Indirect sales are an effective way for companies to maximize their sales potential. This type of sales model eliminates the need for a traditional sales force, and instead focuses on developing relationships with customers through a partner network. By leveraging the partner network, organizations can increase their market reach and expand their customer base. With indirect sales, organizations are able to access a larger audience and generate higher revenues.
In this blog post, we will explore the advantages and disadvantages of indirect sales, the benefits that it can bring to organizations, and how to go about implementing an indirect sales strategy. We will discuss the key elements of a successful indirect sales model, such as selecting the right partners, setting up an effective sales process, and measuring results. We will also look at some best practices for driving strong sales performance through indirect channels.
By the end of this post, you should have a better understanding of the value that indirect sales can bring to your organization and the strategies you can use to maximize
Direct vs. Indirect Sales
Who uses indirect sales?
Indirect sales are used by businesses to either supplement their direct sales or to eliminate the need for sales personnel. The following businesses may use indirect sales to increase their product sales:
What are indirect sales?
Sales made by a company to a third party (such as an affiliate or sales partner) are known as indirect sales. Companies frequently combine their direct and indirect sales in order to maximize their profits. In order to cut costs, a business may occasionally choose to use indirect sales as opposed to hiring more salespeople. Resellers such as used goods shops, specialty shops, and major retail chains are examples of indirect sellers.
Strategies for indirect sales
There are different strategies companies use for indirect sales, including:
Using affiliates
Affiliates are independent businesses that market goods in exchange for a commission. Companies that act as intermediaries and handle the product transfer between two businesses to conduct third-party sales also receive commission. This strategy is more economical because affiliates only profit when they close a sale. To ensure successful affiliate selling, a business may need to give its affiliates their own marketing resources or advertising campaigns.
Using resellers
Resellers sell goods directly to consumers in real-world establishments like retail or wholesale This approach is typical for the software, hardware, furniture, and home product industries. For instance, a customer might decide to buy a game from a well-known local retailer rather than wait for the direct sales team to deliver their order. Resellers, unlike affiliates, are paid a fixed percentage of sales rather than on a commission basis.
Using system integrators
System integrators are business-to-business employees who collaborate with clients to offer tailored solutions to issues. Typically, system integrators work in the software or hardware industry. A system integrator, for instance, could assist in providing customers with computer-related advice in a computer store. In addition to giving advice, the consultant might also recommend buying the client certain products.
Using independent reps
A flexible, as-needed basis is used to hire independent sales representatives. Sales representatives earn money based on commissions from sales, similar to affiliates. However, because they only employ one person, they are also very economical. Independent sales representatives can modify their commission rates to meet a company’s requirements.
Why do companies use indirect sales?
Companies often use indirect sales to:
Advantages of indirect sales
There are many advantages to using indirect sales channels, including:
Disadvantages of indirect sales
There are some disadvantages to using indirect sales, including:
Reduced brand control
Due to the fact that your product is sold by a third party, you have less control over your marketing and brand perception. It might be challenging to develop customer brand loyalty when the selling process is handled by someone else. To combat this, you might think about providing your third-party sellers with guidelines about your brand, such as what they can and cannot say and the objectives you have for brand perception.
Reduced sales control
You might have less control over the sales process than if you handled the process since a third party sells your products. It may be more difficult to comprehend the results of a sale if you don’t understand the process, even though this may not hinder the sales process. Consider visiting your third party periodically to observe the sales process yourself or providing your third party with specific sales-related instructions to help maintain control of sales.
Sharing of revenue
When you use indirect sales, you’ll see a decrease in revenue because your third party frequently receives a portion of your sales. These expenses wouldn’t exist if your business handled the sales process in-house. However, some indirect sales channels provide different payment methods that might be more cost-effective for your requirements if you want to avoid revenue sharing.
Unpredictable revenue
It might be challenging to forecast your revenue if you’re using an indirect sales strategy and selling a product for the first time. Make as many calculations as you can related to your revenue estimates to avoid this. If you’re concerned about how much revenue one indirect sales channel is taking away from you, you might want to use another one to cut costs.
Tips for indirect sales
Consider some of the following advice if you intend to begin an indirect sales project with a third-party seller:
Gauge product marketability
Before starting indirect sales, consider the marketability of your product. Products that are straightforward and sell quickly might benefit more from indirect sales channels. Products that don’t require an explanation to understand them may be the most effective for indirect sales. Consider selling directly through your own business if you have a product that needs research or is complicated.
Consider the product cycle
Check to see if your product’s life cycle is ideal for indirect selling before considering it. A direct sales channel may be more successful for new products at the beginning of their life cycle with potential software bugs or beta hardware features. An indirect sales channel may be appropriate for products that are in the middle or end of their life cycle to maximize sales during these times.
How old and marketable your product is is determined by its life cycle, or product cycle. For instance, a new product with little sales is just starting out in its life cycle. A product is at the end of its life cycle when it is both outdated and selling very little.
Outline your sales process details
Because of your indirect sales channel, you might want to describe your sales process in more detail than usual. This implies that you must be able to succinctly and accurately describe things like your typical buyer personas, the sales process, some buying triggers, and pain points that your salesperson might encounter while attempting to sell your product.
Decide on your distribution process
You can use two different distribution methods with indirect sales channels. One-tier distribution entails giving the products to your sales partner directly so they can sell them. Two-tier distribution refers to the process by which a different party transfers your products to your sales channels. Although two-tier distribution can be less economical, it may result in greater overall sales because you have more sales partners. Choosing a distribution strategy is heavily influenced by your product and whether you think it will sell through a variety of channels.
FAQ
What is difference between direct and indirect sale?
- Break of personal connection between the seller and the buyer;
- Inability to monitor and track the goods independently;
- Reputation of the business is dependent on how the intermediary behaves
How do you calculate indirect sales?
One of the most common sales techniques, direct sales occurs when a company sells its product directly to the customer; what separates direct sales from indirect sales? Indirect sales use intermediaries like affiliates and resellers to connect a company with potential customers.
What are the reasons for indirect sales?
- Number of meetings booked. …
- Number of deals closed. …
- Number of identified and realized growth opportunities. …
- Average sales cycle length. …
- Time spent selling. …
- Training sessions completed.
What are the examples of indirect distribution?
- You are tapping into an existing customer base. Building trust with your end clients requires a lot of time and effort.
- Indirect sales are cost-efficient. …
- Indirect sales increase speed to market. …
- Established logistics allow you to streamline, scale and focus.
