What is channel sales?
Channel sales is a sales strategy where sales teams use an intermediary to approach and address the consumers.
According to Gartner, channel sales (also known as partner sales) is “the indirect sales channel that a business-to-business (B2B) sales organization uses to go to market.”
When B2B sales teams outsource, it’s indirect or channel sales.
Channel sales vs. direct sales: What’s the difference?
Direct sales is when the product goes from the manufacturer to the consumers. The sales team handles and owns the entire sales process end-to-end, and there aren’t any intermediaries involved.
Direct sales is mostly done with the help of door-to-door sales reps, promotional events, and multi-level marketing.
Direct sales: Pros and cons
Direct sales help you build deeper relationships with clients, cut costs, offer better personalization, and earn higher profit margins.
However, it also depends completely on the network of your sales rep and their ability to nurture these relationships to convert them into loyal customers.
Meanwhile, channel sales is an indirect approach where manufacturers leverage third parties with prior knowledge of the market and target audience. The third party – an affiliate firm, reseller, distributor, or wholesaler – earns a commission on every sale.
Channel sales: Pros and cons
Since channel sales partners are trusted third parties, they have a highly qualified network already established and familiar with them.
Channel partners are also experts in selling to your target audience. Their wider audience reach and skills help you improve efficiency and meet your sales quotas on time. This approach also enables you to scale your sales efforts substantially.
However, the downside is that you only partially control your sales process. You also don't get to interact directly with the customers, so you can't get insightful feedback on your product. Moreover, conveying frequent yet significant product changes to intermediaries is a challenge.
Who is a channel sales partner?
Gartner defines channel partners as “companies — such as a reseller, service provider, vendor, retailer or agent — that partner with other organizations to market or sell their services, products or technologies.”
Channel partners are a great way to scale your B2B sales team without investing too much time or resources in hiring and training reps, as channel partners are sales experts with a sizable network.
Types of channel sales partners
There are nine types of channel partners:
- Resellers: Resellers buy the product from the manufacturer and sell it to the customer for a profit.
- Affiliate partners: Affiliate partners promote a business through ads, blogs, e-commerce websites (like Amazon), and other digital media. Their earnings can include a portion of the profit from sales, a commission, or a referral fee.
- Distributors: Distributors provide channels, such as websites, businesses, or other sales agents, to businesses for selling their products. CVS is an example
- Wholesalers: Wholesalers are sales reps who sell your product to restaurants, stores, and other retailers.
- Value Added Reseller (VAR): A value added reseller buys a product from the manufacturer and adds a feature before reselling it. For example, a VAR would sell a laptop with Windows and MS Office installed. This approach helps them earn higher profit margins.
- Independent retailers: Independent retailers are independent business owners with no ties to the parent company. They buy products from businesses (manufacturers or wholesalers) and sell them to the end user.
- Dealers: Dealers are similar to retailers. However, unlike retailers, who can be generic, dealers are more specific. Car dealerships are an example.
- Agents: Agents act on behalf of the parent company and handle negotiations and sales in exchange for a fee. Real estate brokers are an example.
- Consultants: Consultants are advisors with deep knowledge of the industry, market trends, and target audience. They offer insights on differentiating a company’s sales technique, adopting the right sales channels, and more. McKinsey and BCG are examples of consultants.
A checklist to pick the right channel partner
Here’s how you can decide which channel partner to go with:
- The right partner would complement your product
- Their target industry, geography, audience and sales process are similar to yours
- Their goals and values resonate with yours
- They have the necessary technical expertise to hit the ground running
How to decide if the channel sales model is for you?
Here are some questions you should be asking before deciding to go with the channel sales model for B2B sales:
- Is your product mature enough to be sold without receiving continuous feedback from each customer?
- Are you ready for your business to grow and scale rapidly, possibly across geographies?
- Is your sales process mature and competent enough to be adopted by a third party? Also, do you have the necessary resources, such as training materials, product demos, trainers, and so on?
- Are you willing to put the brand's reputation in the hands of your potential partners?
- Do you have the budget available for channel partners? And are you willing to take a cut on your profit margins?
How to develop a B2B channel sales strategy
Here’s a step-by-step guide to developing a solid B2B channel sales strategy:
- Establish a comprehensive, repeatable sales process
- Develop a complete understanding of your audience, product, and market
- Identify the right channel sales partner for your business
- Decide if an omnichannel sales strategy is a better fit for your business and sales process
- Equip the channel partners with the right resources and offer compelling incentives to boost their productivity
- Assign a sales manager or a sales leader to oversee the entire channel sales approach and manage the channel partners
What’s next?
The channel sales strategy is an excellent approach to navigating uncertain markets with minimal risk. The channel partners are familiar with the market, audience, industry landscape, and sales techniques, so you have more hands on deck without investing heavily.
However, the channel partners still require adequate support and training in the form of data and analytics. That’s where Clari can help.
Clari’s revenue platform can help you bring all sales data regarding the past, present and future in one place. Clari makes it easier for you to meet your sales goals and continuously empowers your sales organization.
Interested in learning more?
