By Mark Juliano
This article addresses one of the fundamental choices for any company — Which sales channel should a company deploy?
The first, and most fundamental thing a company needs to decide is WHO their customers are. This may seem obvious, but it’s not as easy as it seems… When I was in the telecommunications industry, marketing high-end, high-priced telecomm equipment, it was indeed obvious — the IT (Information Technology) managers of Fortune 500 (and worldwide companies), governments, and university/research institutions. For these markets, a DIRECT sales force was most appropriate.
At the other end of the spectrum was when I was CEO and co-Founder of Vinomis Laboratories marketing medical (nutritional) supplement products. Our customers were consumers, so it wasn’t possible to use a direct sales force — though we did have to decide whether or not sell on the Internet or through drug and nutrition stores (i.e. GNC). Selling through stores meant we would have to give the stores a 40-60% discount off list price, and we would not be able to “touch” our customers directly. Of course, the stores would provide a large widespread distribution channel. Given our Resveratrol supplement was a new category, we chose NOT to sell through stores, and instead used our website, coupled with online advertising, social media, and some radio advertising.
Below are the DIFFERENCES among the primary sales distribution channels:
DIRECT Sales (meaning company sales representatives)
- Cost — High due to hiring, salaries, benefits and travel expenses
- Profits — High (company keeps all the profits)
- Growth — Slow (it takes time to build a direct sales force)
- Control — High (company has control of its sales people, messages, etc.)
- Customer Contact — High (you see, talk to, meet with you customers)
IN-DIRECT Sales (meaning 3rd party sales reps, affiliates, etc.)
- Cost — Medium (less than direct, but still require training and some expenses)
- Profits — Medium (must pay reps some commissions, etc.)
- Growth — Medium (easier to get larger number of reps via rep companies, and recruiting)
- Control — Medium (yes, they sell your products, but may also sell others and don’t work for you)
- Customer Contact — Low (reps have the customer direct contact)
One of the companies I consult with uses Affiliates to sell their clothing in women’s homes. These fashion shows and “parties” are similar in concept to Tupperware, Mary Kay, etc. type selling. The key here is to train these affiliates to properly represent the company, and in our case we send company representatives to the home shows.
INTERNET Website
- Cost — Low (but higher than you think to build and maintain website)
- Profits — High (company keeps all the profits)
- Growth — Potentially HIGH — but requires a great deal of complementary advertising, social networking, etc.
- Control — High (company controls products, website, prices, etc.)
- Customer Contact — Low to Medium (you build the customer experience, but don’t directly “touch” your customers). Augmenting with customer service (meaning humans) can increase the contact
Contrary to popular belief, selling on the Internet is very difficult. Sure, it may be relatively simple to set up a website, use Amazon (and others) for e-commerce, buy online adds, etc. BUT however great your product or service, customers still need to FIND your website among the millions and millions of websites, online ads, and Internet information.
STORES
- Cost — Low (though company may have to carry the inventory with some stores)
- Profits — Low (stores get 30-60% discounts)
- Growth — Potentially High (if you can sell through a large store chain)
- Control — Low (very difficult to control what stores sell, how they train their people, etc.)
- Customer Contact — Very Low (you rarely see or speak to your customers, though should have a customer service center)
MARKETING
No matter which sales channel the company chooses, you need complementary marketing. Sales is NOT marketing. And marketing is not sales. Marketing includes: customer research, advertising, public relations, trade shows and conferences, writing articles, website information, brochures and literature, etc. etc. etc.
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