Let’s give you a scenario. You’re thirsty, and you crave a soft drink. How do you get yourself this refreshing beverage? You go to the official company website and order the fizzy drink. Right? Definitely not. 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.
Preparing multiple channels for sales and marketing offers your business greater visibility and improved reach. Channel sales help your business achieve its targets even when your sales team isn’t active. Customers shopping across multiple channels are observed to have a 30% higher lifetime value, so there’s certainly something attractive here!
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. Let’s dive deep into the channels you can use for better product placement, leverage channel sales to scale your business up, and how channel sales differ from direct sales.
Why don’t we jump right into it?
What is Channel Sales?
Channel Sales is indirectly selling. In a direct sales strategy, the producer or manufacturer would use a self-owned outlet to sell. Here, in channel sales, we use other platforms or outlets to sell.
As in the example mentioned earlier, a soft drink brand like Coca-Cola or Pepsi would mainly sell through marketplaces. You’d find cartons of these drinks sold wholesale to retailers, and they would then resell them to you. These marketplaces may be physical or digital, but these brands will undoubtedly find the most convenient outlets for you. And resellers are just one of the many types of sales channels! Here are some common types of sales channels used:
- Affiliate Partners
- Resellers
- Marketplaces
- Value-Added Resellers
- Agents
- Dealerships
- Retailers
- Influencers
- E-commerce Platforms
- Distributors
Benefits of Channel Sales
Channel Sales has multiple benefits. For example, partnering with influencers as affiliates can drive traffic from their audience to your product. The influencers also cover the marketing according to their style so that you can find a new market for your product effortlessly.
Outsourcing your sales to third parties also lifts the sales burden off your shoulders. You can let them take care of the selling, and they’ll be able to sell your products to their target markets. This means you can sell to new audiences and expand your territory. Diversifying your sales channels creates new revenue streams.
It’s not just one sales team creating more sales opportunities, but multiple platforms coming to your aid. There’s only so much selling your team can do. It isn’t reliable. Especially for products that are used more daily, you need convenient outlets for the customer. Resellers can help you sell on a one-to-many basis, as it exponentially increases your reach to customers.
More so, it would be best if you had outlets that exist passively so that the customer can go ahead and make their purchases according to their timeline. Your sales team’s presence or absence should not affect the quality or quantity of sales.
Direct Sales vs. Channel 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 gives you complete control of the sales process and allows you to keep 100% of the revenue. There exists a natural, wholehearted relationship between the company and the consumer.
Those are a few of the pros of Direct Sales. We’re not saying it’s terrible or inappropriate for your business. Direct Sales might work fine in some companies, like B2B service businesses or small enterprises.
Yet, companies are increasingly moving towards Channel Sales, and here’s why. Channel Sales works parallel to Direct Sales and allows for the branching of the sales process. You usually have only one sales team, but you can have multiple sales channels. 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.
For B2B companies, channel sales can work differently 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.
Specific channels are more advantageous for B2C, like retailers and resellers. For B2B, distributors are beneficial, and integrating with other businesses can prove to help each business grow in a particular industry.
But how does Channel Sales compete against the classic Direct Sales model? Let’s see.
| Direct Sales | Channel Sales | |
| Definition | Direct Sales involves selling to the customer directly without any third-party taking matters into their hands. | Channel Sales uses third-party channel partners to broaden the scope of selling. |
| Costs to Company | High | Significantly lower |
| Management | The complete sales team must be managed by the company. | Channel partners take care of the sales, and minimal management is required. |
| Know-how | The sales team needs to be self-equipped, trained, and certified to sell the product. | The channel partners can take care of the selling with their pre-existing expertise and need to learn only the niche details about the business’s offerings. |
| Revenue Split | The entire revenue goes directly to your business. | The business will have to share a commission with their partners. But it’s still profitable because of higher volumes. |
| Focus | Direct sales requires full focus from the business to thrive. | Channel sales allow for focus to be shifted to other areas, as selling is catered to by the partners. |
| Damage Control | Since all parties follow the same sales procedure, making mistakes and receiving feedback is a slow process. Mistakes can severely damage the sales flow as there is only one channel where sales occur. | Multiple different sales channels allow for feedback to be gained quickly, and new techniques to be implemented regularly. Any mistakes will only cause a small hindrance as only one channel will be affected. |
Pros and Cons of Channel Sales
There are both pros and cons of Channel Sales. Let’s go over them.
The Pros:
1. Low management efforts:
Channel partners who have an established presence are easy to bank on. It isn’t cumbersome to manage them or give them directions. This reduces efforts and money spent on boosting sales, marketing, and distribution. It also makes distribution stress-free.
