We’ve talked before about channel sales not being great for new markets. That can vary a little bit by industry, but in general channel partners have a great reach but are best for high-volume, low-margin business. Complex solutions really isn’t something you want channel for.
Within this discussion is a broader theme of sales, though. A lot of people seem to get confused about the pros and cons of indirect sales, i.e. third-party, i.e. maybe channel. Let’s try to outline some of the pros and cons of this model, which companies usually do either in conjunction with in-house sales or in place of hiring in-house sales.
The pros of indirect sales channels
- Very little fixed cost
- As a result, not a lot of risk
- Can seem to be easily scaled
- Third-parties often have a large reach
The cons of indirect sales channels
- Hard to find the right resellers
- Not good for complex, longer sales cycles in general
- No direct market feedback from the reseller, often -- so how do you learn and improve?
- If you yourself can’t sell the product directly at least three-four times, how can you make a reseller do it?
The core questions of a channel sales strategy
If you are using channel or indirect sales, there are really two core questions you need to be asking --- >
- How do you help the partner make money?
- How does the partner help you make money?
If the answers to those questions are clear, and if the sales cycle is relatively short and not overly-complicated, then using indirect, channel, third-party makes a lot of sense for your business, especially in early stage sales development.
But if those answers are muddy or the solution is too complicated or the sales cycle regularly goes six months or longer, you should not be relying on direct sales that much.
Outsourcing is a bit of a different animal
Sometimes people will group “outsourced sales” with “third-party” or “indirect.” It’s third-party in that it’s not your core in-house sales team, but the outsourcing model is very different than the channel model, usually. Outsourcing is a good play if you want market expertise and scalability without the gamble of full-time hires. It’s an even better play if the outsourcing partner isn’t just a big Rolodex and understands stuff like lead generation, business development, relationship-building, etc. Don’t necessarily evaluate “outsourcing” in the same way you evaluate “channel.” They have differences.
Any other questions? Reach out.