Direct? Channel? Blend? What sales strategy is right for your company?
Geometry and logic tell us that the shortest distance between two points is a straight line. But when it comes to getting your animal health products to the appropriate end user, is a direct sales strategy the most effective for your organization? Or would selling through one or more channels deliver more products to more customers more efficiently?
The answer is, “It depends.”
Finding the right mix between direct and channel sales depends on the products or services that your company offers. Each has its strengths and weaknesses, which is why many animal health and pet care companies use both.
What’s the difference between direct sales and channel sales?
Direct sales means selling directly to the end user of your products or services. That could be a veterinarian who administers a vaccine or dispenses a medication. Or your customer could be a pet owner who purchases a custom-blended dog food formula through your company’s website.
Selling direct to end users requires establishing, training, managing and paying one or more company employees who will be close to your prospective customers. That means if your company sells in several markets, you’ll need in-market sales teams or representatives — especially if your company isn’t tapping e-commerce for product sales.
In contrast, channel sales can include any type of third party who would buy products from your company and then sell those products to the end user. Distributors, value-added providers (aka veterinarians) and other types of channel partners (aka pet specialty mass merchandisers, independent pet stores, and farm-and-home stores) can get your products or services in front of many more prospective consumers. Tapping channel partners also offers a cost-effective means for entering new markets.
What are the pros and cons of direct sales?
The primary advantages of direct sales boil down to control, customer insights and feedback, and revenues. Control over day-to-day selling activities is appealing to most companies. Your company controls pricing and the selling process, including making changes to the process as needed.
Direct sales enable regular communication between the company and its customers, providing valuable and insightful information about end users’ wants and needs. It allows companies to identify and correct product issues earlier, potentially avoiding costly changes or even product-related crises. And because product sales are handled internally, it’s easier to communicate developments and updates to sales staff.
Finally, selling directly means your company doesn’t have to share revenues with a channel partner.
But these advantages come at a price. Recruiting, hiring, onboarding, developing and managing sales teams can be expensive. On top of payroll, bonuses and expenses, there’s the overhead associated with office space, equipment and sales materials. Unfortunately, these costs can be prohibitive for many small businesses.
What are the pros and cons of channel sales?
Channel sales — whether that’s working with one or more distributors or tapping mass merchandizers — can be a cost-effective way for getting your products into the hands of consumers, especially for small and start-up companies. Your channel partners typically are established with valuable industry and product category knowledge, and know how to most successfully price and market your product. And because channel sales partners take care of the hiring, managing and optimization of their own channel, there are low initial costs for sales, marketing, distribution and even market expansion.
The channel sales model has shortcomings too. These boil down to control, focus and revenues. When using a distributor or other channel, your company sacrifices control over the sales process and lead management pipeline because the sales reps aren’t company employees. But the trade-off is greater exposure to a larger pool of prospective customers. In addition, your products will be among many products that the distributor represents, and may not be the distributor’s top priority at any given time.
While channel sales may appear to be a turnkey solution, that’s really not the case if you expect success. The relationship needs to be managed with regular communications and transparency. That takes time, but it could still be less expensive that establishing a direct sales team.
Finally, revenue may be less predictable since your company doesn’t control the selling process. And a percentage of the revenues will need to be shared with your channel partners.
New(er) CRM systems can help address sales pipeline management
For companies that use channel sales to get products into customers’ shopping carts, visibility into the sales-lead pipeline ends where the channel or distributor involvement starts. However, you do need to know and understand what’s happening to the leads that your company provides. And your distributors need an easy way to communicate with your company that works seamlessly with their own business processes.
While customer relationship management (CRM) systems are known for managing leads and customer data for direct sales teams, they don’t provide the functionality needed to manage leads and facilitate communications across complex sales channels. Fortunately, new technology can help bridge this gap by easing communications and information flow for both parties. But that’s a topic for another day, another blog post.
What’s really the bottom line?
Whether your company uses direct or channel sales, there’s one activity that’s essential for sales success — solution selling.
According to Mike Biggins, in a post for the Veterinary Advantage blog, solution selling is a strategic approach to sales that focuses on developing long-term customer relationships — relationships that produce greater sales and profits for both customers and sales reps. In other words, you form partnerships.
Solution selling requires sales teams to think like your customers and to understand what end users really want. To help determine those wants, you (or your sales team) need to answer these three questions:
- What is the need?
- Does my company have a solution to offer?
- How does that solution satisfy the customer’s need?
Remember that your veterinary customers buy what they need to achieve the results they want for their practice and their patients. They don’t buy pharmaceuticals, biologicals, pesticides and pet foods just to have them sit in inventory until they reach their expiration date.
So what does the solution-selling process entail?
To answer the question about customer needs, start with a needs assessment so you can identify the problem customers want to solve. It also can result in identifying unmet needs or needs that your customers don’t yet know they have.
Next, review the resources you have available to help solve the customer’s problem. The solution may be products, services, another type of expertise or a combination. Whatever the solution might be, take the time to create a solution that’s right for your customer. Don’t just sell a product or service.
Then it’s time to deliver the solution. If the solution is a product or service, it must meet or exceed your customer’s expectations. If it’s other support or expertise, it should contribute to the customer’s profitability in some way.
People prefer to DEAL WITH PEOPLE
Whether your company uses direct sales, channel sales or a combination of the two, people are at the center of the transaction. As the saying goes, people buy from people. Your company can differentiate itself when sales teams demonstrate that they understand your customers’ businesses and have customers’ best interests at heart. So respect your customers’ time by focusing on what’s new, offering a solution that’s compelling and meets their needs, and being passionate about your work.
Ultimately, neither selling model is perfect. Your company may need to weigh the benefits and drawbacks of both — and even experiment — before arriving at the best fit for your products, services and customers.