Did you know over 60% of companies say channel partners help strengthen their annual revenue?
When implemented correctly, channel sales can be the key to lifting your business to the next level.
It is a strategy that can be adopted by businesses of all types.
Is your company in a position to implement a channel sales strategy?
Keep reading to learn more about channel sales and understand if it is the right way to grow your business.
What Is Channel Sales?
Channel Sales is the practice of distributing your product to consumers through different selling platforms.
Say your direct sales operation consists of a team of five sales reps who sell your product door to door. They’re doing a fine job, but you want your product to be seen by even more customers on a daily basis. To achieve this, you strike an agreement with the owner of a shop down the street to carry your product as well.
This is a channel sales strategy! Any additional method of selling outside of your sales team can be classified as channel sales.
Even with a successful direct sales operation, many businesses still choose to get involved with channel sales.
Take Apple, for example. As you may already know, an Apple Store is far from being the only place where you can buy an iPhone. You’ll see iPhones for sale at Best Buy, Verizon, and AT&T stores.
In fact, Apple made over $180 billion in sales revenue this past year from channel sales! A large portion of this was from the iPhone, as 70% of iPhone sales came from sellers who aren’t Apple.
There are different types of sales channels that an organization could partner with. Some examples are Resellers (such as Best Buy in the example above), Agents, Consultants, Distributors, and Value-added providers.
If you’re considering incorporating some of these channels to your sales strategy, it is important to know what your company could stand to gain - and lose - before doing so.
Benefits of Channel Sales
Greater Customer Reach: If your direct sales operation is limited in terms of the area it covers or the amount of customers it sells to, partnering with certain sales channels could help expand both the area your product is selling in and the number of customers it will reach.
Recognition/Trust: Businesses tend to incorporate channel partners that are already well-known and trusted by customers within their market. Selling through their platforms will give your product immediate credibility and recognition with your market and audience.
Reduced Marketing/Overhead Costs: Another benefit of partnering with a channel that has an established presence is that they are likely already advertising their brand and the value it provides. With your channel partner doing the work to drive their own customers and sales, your business can enjoy the benefit of saving on advertising costs, allowing you to enter new markets in a cost-effective way.
Drawbacks of Channel Sales
Less Control: When you’re selling your product through a channel, there is an intermediary between you and your product’s end user. While this has many benefits, any problems that arise during the sales process will be more difficult to deal with now that you’re not directly overseeing the sale.
Less Predictable Revenue: Selling through partners also means you will have a harder time predicting your revenue over certain time frames. You won’t know your partner’s sales pipelines as well as your own, and this limited visibility could make it tough for you to forecast future sales.
Reduced Profits: If your partner is selling products for you, they’re going to be getting a portion of each sale. So, while your product might be reaching more customers, you’ll be making less on each individual sale.
Are Channel Sales the Right Fit for Your Business?
To ensure successful implementation of a channel sales model, you must be confident that your benefits will outweigh the drawbacks. Here are some aspects to consider when evaluating how your current business strategy could align with potential channel partners.
- Cost Structure: Channel sales will transform the cost structure of your business. As mentioned above, this could be in the form of reducing advertising costs and/or increasing cost per sale. It is important to have a clear idea of how your businesses cost structure will change when starting channel sales, and if you’re prepared to endure the change.
- Sales Process Complexity: It is easier to adopt a channel sales model when your product has a straightforward sales process. Some products require extra effort to sell (think of a wearable tech device that customers may want training, demos, and questions answered before buying). This added complexity can make it more difficult for your partner to resell your product, and any issues they have will be amplified since you’re not there to directly facilitate the sale. You can prepare for this by keeping in close contact with your channel partner and training them on how to carry out the sale beforehand.
- Communication/Transparency: A new channel partner means a new party you’ll have to be in communication with, especially early on in the partnership when you’ll be closely monitoring how things are going. It is important that any updates, issues, or ideas from either side are seamlessly communicated between both parties. Make sure you (or whoever is in charge of being the point of contact) are able to handle this additional responsibility.
Not all businesses are the right fit for channel sales, but evaluating the aspects listed above will give you a good idea where you stand.
If your product is still early on in its lifecycle stage or you’re not yet prepared to handle many changes to your current business strategy, then it may be best to stay focused on your direct sales operation for now.
If you’re confident that your business has a mature product with transferable sales qualities, and you’re prepared to handle changes to your business structure and additional responsibilities, then you can start looking into how to get started with a channel sales partner.
While channel sales comes with added responsibility, it has the potential to be a game-changer for your company’s sales and revenue.