2. Easy expansion into new markets:
Channel sales allow untapped potential to be utilized. Networking with local sellers and partners with a strong community presence can help you:
- Enter new markets quickly
- Identify regions where you can sell better
- Capture your target audience
3. Experimentation opportunities:
With channel partners, you can run experiment campaigns efficiently. You can also get better feedback as your datasets will be more significant. Test multiple marketing campaigns, product packaging, promotion strategies, etc., and determine how people perceive your brand.
4. Higher onboarding efficiency:
Onboarding new salespeople can be difficult, but onboarding sales partners? It’s usually easier to have more sales partners because they get a sizable cut of the profit, which incentivizes them to sell more on your behalf. Install a partner manager in your organization to look after your partners and ensure they’re always content with the partnership. Maintaining healthy relations with your sales partners will result in better, more fruitful partnerships.
5. Third-party consultations:
Channel partners help you outsource the consultation process, especially in the case of software. Expert consultants who recommend your product to potential clients are more trustworthy and can help you close sales better. For instance, delegating the installation process allows you to onboard customers faster.
The Cons:
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. Therefore, assessing your sales KPIs is a challenge.
2. Opacity in the pipeline:
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. Tweaking the process according to feedback can be annoying.
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 analyze your ROI to ensure the partnership is worth it.
The Verdict:
The pros and cons of channel sales show that you need to make wise decisions before using them.
- Smaller businesses can hold off on channel sales until their volume increases.
- Medium-sized companies can use a few channels to scale up and increase overall revenues by improving market share.
- Large-sized enterprises need to implement channel sales as it will exponentially provide returns, and the losses are minimal compared to the returns.
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. Understanding 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.
[Here’s how you can leverage social media for customer acquisition: Digital Customer Acquisition through LinkedIn and Instagram. ]
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. Focus on Omnichannel Marketing
87% of retailers agree that an omnichannel marketing strategy is critical to their success. But even after developing an omnichannel sales approach, 74% of businesses are dissatisfied.
So, things can go wrong. And we need to be prepared for it. Omnichannel marketing helps because it can direct traffic to your sales partners, who can help close sales. With omnichannel marketing, you can see drastically improved visibility. Once your sales channels are set in place, the funnel becomes easy.
You can easily manage your leads from multiple channels with a CRM tool. LeadSquared’s Lead Management Software allows you to seamlessly capture leads from all your channels and engage in an omnichannel approach to collect leads and siphon them towards productive activities for your business.
3. Here’s to B2B!
For the B2B companies out there, your channel sales strategies will look a little different.
Reports show that online/remote sales channels can attract big spending from buyers. 35% of buyers were willing to spend $500,000 this year, an increase from last year’s 27%. 77% of B2B customers had a budget of $50,000 or more.
B2B Sales have become increasingly competitive, and almost every business relies on three channels: e-commerce, face-to-face, and remote videoconferencing. Telesales is also a significant sales channel for most companies.
[Also read: Strategies to scale up telesales in 2023.]
On average, companies that focus on omnichannel can retain 89% of their clients.
4. Multi-Channel Retailing
Moving to a more B2C approach with this one, multi-channel retailing is a stellar way to improve your sales processes with your channel partners.
On average, multi-channel shoppers spend 3x more than single-channel shoppers. If you employ an effective diversification strategy with your business, you can target customers visiting multiple websites, for example. Consumers spend time on e-commerce websites, review sites, YouTube, social media channels, physical channels, and more.
Leverage these channels and improve your brand presence organically or through paid ad campaigns. You can also use the classic, evergreen tool of email marketing to build better relationships with your consumers and increase engagement. Omnichannel marketing automation allows you to understand your prospects and increase your ROI.
How to Choose the Right Channel Partner
Marketing Alignment
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.
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.
Commitment Levels
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.
ROI Considerations
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?
Keep All Collaterals Ready
When using channel sales, you must make sure your partners have the right equipment to be successful. Keeping collaterals ready will ensure that your partners are aware of how your business works and can quickly get up to speed on what needs to be done. Two broad categories of collaterals exist:
- Marketing Collaterals: The leads for channel sales are brought in by marketing teams. Manufacturers and suppliers can manage the messaging associated with their brand by using marketing collateral to raise awareness of their goods and services.
- Sales Collaterals: Sales training resources help speed up growth and guarantee that your channel partners can effectively explain a product’s or service’s value proposition. These collateral pieces may take the form of competitive data sheets, engaging webinars, sales scripts, client references, spec sheets, or case studies.
Crystal Clear Communications
Streamline your communications with your channel partners to prevent any falters. Miscommunication can be a key pothole in your path, as you don’t want your channels fumbling or falling out of line.
Make sure there’s organized communication between partners. Communication platforms help keep track of what’s been communicated and to whom. Onboarding your partners onto these platforms can maintain secure information flow.
If your channels involve on field movement, then it’s important to ensure their schedules, routes, and programmes are aligned. Field Force Agents can help you sell door-to-door, which is beneficial in the case of certain B2B sectors. In order to maintain a complete account of your field force, consider using a Mobile CRM.
