planned sales process that allows for easy-to-follow and quickly understandable buyer personas, buying triggers, pain points, average sales cycles, and others. These all ensure that your channel partners have accurate information regarding the sales strategy of your service, product, or solution to effectively determine and sell it to the end-users or clients.
4. Long-Term Investment
Since you are working with other companies, the sales cycle length is probably not within your usual control, and setting the appropriate system for it may take some time and effort. However, with proper preparation of whatever your channel partners may need to operate with as much independence as possible after the initial orientation and/or initial training, channel sales make a sound long-term investment. Unfortunately, this is just the opposite if you need revenue sooner rather than later.
Advantages of Channel Sales
Despite having a successful and effective direct sales program, some companies choose to entertain channel sales as a marketing and sales strategy. However, it will still depend on your business and the product, service, or solution you want to sell if you can use direct sales, or channel sales or both.
Here are some advantages that businesses choose to implement a channel sales strategy.
1. Lower Sales and Marketing Cost
Channel sales require lower costs compared to having an in-house sales team plus the overhead costs of maintaining it. A channel partner or reseller often has his/her own staff, store, and inventory that you won’t have to worry about if you were to award the right to sell your product, service, or solution to them. As a result, your marketing and sales costs can be lessened. Also, he/she usually has his/her own base of clientele so partnering with one empowers you to expand and/or break into new markets minus the total cost of running your own campaign.
2. Effortless Scalable
After establishing the appropriate program and settling the system to be effective for your business, it should be so much easier to take on new reseller partners as you need. This will result in the freedom to scale up or down as your product sales dictate minus the need to train new salespeople.
3. Efficient
In a channel, one channel sales manager is able to collaborate with several partners to help them in product sales. This frees you from having to hire various salespeople. Ideally, a channel manager can handle 5 to 6 salespeople or resellers.
4. Established Trust
Cold calling or cold emailing can be very challenging for many salespeople. After all, it is never easy to build trust quickly. However, channel partners or resellers already have base clientele with whom they have established and maintained trust. Upon their recommendation, your product, service, or solution will be received with a more positive reception and some will even become clients already. In the end, you are able to create your brand presence with less effort it would have taken if your resellers didn’t offer them your product, service, or solution.
5. Less Risk
Channel partners enable you to gain potential clients with greater chances of having sales in their shops or stores. This results in less risk for you and enables you to test new packages, products, promotions as well as campaigns with your channel partner. Again, this would have cost you more if you were to handle in as direct sales.
6. Hassle-Free Onboarding and Service
Choose to align with channel partners or resellers who have enough resources to provide end-users with training, onboarding, and/or client support. This way, you can delegate these services to your channel partners and focus more on other more important aspects of your business that will eventually bring more revenue. The right channel partners will enable you to focus on establishing new business while they cater to client issues.
Top 3 Channel Sales Challenges
As mentioned above, there are a lot of companies who may opt to use this model. But there may be some drawbacks to this strategy. To avoid these challenges, strive to avoid these pitfalls by anticipating and working around them.
Here are 3 challenges that you may have to avoid if you decide to use channel sales.
1. Less Control
Working with a reseller or several channel partners may find you in a situation where you cannot dictate much in the sales compared to someone working for you in-house. More often than not, you cannot manage their sales processes directly and will be dependent on their decisions wither to close sales and when. What’s more, though it very rarely happens, there may be a time or two when your reseller is not very adept at handling sales. Their training would be controlled by your channel partners, not like your in-house team, whom you can decide when and where they should train until they know how to promote and sell your product, item, or solution.
2. Profit Reduction
Yes, you save in sales and marketing plus efficiency. However, channel marketing may require some outlay and thus, lessen your revenue. Your partner’s value and your agreement will dictate it, but your share will be from 20% to 50% of the sales revenues.
3. Less Customer Access
Since your channel partners and resellers are in direct contact with your end-users, you have less access to them if you want to acquire feedback from them. It is understandable that some resellers may want to keep you from having direct contact with their clients. However, even if you are given permission to contact end-users for honest feedback, it will still require precious time and effort to gather their feedback compared to if you were using direct sales.
Sales Management Strategies
Each channel partner or reseller selects a sales strategy to employ.
Here are three universal concepts to mark when handling them.
1. Establish Sales Enablement Content
Your channel partner has to have a clear understanding of your product, service, or solution and how to properly market and sell them to the end-users. So, establish accurate and effective training materials that will allow them to understand your product, service or solution including how to market and sell it, and troubleshoot problems or issues that may arise when end-users encounter them. Create the materials in a way that is easy to learn and understand while emphasizing the key elements they need to successfully promote and sell your product or service.
2. Align Your KPIS
From the start, state your expectations from the channel partnership clearly. Devise a plan on how to get and comprehend performance metrics from each partner. It may be a great idea to associate a partnership with a specific market or demographic to easily identify each from others. This will also allow you to easily track results that you may want to prioritize.
3. Create A Consistent Agenda And Schedule
Know that this is the start of a hopefully very long relationship. So, develop one by creating a consistent agenda as well as meeting schedule to give you both the time to regularly work on enhancing your partnership on both sides.
Choose Channel Sales For Your Company’s Efficient Growth And Success
Channel sales can require your valuable time and efforts as an important investment in it, especially at its onset. However, it has the potential of jumpstarting your business to the next level or even to a whole new one at that.
With the right use of channel sales, you can quickly increase your market in ways that direct sales will find challenging by utilizing the trust that channel partners have already established with their clients. This affords you flexibility based on your size and your goals while allowing you to test any ground with less risk. After all, channel sales pave the way to creating new business connections which can benefit you continuously.
Discover the channel that you can team up with for your business growth and success. Check out the Forzadash community and its numerous multi-skilled channel partners. To set a meeting, call here now.
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