The channel sales vs direct sales debate is something that every SaaS business owner is likely to find herself grappling with at various points during her company’s lifetime. Unfortunately, there’s no hard-and-fast answer to the question of channel sales vs direct sales, because what’s right for your operation depends largely on what you’re selling, who your customers are, and how established your brand is.
Of course, it doesn’t have to be just one or the other, and most often the trick lies in finding the right balance of both direct and channel sales to reach the widest audience of customers. Keep in mind that what works best for your company at one stage, however, may not be the best idea at a different stage. Your sales strategy is likely to change and evolve as your business grows and market conditions change.
Channel sales vs direct sales: The pros and cons
This article from SalesHacker does a great job of breaking down the pros and cons of channel sales vs direct sales. To help you work out which sales channel – or combination – is the most appropriate for your business right now, we’re going to give you a round-up of the main points outlined by SalesHacker, in a nutshell.
· You’re in control. One of the great attractions of the direct sales route is that you’re in control of the entire sales process, from start to finish.
· No dependence on external parties. Because you don’t rely on any partners or resellers in a direct sales model, you don’t risk losing out due to mistakes made by external parties.
· Customer feedback is easy to gather. Selling directly to your customers without a middleman means that you’ll have direct access to first-hand feedback about your product, services, support, customer experience, and so on. This makes it easier to implement relevant changes quickly.
· You only have one set of ‘customers’. Attracting and retaining partners and resellers requires almost as much work as attracting and retaining end customers. With a direct sales strategy, you don’t have to worry about keeping partners happy; you only need to focus on your customers.
· No shared revenue. Selling directly to the end customer eliminates the need for partner commissions, rebates, or incentives.
· Direct sales are expensive. Managing an in-house sales team comes with high overheads and risks. Think payroll, bonuses, and all the usual expenses associated with keeping a team of full-time employees on your books.
· It’s difficult to break into new markets. Following on from the previous point, breaking into new markets with an in-house sales team comes with considerable expansion costs. In addition, you’re up for a steep learning curve when attempting to reach a new market or area without working with established local partners.
· Easy scaling. One of the biggest attractions of a channel sales strategy is that it allows you to effectively scale your business without taking on the risks and overheads associated with growing your own in-house team. According to this Concur article, 77% of companies who’ve taken part in co-selling partnerships have seen a direct or indirect increase in profits. Besides, a single partner manager can handle multiple partnerships with vendors and channel resellers, bringing in a huge amount of sales.
· Shortcut to new markets. Another excellent benefit of partnering with a network of channel partners is that you’re able to break into new markets with less investment and effort on your part. As stated by Partner Path, 68%of consumers can make buying decisions after seeing a co-branded campaign, meaning that partners who already have a trusted presence in local markets are able to skillfully co-market and co-sell your products to their customers.
· Lower CAC. Customers acquired through channel partners often have a much lower acquisition cost, because the marketing and sales costs and effort are shared between you and your partner.
· Revenue is shared. Depending on your partnership model, you’ll need to share sales revenue with your partners and resellers, usually in the form of commission.· Revenue can be less predictable. Not all of your partners will share their full pipeline with you, which can make it more difficult to predict revenue. However, this situation can be improved by building a solid loyalty program and offering partners the most effective incentives.