Within your channels, communication breakdown should be very transparent. Partners should be aware of who to contact about any concerns. Beyond that, all communication should be possible with those contacts, at convenient hours.
Intense Incentives!
What’s in it for your partners? Keep it well defined and rewarding too! When given high-value incentives, your partners will perform at their best. Despite the fact that the majority of channel sales partners currently have incentive and reward programmes, it’s surprising how frequently they can be disorganised and hence useless.
Indicate proper goals with well-defined metrics and track them with a performance tracker. You can even keep it competitive and reward the best performers, to incentivize partners to give it their best.
Looking for a platform to organize your sales performance, and keep track of goals and metrics? Try out LeadSquared’s Sales Performance Suite: Ace!
But what metrics do we track in channel sales? Let’s find out.
Channel Sales Metrics
Right now, you might be wondering what kinds of sales metrics exist and which ones you should monitor. Let’s focus on them in this section.
1. Sales Key Performance Indicators (KPIs)
For evaluating the performance of the entire company, these sales metrics are crucial:
- Total revenue: The total income generated from all activities, be it sales or operational.
- Market penetration: A ratio of number of your customers to number of potential customers in the market.
- Revenue by product or service: Income generated per product or per service.
- Percentage of revenue from new business: The amount of income that new customers generate for you.
- Percentage of revenue from existing customers: The amount of income generated from existing customers, mostly through cross-selling and upselling.
- Year-over-year growth: Revenue generated from year-to-year.
- Average customer lifetime value (CLV): The amount of revenue that one customer typically generates for the business.
- Net Promoter Score: Reflects whether a customer would recommend your business to another person.
(Note: NPS is calculated by asking customers to rate their overall experience on a scale of 0-10, where 0 is the lowest and 10 is the highest. The responses are then divided into three categories: Promoters (9-10), Passives (7-8), and Detractors (0-6). The NPS score is calculated by subtracting the percentage of Detractors from the percentage of Promoters.)
- Number of deals lost to competition: Shows how many customers are being acquired by the competition.
[To know more about sales KPI, which one’s to choose, and how to calculate them, check out this article: 32 Sales KPIs Every Manager Should Measure]
2. Activity Sales Metrics
Activity Metrics discuss other important aspects of the sales process, including:
- Calls made
- Emails sent
- Visitors converted
- Meetings scheduled
- Webinars attended
- Social media interactions (likes, comments, shares)
- Inquiries made
- Website engagement, etc.
These metrics will help judge whether your sales channels are moving in the right direction or not. What about some metrics specific to channel sales?
3. Channel Sales Specific Metrics
1. Number of partners: Tracking the number of partners, especially the number of active partners, helps you gauge how many partners are involved in selling, and improving your numbers. You can also track the number of active salespeople within partner organizations if you’re engaging with big channels with their own sales force.
2. Onboarding completion rate: This is a good way to track how many of your new partners are successfully completing the onboarding procedure, following all the necessary trainings, and passing the relevant tests.
3. Pipeline activity metrics: Here you test your pipeline health to make note of how your partners are working, and what they’re bringing to the table for your business. Track metrics such as:
- Active pipeline per partner
- Total sales per channel
- Leads generated by each partner
- Conversions per partner
4. Enablement engagement metrics: These metrics track how actively your partners work with you and how dedicated they are to your business. Highlighted metrics include:
- Logins to channel portal
- Collaterals accessed
- Partner communication analysis
- Trainings and certifications completed
5. Total revenue per partner: Track revenue obtained by partners, both directly and indirectly. Partner-sourced revenue and partner-influenced revenue are both metrics that show how your partners are driving traffic and obtaining sales.
6. Gross profit per tier: Check the profits that come in from each tier of your channel partners. See how the top 10% are selling, and then the next 10%, and so on.
7. Percent increase in channel revenue and productivity: Year after year, measure how these metrics are changing. Measure your sales productivity by calculating how your revenue numbers increase, and how your cost-profit ratio evolves over the years.
8. Channel attrition rate: Pay attention to the channel partners who end their partnership with you. Figure out what makes them leave, and what you can do to keep them partnered.
9. End user satisfaction: Check whether your partners are able to do a good job selling, by gauging how satisfied your end users are. If your customers are happy with the service offered by the partners, then you are on the right track.
10. Partner satisfaction: Also check whether your partners are satisfied with the partnership. Ensure their needs are met, and that their cuts are to their satisfaction. Keeping partners content is the best way to sustain a fruitful channel sales partnership.
Is Channel Sales the Way to Go?
As we’ve established, channel sales has 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.
Track your sales and keep a firm grip over the leads you generate with a multi-channel sales approach. Using a CRM tool such as LeadSquared allows for a 360-degree view of your sales pipeline and maintains a consolidated database of leads entering from all sources.
Want to run high-volume sales with crystal-clear transparency? Get in touch with our team right now!
