Building a sales team in-house can be an overwhelming process. Not only do you have to find and hire the right talent, but there are several things you have to think about as far as your sales strategy goes. What method are you going to use to attract new customers and close deals?
Why Understanding Direct Sales vs. Channel Sales Is Important
Broadly speaking, the two different types of sales methods are direct sales and channel sales. The strategy you choose helps you determine the best way to sell your product or service to potential customers. Finding the right mix between the two strategies will help you effectively reach your target audience and maximize profits.
This post will help you understand the difference between direct sales and channel sales and determine which strategy is best for your small to medium-sized business.
What Are Direct Sales?
“The shortest distance between two points is a straight line.” This is the type of thinking that defines a direct sales strategy. Direct sales are when a company directly sells its product or service to consumers, either via a company website or in physical stores (or both).
Pros and Cons of Direct Sales
A direct sales strategy requires building and maintaining a sales team. Many businesses find that this is the best way to sell their product or service; however, there are things to consider if you decide to go this route.
Full control of the sales process—With direct sales, you get full control of the sales process. You can manage your sales pipeline without the interference of a third party. According to the Microsoft 2017 State of Global Customer Service survey, 96% of customers say customer service is important in their choice of loyalty to a brand. If you control the sales process, you also control how you communicate with customers.
Keep all the revenues—When you sell directly to consumers, you keep all of the revenues. Working with a third party means having to split the profits.
Make changes more easily—Handling sales in-house makes it much easier to communicate product updates and changes in the process to employees.
Cost and time—The biggest downside to direct sales is money and time. Developing and managing a sales team is a huge expense. Not only do you have to worry about payroll, bonuses, and the cost of tools, but you have to spend a lot of time training your sales reps.
Difficult to scale—As if hiring your own sales team wasn’t hard enough, if you make a small change to your revenue targets and want to scale your sales efforts, you now have to hire more sales reps and start the process over.
Hard to enter new markets—Entering new markets with a direct sales team means more sales reps and potentially a new office. The more your company grows, the more a channel sales strategy may make sense. A third party vendor will know how to use outbound tactics to penetrate into new markets, whereas your company may not.
What Are Channel Sales (or Indirect Sales)?
Channel sales, unlike direct sales, involve a middleman who helps your company distribute a product or service. Channel sales can include any type of third-party vendor who helps you, in some way, sell your product or service. Essentially, channel sales is B2B sales outsourcing.
Pros and Cons of Channel Sales
Outsourcing is a cost-effective way to enter a new market or cover the ones you’re already targeting. Outsourcing your sales and marketing efforts to a third-party vendor allows you to leverage cutting-edge tools and a team of experts. An outsourced sales team provides value by getting your product or service in front of as many buyers as possible. Plus, it gives you more time to focus on what’s important: your business and what product(s) or service(s) you offer. However, just like direct sales, there are pros and cons to consider.
Low sales and marketing costs—When you consider the cost of a sales team and the tools required for your sales process, it’s actually much more cost-effective to outsource.
Scale more easily as needs change—If you want to scale up and enter new markets or even scale down as needs change, this is an easy change for your third party partner to make.
Focus on important business functions—A channel sales strategy allows you to focus your attention on what’s important: the quality of your product or service, product development, operations, employee training programs, and so much more that you simply would not have the time for if you sold directly without any outside help.
Less control over the sales process—Working with a third party partner means there is another person between you and your potential clients. Depending on your partner, you may have little involvement in the sales process other than taking appointments with leads who are ready to buy and closing the deal.
Unpredictable revenues—It’s hard to predict revenues when you have no control over the sales process. If not being able to predict revenues is a problem for you, direct sales may be a better option.
Split revenues—Depending on the partner, you will sometimes need to split a percentage of your sales revenues with them as a part of your program. Even if this isn’t the case, you’re still outsourcing, which means you have to pay someone to generate leads for you rather than you doing it yourself.
While there are benefits to direct sales, incorporating channel sales into your strategy will allow you to truly take advantage of all business opportunities. It’s hard to perfect your lead generation strategy on your own and keep your sales pipeline full. Why not allow our team of experts at Abstrakt Marketing Group to handle outbound lead generation for you?
Our team keeps you informed at all times so you feel in control. We pride ourselves on excellent communication; plus, you’ll be able to monitor activity using our online portal. Whether we provide outbound or inbound lead generation services to your business, you’ll always have full visibility into your program. See dials per day made from cold calling, or edit blog posts written by our content team. Whatever services we’re using to help you grow your business, you’ll never be in the dark.
Interested in how our budget-friendly outbound lead generation strategies and marketing services could grow your business? To learn more, contact our team today.