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May 11, 2013

Sales Channels

by Adam Famularo

There are many different sales channels that you can use to grow your business.  If used effectively your sales channels can become a unique sustainable competitive advantage for your company.

Microsoft is one of my favorite examples – what most people overlook with Microsoft is the strength of their channel partner network, this network has been developed in the early days of windows and has only grown in strength over the years.  When Microsoft is attacked by companies that range from Google to Apple, the piece that is often overlooked is the hundreds of thousands of partners that own businesses selling Microsoft’s products and rely on the margins to drive profit for their company.

When you think about sales channels you do need to consider all the various channels that can be used and what is a healthy mix for your business today and where would you like to be in five years from now.

Here are some important sales channels to consider:

Direct Sales – usually the most expensive sales channel but also the most effective to test new sales use cases in the market.  You need to focus on hiring the best people with knowledge of the industry or product, relationships with target customers and are geographic specific.

Tele-Sales – one of the more cost-effective ways of creating new leads for your products, the higher the price point the harder it is to close the sale in this model – usually used in combination of direct sales or channel partners for face to face selling.  The lower price point products do really well with this model along with an eCommerce fulfillment model.

eCommerce – one of my personal favorite sales channels and one that I believe should be built into all new software.  Having a eCommerce store front to procure software is a great start but ultimately having eCommerce capabilities built right into your software is ideal.  This creates a seamless transaction for customer to try and buy your software as well as continue to up sell as time goes on.  This sales channel should also be integrated with your direct, tele-sales and channel partners to drive automation across your whole sales process.

Channel Partners – these are partners that deliver complete solution for their customers.  They will combine your software with another vendors hardware and their services to deliver a complete solution for their customers.  They have a strong hold on the SMB marketplace, serving as their CIO and usually sell as a specialist into large companies.

Service Providers – these are the new IT outsourcers in the cloud era.  They would leverage your software to add-on a new business service for their customers.  These customers look to purchase a solution and then pay on a consumption basis.

System Integrators – these partners are focus on providing professional services for large companies.  They usually are tied into an enterprises IT environment and become recommenders of your software to the CIO – they will then make money on the services needed to implement the software.

OEM Partners – done correctly this could be one of your most profitable sales channels.  OEM partners hard or soft bundle your software with their hardware or services to go to market with a complete solution.  To do this right you need to make sure that you consider the support structure for the end customer and ensure that right level of product training is provided to the OEM partner to handle support and service for your software.

Distributors – these partners assist in the management and training of your channel partners and service providers.  As you grow your business they are very helpful to manage a critical mass of partners as well as to enter new countries were you do not have a sales presence today.

Choosing the right mix of sales channels will depend on the type of product that you are trying to sell and how your customers like to purchase complimentary goods.  To get started think about what are the complimentary products that are purchased with your software and trace the steps a customer uses to make a purchase.

A personal example, when I was in our security division I was trying to figure out how to compete with Symantec and McAfee in the OEM sales channel.  At that point in time they had a lock on all the hardware manufacturers and it would have cost us millions of dollars to get on the boxes.  So I thought through what other complimentary goods do these consumers purchase that I could possible leverage – the answer came to me in the form of the internet.  Most consumers got viruses through their connection to the internet and their might be some value in ISPs offering security software to their customers.  After a visit to one of the largest ISPs in the US, we uncovered a great need for the ISPs to protect their consumers from viruses to reduce the cost of help desk calls as well as to make their service more attractive than the large telephone companies that were moving fast into their market.  That visit set us up to build out an entirely new sales channel that created a huge growth in revenue and a new competitive advantage against our competition.

Hopefully this information will guide you to think about how you best leverage sales channels to build a long sustainable profitable business.

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