One of the most common conversations I have with clients is about deciding how they should go to market with their product offering. The first step is always to have a clear product strategy and messaging. But once you feel confident in your plan, choosing the right sales channel strategy for your immersive product, whether hardware or software, is crucial to the success of your product in the marketplace. There are several types of sales channels available, each with its own pros and cons. Let's take a look at the most common types and their advantages and disadvantages specifically for B2B and enterprise focused tech products.
1. Direct Sales
Direct sales involve selling products directly to businesses through your own sales team. This type of sales channel is often used for high-end technical products, such as enterprise software or high-tech hardware, as businesses typically require detailed technical demonstrations and personalized support. The advantage of direct sales is that it allows for a personal relationship to be built with the customer, which can lead to more trust and a higher likelihood of repeat business. Direct sales also allow for hands-on sales demos and the opportunity to answer questions and address concerns on the spot.
Building a great direct sales can be time-consuming and expensive. Each sales person can only be successfully focused on only a handful of customers at a time which can result in a very slow sales cycle. Scaling can also take more time as you will be limited to the team you have on hand which is especially challenging if you are targeting a large, global market. Large companies may also be hesitant to onboard a smaller, untried vendor, which is where a channel sales or system integrator partner can be helpful.
Here at One/Twenty1, we are focused on emerging technologies, which come with additional challenges when training and building your own sales team. It is especially important with these sorts of products to make sure you have sales people with existing relationships as well as hands-on expertise.
2. Online / E-Commerce
Online sales involve selling products through a B2B e-commerce platform or online marketplace. This type of sales channel is often used for software products (i.e. SaaS), as they can be easily downloaded and installed, and for hardware products that are less complex and don't require a demonstration. Online sales allow for a wider reach, as businesses can purchase products from anywhere in the world (be sure to be aware of local regulatory requirements). It is especially important when selling online to reduce friction and be responsive. The more quickly a potential customer can execute a transaction (without having to endure a "call for a quote" meeting with a sales person), the better.
On the challenge side, the lack of personal interaction can make it more difficult to build a relationship with the customer and address any questions or concerns they may have so having a robust and responsive customer support function is vital. We've all tried to get customer service from a digital only support team and the frustration is real!
3. Channel Partners
Channel sales involve selling products through partners, such as resellers or value-added resellers (VARs), who then sell the products to businesses. This type of sales channel is often used for technical products, as partners can provide technical support and training to customers. Channel sales also allow for a wider reach, as partners often have a large network of businesses they serve. Many of these businesses have long and complex vendor onboarding processes which resellers have established. The value for a business is that they can deal with a smaller set of vendors who then can source products and services they need from across the marketplace without having to negotiate individual contracts, one vendor at a time.
Keep in mind that reseller partners also need to get paid, leaving less profit for your company. Often this cost can be easily justified when compared to the cost of maintaining a full time sales team or the effort required to reach potential customers. They also may not want to have you competing with them so be sure to be aware of potential "channel conflict." And while you might have less control over how the product is marketed and sold by the partner, doing a good job of defining clear product messaging and supporting materials will go a long way to ensuring your product is correctly represented.
4. System Integrators / Value-added Resellers
System integrator (SI) sales involve selling products through SIs, who provide customized solutions to businesses by integrating multiple products and services. This type of sales channel is often used for complex technical products, as system integrators can provide a comprehensive solution and technical support to businesses.
As partners, SI sales can sometimes be time-consuming and expensive, as SIs may require a significant amount of customization and support. In addition, system integrators may take a significant portion of the sale price, leaving less profit margin on your product. So it is imperative to choose the right SI partner, one that has a proven track record in your industry, has access to the customers and markets best suited for your products and knows how to scale. The right partnership can be a huge asset not only to you but also to your future customers and their confidence in your ability to deliver what they need.
In this video, a16z general partner Ben Horowitz shares his way of thinking through a simple formula that can help you decide your sales sales strategy as a function of your product (what it is) and your target market (your customers).
You can read Ben's full post online, including a detailed explanation of the formula, on a16z's website.
At the end of the day, the choice of sales channel for your company will depend on the type of product, the target market, and the resources available to the company. Direct sales may be the best option for high-end technical products, while online sales may be the best option for software products. Channel sales may be the best option for technical products that require technical support and training or whose main customers are larger, Fortune 500 companies, while system integrator sales may be the best option for complex technical products that require a comprehensive solution. It is important to consider the pros and cons of each type of sales channel and choose the one that best fits the needs of your business and product.
Whichever sales strategy suits you and your business best, having a very clear product and go-to-market plan is key. You'll need to be prepared to let your "baby bird leave the nest" so invest up front in order to plan for long term success. Not sure which strategy will work best for your product? Get in touch and let's come up with a plan that meets your business needs.