Choosing and managing your sales channels
Sales channels, or distribution channels, are simply the method by which your business sells its product or service to its customers. To get the most effective sales mix, sales channel management is an important area to get right. To have an effective sales process you need to consider who your customers are and how they prefer to buy. Customers will often show a preference to buy certain goods and services in a certain way, for example they may prefer to buy stationery supplies on line, and book travel arrangements via telephone, but prefer to see a specialist in person when they’re buying more complex or high value goods such as IT equipment.
Sales analysis and performance monitoring
Whichever channels you adopt, make sure you regularly review how each channel is performing to ensure it is cost-effective and productive. Sales analysis will show you the sales revenue each of them has achieved, and you need to balance this against the cost of supporting them. Support costs might include training, advertising, provision of special sales literature, as well as how much management time are they taking up in dispute resolution, payment queries and so on. Make sure any contracts you have contain a review clause and a termination clause so that you are free to take necessary action to maintain balance and control over your marketing channels and how, where and when your products are sold.
Direct sales or indirect sales
One of the most fundamental decisions you must make is whether to use a ‘direct’ or an ‘indirect’ sales model. ‘Direct selling’ or a ‘direct sales force’ is where you have direct management and control over who is doing the selling, how and when. This is because you are using your own resources and staff. ‘Indirect selling’ or an ‘indirect sales force’ is where you effectively out-source the sales activity to another organisation that, under contract, will sell your product or service using its own staff and resources. This is known as a channel partner.
For more detail see our articles on Setting up a direct sales force and Setting up an indirect sales force.
Avoiding sales channel conflict: helping your sales channels work together
The decision of which sales channel to use is often based on a combination of cost-effectiveness, performance and appropriateness to the product and the target market. It’s not unusual to choose a combination of channels, sometimes temporarily to test which are the most effective, but often permanently. Using multiple sales channels and channel partners can bring many successes but it also needs careful managing if you’re going to get the best results with the minimum amount of conflict.
Indirect sales channels give you little real control over the sales activity and distance you from the customer. This means communication becomes a priority. You need to make sure:
- the channel partners are appropriately trained in the product and your brand
- you keep in regular contact
- they are fully briefed on any technical or product changes
- they are incentivised to sell what you want them to sell
Have an effective sales incentive scheme
This last point may seem obvious but it’s not always as straightforward as you’d think. Having multiple sales channels will almost inevitably lead to disputes over whose customer it is and who gets the commission on the sales. Having clearly defined boundaries helps, as does having compensation schemes that reward the sales you want each channel to make, and doesn’t reward (or makes a smaller reward) for sales that you would rather they didn’t make.
For example you may have a policy that key accounts are only sold to via your direct sales force. If this is the case you would not incentivise an agent to sell to accounts whose turnover with you is in excess of a certain amount. Alternatively you could provide them with a ‘hands off’ list of accounts they must not approach.
However, do make sure you have the check mechanisms in place before you implement this type of sales channel restriction. It’s no good telling one of your channels they must not sell to these accounts if you have no mechanism for stopping payment to them if they do– any sales person worth their salt will work that one out very quickly! At the end of the day the sales channels are there to sell for you and you do not want them distracted by arguing over ownership or payment. To minimise any sales channel conflict you should give very clear instructions and boundaries so each person in the sales process can go and sell, in the sound knowledge that they will get compensated for a job well done.
Choosing and managing your sales channels
Sales channels, or distribution channels, are simply the method by which your business sells its product or service to its customers. To get the most effective sales mix, sales channel management is an important area to get right. To have an effective sales process you need to consider who your customers are and how they prefer to buy. Customers will often show a preference to buy certain goods and services in a certain way, for example they may prefer to buy stationery supplies on line, and book travel arrangements via telephone, but prefer to see a specialist in person when they’re buying more complex or high value goods such as IT equipment.
Sales analysis and performance monitoring
Whichever channels you adopt, make sure you regularly review how each channel is performing to ensure it is cost-effective and productive. Sales analysis will show you the sales revenue each of them has achieved, and you need to balance this against the cost of supporting them. Support costs might include training, advertising, provision of special sales literature, as well as how much management time are they taking up in dispute resolution, payment queries and so on. Make sure any contracts you have contain a review clause and a termination clause so that you are free to take necessary action to maintain balance and control over your marketing channels and how, where and when your products are sold.
Direct sales or indirect sales
One of the most fundamental decisions you must make is whether to use a ‘direct’ or an ‘indirect’ sales model. ‘Direct selling’ or a ‘direct sales force’ is where you have direct management and control over who is doing the selling, how and when. This is because you are using your own resources and staff. ‘Indirect selling’ or an ‘indirect sales force’ is where you effectively out-source the sales activity to another organisation that, under contract, will sell your product or service using its own staff and resources. This is known as a channel partner.
For more detail see our articles on Setting up a direct sales force and Setting up an indirect sales force.
Avoiding sales channel conflict: helping your sales channels work together
The decision of which sales channel to use is often based on a combination of cost-effectiveness, performance and appropriateness to the product and the target market. It’s not unusual to choose a combination of channels, sometimes temporarily to test which are the most effective, but often permanently. Using multiple sales channels and channel partners can bring many successes but it also needs careful managing if you’re going to get the best results with the minimum amount of conflict.
Indirect sales channels give you little real control over the sales activity and distance you from the customer. This means communication becomes a priority. You need to make sure:
- the channel partners are appropriately trained in the product and your brand
- you keep in regular contact
- they are fully briefed on any technical or product changes
- they are incentivised to sell what you want them to sell
Have an effective sales incentive scheme
This last point may seem obvious but it’s not always as straightforward as you’d think. Having multiple sales channels will almost inevitably lead to disputes over whose customer it is and who gets the commission on the sales. Having clearly defined boundaries helps, as does having compensation schemes that reward the sales you want each channel to make, and doesn’t reward (or makes a smaller reward) for sales that you would rather they didn’t make.
For example you may have a policy that key accounts are only sold to via your direct sales force. If this is the case you would not incentivise an agent to sell to accounts whose turnover with you is in excess of a certain amount. Alternatively you could provide them with a ‘hands off’ list of accounts they must not approach.
However, do make sure you have the check mechanisms in place before you implement this type of sales channel restriction. It’s no good telling one of your channels they must not sell to these accounts if you have no mechanism for stopping payment to them if they do– any sales person worth their salt will work that one out very quickly! At the end of the day the sales channels are there to sell for you and you do not want them distracted by arguing over ownership or payment. To minimise any sales channel conflict you should give very clear instructions and boundaries so each person in the sales process can go and sell, in the sound knowledge that they will get compensated for a job well done.