Making a decision can be a tricky task. Especially, when it comes to choosing a sales strategy because your decision will impact your revenue growth.
This is a big decision: you have to weigh the pros and cons, which includes taking costs into account, going over the entire sales process, and charting out growth targets and projections.
One of the biggest decisions that sales department heads and sales managers have to make is whether they want to use channel sales or stick with direct sales.
You might find yourself mulling over this question when you want to enter a new market, when you have a new product or a new feature or some product upgrade to announce, or when you are planning to embark on aggressive expansion.
The question might also come up when something throws the market off balance.
This blog will give you an overview of both approaches so that you can make a fully informed choice.
What are direct sales?
The product is served hot, right onto your plate! Direct sales know no barrier. This sales strategy circumvents all the middlemen - distribution centers, wholesalers, regional distributors, and everything and everyone in between.
Without the intermediaries, connecting with your prospects is simpler and the connection is strong.
Products go from the manufacturer to the sales company and then directly to consumers. The sales company deploys its sales teams, sales reps, or salespeople to sell it to the customer.
You won’t find the product sold using a direct sales strategy at your local retail outlets. Distributors or sales reps are the only people selling these products. Avon and Amway are famous for having used this method.
Direct selling has a network spread across markets via third-party vendors or third-party sales companies. These can include door-to-door sales reps, product promotional events, multi-level marketing, and other ways to get closer to the client.
B2B companies routinely target clients and attempt to sell their products directly. For example, a business selling paper would typically sell directly to stores that retail stationery and other office supplies.
Direct sales can be further divided into three types :
1. Straight to the door inbox
When a salesperson knocks at your door - s/he is using the direct sales strategy. A company employs them to give demos of the product and increase brand awareness by directly reaching the customers. This is not necessarily an offline process. The salesperson can also come sliding in your inbox.
Methods like online shopping on the brand’s website, in house-presentations, and catalogs sent to your mailbox are adopted to sell directly to the customer.
2. All-salesmen mixer
It’s a sales party!
Sales companies host several sales promotional events and host parties to either introduce their products or recruit new members to their sales team.
Don’t get carried away. These are promotional events that are only termed as parties. And the aim is not to have fun, but to sell your products, although you would typically do so in a more subtle manner than you would on a sales call or in a sales meeting. The aim is to create awareness and maybe even make some sales in a group.
In B2B markets, this might play out like this: The tourism promotional office of Italy or France or Germany might host a party for travel agents, where they allow them a taste of their destination’s cuisine and display a presentation of the country’s sightseeing, hotels, visa formalities and travel access. The goal is to sell the idea to travel agents so that the travel agents will in turn suggest the party host's country to holiday-makers who approach them.
In B2C markets, this might take on a slightly more subtle note. Liquor brands often host or sponsor parties and allow attendees to try their products at the event. They might announce a special discount on purchases made at the event. Runway fashion shows might also come under this category: Fashion brands like Gucci invite people (who can afford their product) to a party of sorts, where they showcase their product and hope to find buyers.
3. Widening your net(work) with multi-level marketing
Multi-level marketing is all about widening your net so that you catch more fish. The focus is on recruiting members into the teams. The idea is for new members to further recruit new members who will further recruit new members… The network expands the product reach by engulfing more sellers into a company's sales network.
The new members are not on paid salaries but are rather roped into service by commissions and milestone rewards. You have seen this in the examples we cited earlier, that is Avon and Amway.
What are channel sales?
This approach relies on the contribution of expert companies that leverage third parties that have prior knowledge of the market and potential customers. The manufacturer will be able to handle sales much more conveniently. Your company’s sales team can contact a channel partner to sell your product.
For example, you could partner with an affiliate firm to help you improve sales. How do they achieve this? One of the most popularly seen methods is that affiliates might place links to your products or might introduce your product. This method helps you make a sale while the affiliate firm will get a commission from the sales made.
Just like direct sales, the channel sales strategy can be subdivided into several categories.
Broadly speaking there are nine types of channel sales or nine types of channel partners:
1. Resellers
A reseller sells the product again. They would buy the product from you and sell it to the customer. Selling of the product happens twice - RE-seller.
So, you are not directly interacting with the customer and the reseller gains a profit from the end-user.
2. Affiliate partners
Affiliate partners work together with your company to promote your business through advertisements, weblinks, e-commerce websites, and all the mediums to promote your product.
You must have come across blogs with links to products and services. It is right to assume that the blogger is an affiliate partner of the seller.
3. Distributors
Distributors provide channels to sell your products. These are middlemen who target the customer base via sales agents, websites, or businesses.
For example, Wesco International is an electrical distribution and services company.
4. Wholesalers
Wholesalers are accumulators. They are a team of sales reps who sell their product to store shelves, restaurants, or retailers.
For example, Sysco is one of the biggest wholesalers out there in America. They distribute tabletop items, kitchen equipment, and many other food products to various outlets or retailers.
5. Value Added Reseller (VAR)
These are special resellers. How? Well, they add their magic to the existing product. A simple reseller would buy a product from the manufacturer and sell it to the end-user, but a value added reseller will add a feature before reselling it.
