As you may be familiar with the term “direct sales”, especially since the name itself is very straight forward, but what is channel sales and how your business can benefit from it?
I will break it down for you!
What is Channel Sales?
Essentially, it is a method of distribution, which is typically done by segmenting sales operations through a third-party. A business can be sold through multiple “channels”, which is why it’s called channel sales.
To help better understand the concept, I like to think of a product or service that I frequently use, such as an Apple laptop. While Apple sells their products within their own physical store and online, their products are also sold in Walmart, Best Buy, and many other affiliated stores.
Why? Well, it expands the reach of their products. There may not always be an Apple store conveniently located near me, but I’m sure there are several Walmarts and Best Buys locations that I can think of.
Third party partners can include:
- Affiliate partners
- Value-added providers
- Other types of channel partners that can provide a wide reach for the business
Just a few of the many benefits of utilizing a channel sales strategy:
- Provides leverage for your business
- Expands the reach of your products and services
- It’s a way to outsource instead of having your own extensive sales operations, while still retaining a great portion of the sales profits
- Low sales, marketing, and distribution costs
- Allows your business to grow without having to expand your entire business operation
- Many third-party partners already have their own set of trusted consumers
- It’s easier to expand into new markets and establish a presence with local partners without high initial investments
Who is Channel Sales For?
Channel sales is great for any business that wants to expand the reach of their products and services. Businesses will generally implement this type of sales strategy to sell a product or service through in-house sales teams, retailers, affiliates, and partners.By utilizing all these different channels, there are more opportunities for sales to grow! Click To TweetHowever, before you begin, you will need to ask yourself a few questions to see if it will work for your business:
- Size of the business: Using channels works well for smaller businesses because they don’t need to invest in hiring and training a sales team. However, it is still a great option for larger businesses, but there will be more funding available for hiring a sales team. And depending on the size, you may need a channel sales manager for the process.
- Location and reach: If you have multiple office locations spread out, or would like to, then the channel sales strategy is a great option. You will be able to obtain a wide reach without having to allocate a significant amount of money and resources.
- Defined sales process: I always recommend to have a defined sales process before diving straight into channel sales. This is because you will need your partners to be on the same page to implement the same process.
How To Implement Channel Sales Strategy
When implementing a channel sales strategy, you need to know where you potentially want to market your products and services and who you want to be a part of the process. That means that you will need to determine a set of channel sales partners.
There are a few things to take note of when selecting channel sales partners. You want to consider their:
- Sales and marketing process
- Brand values
- Market and demographic
Ideally, you want to work with partners with great expertise in your correspondent industry, share similar values, and have a demographic that directly connects with your product and service. They will be representing as one of the many faces of your brand, so it’s important to be careful with your selection.
Structuring the Channel Sales Strategy
The channel sales partner you select all comes back to the channel sales strategy. In fact, the entire process revolves around the strategy. It’s like having a marketing or sales plan! It defines the business process to ensure that your business goals are achieved.
So, what does your channel sales strategy need? It will need to outline:
- Objectives: You will want to set objectives that align with your business functions and support overall marketing, sales, and business goals. With these objectives, you want to have defined expectations for your partners to ensure that they understand what is expected.
- A clear process: This process will include onboarding, guided sales process, and ongoing support and management with the partners. Having a clear channel sales process will promote productivity within all the channels.
- Measurement: What will define success for your business? How will you measure it? You will need to monitor and analyze important metrics to ensure that your partners are productive and profitable. This will also help you understand what is or isn’t working with your partners.
Measuring Your Program
How do you know if the channel sales program is working for your business? Here are some of the metrics your business should be measuring:
- Total number of partners
- Average value of partner deal
- Average sales cycle length
- Percentage of partners actively involved in events, training, and programs
- Retention rates for partner sales versus direct
- Cross-sell and upsell rates for partner sales versus direct
By knowing these numbers, you can determine the effectiveness of the program and each partner. They can help you look for new opportunities or make tweaks in the program.
To wrap everything up and understand what the channel sales strategy is:
- It is a method of distribution, which is typically done by segmenting sales operations through a third party
- It’s great for smaller businesses that want to expand their reach
- You will need to select the right partners for your business
- Having a clear and defined channel sales strategy is essential
- Ongoing analysis of metrics will promote productivity and profitability
Now you’re ready to grow your distribution and dive into channel sales!
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