Before the internet, there were two sales channels: indirect and direct. If you were a brick-and-mortar business, you sold your products directly in your store. If you were a wholesaler, you sold through resellers or distributors.
In today’s world, things are a bit more complex. And choosing sales channels to reach your targeted customers takes more effort. While the internet has certainly simplified many aspects of selling, it’s also created new demands for teams to learn and utilize disparate marketing channels.
It can be reasoned that the more channels you use, the more customers you reach. However, it should also be noted that additional channels add costs. To help illustrate your options—and help illuminate which types of channels you need in your growth strategy—let’s review the basic channels:
Direct sales teams engage directly with their clients, without the help of an outside party. As the saying goes, the shortest distance between two points is a straight line. So, with this logic, direct sales—and the concept of cutting out the middleman—should ideally be the shortest way of selling. It’s certainly one of the most popular channels. Direct sales is a $114 billion industry, and one out of every 20 Americans buys from direct sales agents.
Out of the gate, this channel sounds ideal. It eliminates the costs of sales commissions and encourages personalized contact and customer service. However, direct sales can be downright expensive and results in a requirement for increased leadership, staff, and overhead. Direct sales can also be limiting. Whereas outside reps can provide geos and verticals, inside sales reps have an infinite reach. Finally, if you are targeting customers who prefer to deal with large suppliers, selling directly may not be a realistic option.
Affiliates are individuals or companies that sell goods on behalf of your company, in exchange for commissions on sales. Affiliate programs enable organizations to quickly build a large army of sales reps. These reps appear as an extension of your team to your customers; reps have their own websites, opt-in lists, and visitors. Plus, unlike in-house teams, you don’t have to pay affiliates until they make a profit for you.
Affiliates enable businesses to extend their reach, and contribute to geo and vertical expansion, but tend to charge high commissions. While this channel is a low-cost, high-profit option for many, it’s littered with scams and shady business. In extreme cases, individuals will hijack affiliate links and commissions, leading to the unlawful use of logos and other brand assets. Plus, it can be tough to control programs. If competitors offer better options to affiliates, you either change your offers or wait. In many cases, working with affiliates becomes a high-priced bidding game with your competitors making it difficult to predict costs.
Resellers and Vendors
As far as licensed enterprise software is concerned, value-added resellers (VARs) and independent software vendors (ISVs) are the name of the game. In a nutshell, these vendors purchase a company’s products and alter or enhance them before reselling to customers. After signing the deal, VARs and ISVs craft and customize the software to the needs of their customers, invoice the customers, and support the customers.
Software-as-a-service (SaaS) companies are changing the way VARs and ISVs operate. Unlike licensed software, SaaS generally requires less integration and customization, thus demanding an alternative approach. SaaS eliminates the low-value work of the channel but still enables opportunities for this channel. “What we see is VARs becoming more strategic advisors rather than implementers,” says Hernan Marino, SVP of marketing for ecosystem, channels, and routes at SAP.
It’s common for teams to outsource IT, human resources, and advertising or marketing. However, as the evolving sales landscape moves away from traditional, in-house sales teams, more and more organizations are outsourcing elements, or the entirety, of their sales needs.
For many managers, outsourcing sales creates a feeling of fear. They are afraid they’ll lose control of their teams or that outsourced reps won’t understand their complex products. However, these fears are simply misconceptions. Whether you’re looking to save money or reduce overhead or are simply strapped for time, outsourced sales solutions provide your team with dedicated, leadership, front-line sales and service reps whose sole objective is hitting the goals you set for them. This option can be challenging for smaller organizations to absorb the cost and allow the time necessary to ramp a program to productivity where acceptable ROI is achieved. In addition, often times for this type of sales motion to be optimized companies need to be open to share strategies and sales data with these outsourced sales teams. At times this proves to be difficult for companies to share this type of sensitive data with an outsourced partner.
Solution providers are looking for profitable partnerships. However, discovering partners that can drive reliable revenue is easier said than done. In fact, 10 percent of vendors were cut by solution providers in the past few years. Conversely, 36 percent of solution providers cited poor service and support as reasons for terminating a vendor.
Outsourcing sales enables businesses to remove complexity from channel programs to increase profitability. From recruiting and onboarding to ongoing support, outsourced teams provide salesforces with peace of mind.
Building growth strategies with the optimal mix of tactics is much more complex than it used to be. However, like optimizing variable and fixed cost structures, getting your customer acquisition strategies right will prove to be the difference between winning and losing.