Computer retailers and technology service companies are value-added resellers offering services such as installation, supplemental hardware, and software programs.
6. Independent retailers
Anyone can sell a product with a twist and a new angle. For example, plain t-shirts can be sold with accessories and ripped jeans. The person who is selling this product is an independent retailer. S/he has no affiliation with the parent organization and the selling is done independently. Independent Retailers are independent business owners.
7. Dealers
Dealers are specialized retailers who sell specific products to the end user. For example automobile dealers.
8. Agents
Agents are middlemen who have no ownership of the product. They simply exist to make the job easy by negotiating between owners and customers.
9. Consultants
Consultants are your experts and advisors. They do not make a sale or directly get involved in the sales process and sales method.
Speaking of which, sales process and sales methodology can be confused for the same concept. The two terms are often used interchangeably. However, here’s the difference:
A sales process is a blueprint of the entire process. It is a sequenced structure that starts from identifying a prospect to converting it into a closed deal.
On the other hand, a sales method has to do with the defined process in action. The sales method chosen at each step of the sales process will determine the result.
Choosing the right approach is imperative. But how do you decide that between direct sales and channel sales, what is the better course of action?
Direct sales vs channel sales: What will work for you?
Pros of choosing direct sales
- Direct sales involve close interaction with the customers hence it is easier to take feedback. You find out about their likes and dislikes and the buyer's persona evolves with a closed-room interaction. The feedback can also be used to improve the product.
- The second advantage is very closely linked to the first one. Because there is a close interaction, you can personalize the product and the service according to their needs. You might also be able to customize the product and recommend more because you are more aware of the customer’s behavior.
Direct sales improve the chances of customer retention because they are closer to the brand. It is easier to satisfy them when you know them.
Pricing is another benefit of a direct sales strategy. By cutting the intermediaries, the company can cut costs and the sales process becomes more transparent. This can be very helpful for small businesses.
Price control results in higher profit margins. No middleman is eating into your gains.
Disadvantages of direct sales
Direct sales can sometimes be equated with shooting arrows in the dark. The manufacturers have no leads and they depend entirely on the sales rep to optimize product sales. So, the sales reps have to build a network first. The time that could be invested in selling the product is now invested in building a sales network. This approach might look like a pyramid scheme.
Even after the network is created sales are heavily dependent on the skills of the sales reps. Remember that customers are not naive and they will not fall into the seller's trap. It is difficult to get the customer’s attention.
Direct sales leverage door-to-door salesmen and traditional marketing schemes that may not work as well as new methods available to companies today.
What are the benefits of channel sales?
Channel sales partners are trusted, third-party vendors. Customers already know their faces. When you are entering the market for the first time, the trust factor gained by channel partners can be used to reach new customers at lower marketing and sales costs. It is human nature to distrust a newcomer - channel partners can help you overcome the customer’s initial wariness.
Some channel sales models will also include services like onboarding and training new clients. The sales team will have plenty of time to concentrate on their job.
This leads to increased efficiency at a lower cost. Because a sales manager is cowering with several partners. A network is easily established which is a hassle in the case of connecting salespersons.
Channel sales partners have a wider audience reach. They allow you to be noticed conveniently.
Maybe channel sales are meh...
Cons of channel sales
- Using a channel sales strategy means that you are reliant on a third party. The KPIs and feedback given to the channel partner might not necessarily reach you. This way, the real picture of sales is hidden from you. And you are losing control over the sales process.
- Your product may not be a static object. You might continuously require new features to be introduced. The process of conveying changes in your product features to the intermediaries is a hell of a task.
PRO TIP
Make sure you are dealing with authentic and reputed Channel Sales partners! Their image is your image.Who is the winner?
Well, that depends on you - ask yourself a handful of questions:
How much control do you need over the sales process? This question alone can decide the winner for you.
For instance, if you want the sales reps to work according to a predetermined process and you do not trust partnerships, then direct sales is probably a better option for you.
Channel partners tend to prefer to work independently and they reserve the right to choose their working style. They might prioritize a client for your sake or they might not. They might not even be ready to enter CRM details if that’s how they operate. The unsaid norm with a lot of channel partner relationships might be: You want a change? Change your partner.
That said, if you are entering a new market then channel sales can help you tap the right customer base at an effective low cost.
Clari Copilot helps you work your chosen approach to your advantage
You never need to fear a loss of control when you work with Clari Copilot. Your sales rep will push the deal down the funnel thanks to our AI-powered platform. The tool provides the right insights to your sales reps to help them make better-informed decisions in real-time.
You can also share your integrated data and call recordings with your sales reps and and vice versa to increase visibility into sales processes.
Clari Copilot automates your B2B sales and makes the process seamless. You - and your sales reps - can rely on our real-time insights and sales metrics to improve and prioritize customers. Moreover, you can measure the performance and efforts of your reps on each call as Clari Copilot integrates with other business platforms such as your salesforce CRM, call logging tools and dialer, video conferencing apps and Slack.
The tool increases the cost-effectiveness of your sales calls and makes those cold prospects turn warm for you. To turn your cold leads into hot deals, reach out to us today.