What works best? Channel sales vs. direct sales

You already have your KPIs set and you know what your goals are. You want as many customers as possible who need your product right now, you need to make them interested and then get them to buy that product or service. The success of your B2B tech business, especially if you are currently considering expansion to new markets – different markets require a different approach – depends on choosing the right sales strategy. But what’s the best way for you to start selling and closing deals in a new market? You don’t want to hire more local sales representatives, but you need more sales. There are only a limited amount of selling hours in a day and your current team of sales reps are full on. What’s the solution? It’s one of the biggest challenges to scaling revenue, according to our partners at Hubspot.

What will work best for you? Channel sales or direct sales?

  1. Channel sales - when you partner up with a third-party vendor and avail of their expertise. Distribute your products and they will sell them for you.
  2. Direct sales - the shortest route between your product or service and the customer. 

Which is the right choice? Each organization is different with varying and changeable needs, so let’s look at the pros and cons of both types of sales to help you make the right choice between channel sales versus direct sales.

Understanding direct sales

The simplest definition of direct sales is that there is no middleman. The business that makes the product or provides the service – such as SaaS –sells it directly to the customer. The entire sales cycle is handled in-house with no outside interference. 

Pros and cons of direct sales 

The upside of direct sales

  • You’re always in full control of your pipeline and sales process with no other outside interference.
  • You don’t have to share the revenue with a channel partner or another retailer.

The downside of direct sales

  • The cost can be high to directly manage your own sales team, and it takes a lot of time to internally recruit those sales representatives that you could better use on getting straight to market.
  • You will likely be tied into contracts that leave no room for scaling up or down, so you’ll have to be pretty certain that your size team is both enough to cope with future sales, and that you haven’t overestimated it, losing you money better spent elsewhere.

What is channel sales?

It’s who you know as much as what you know. Channel sales form a really strong part of international sales. It takes strong relationships that are steadily built and much political juggling to get deals done right in the tech industry. Multi-stakeholder and multi-decision makers are involved in the deals that are done in SaaS, telecoms, cybersecurity, fintech and retail. Using the services of a reputable outsourced sales agency will often allow you to avail of introductions to their partners.

Examples of channel sales are:

  • Resellers - Someone who buys from you, adds their commission and sells it on.
  • Distributors - Intermediaries between the manufacturer and the end-user.
  • Wholesalers - Getting actual goods onto retail shelves.
  • Consultants - Facilitators who will negotiate on your behalf.
  • Affiliate partners - Affiliate marketing, as with Amazon.
  • Value-added resellers (VAR) - Will buy your tech product and add value to it before selling it on.

We have European channel sales partners of all kinds that help you reach your final customer faster.

Our CEO Rick advises that “It’s a pretty closed market. You need to know the right people and you need to know the politics. It’s always a group decision. You need to know the right people and the right buttons to push. We have people on our teams in the UK or in France or wherever that are experts in their field, be it retail, or distribution or security. We have marketing tech industry experts and they know all these people. Or the banking people in FinTech. It’s horses for courses. You need to build the right team around that. What we do is dig deep and work on the best sales strategy.  if channel sales are working well in your home market then look to replicate that in the European market. That needs to be done at a local level because there aren’t really any Pan-European distributors or retailers, but if there are then they are still making local decisions with local management. It’s high-touch work, being in their local offices or being on the phone talking with customers in their local languages.”

Pros and cons of channel sales 

Three benefits of channel sales

  • The channel partner you choose to work with already has a presence. A valuable presence that has already gained local respect, and knows the local market. They have an already set-up continuum of partners who can add value to your existing business. You can ride into town on their already built reputation and so become more accepted, and effective, faster.
  • It’s a low-stakes environment where you can still experiment with a new customer base, so it might open you up to a whole new client base that you hadn’t thought of marketing before. 
  • Partnering with new vendors can allow you to use their training and onboarding services, freeing up your time and budget. Your focus will be clear for closing more deals. 

Two holdups of channel sales

  • You might worry that you won’t have full control over the sales process and the pipeline.
  • You will have to pay the channel partner a commission or percentage of every sale thus cutting your overall profits.

Which option? Channel sales or direct sales?

So, which is best? Whatever works better for your organization and your vertical. 

Rick gave us the last word on channel sales versus direct sales: “Sometimes it’s better to do a direct sales strategy in your home country, and then the channel sales approach in Europe. [Especially] wherever there is a lot of local integration to be done. For example, in the US and a high tech security solution, the company can easily make direct sales, but the same product in Europe where you don’t have the local integration teams in 20 different languages, then maybe it is the best to have indirect sales and find the top 5, 10, or even 20 security integrators in that home market, sign them with good deals, make sure that your channel program looks good to them. It’s not just about giving 30% off the software, there’s a lot of thought and work that needs to go into that channel to make them want to work with you. There are thousands of security companies they can work with, you need to rise to be at the top to make them interested in working with you, and to stick with you.”

That’s what it’s all about, in the end. Rising to the top. Having the best product that’s the solution that buyers need, and want. Making loyal companies and partnerships that stick with you and recommend you, for both repeat and new business. And to be able to easily scale into new markets and do that all smoothly and continue to grow.

So, which will you choose, channel sales or direct sales? Perhaps both?

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