Channel choices

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in June 2016 and is posted here by their kind permission

Which channel will achieve the best returns for your business?

You face many choices of how best to get your products and services sold. The most common channels include a field or counter direct sales force, various models of reseller from freelance agents to sub distributors with their own resellers. E-Commerce is becoming a significant channel and self-service in stores has been around for years. Inbound and outbound telesales offers very wide reach; exhibition and catalogue sales work in many sectors like spare parts and curios. Then there are many mixed models; telemarketing followed up by salespeople is one example. For some the best or only channel may be defined by the product. High end cars need a network of showrooms and salespeople so branches or resellers are required, but music is distributed primarily over the internet. For most entrepreneurs making the right choice is difficult and may come with some risk; many companies stay with traditional methods even if that is not the best model for them.

Generally there is a trade-off between cost and control so if you want tight control be prepared to pay for it. You should also consider factors like the lead and conversion rates; for example you do not want a very large number of unqualified leads being processed by an expensive sales force.

Sales force

Your own sales force has many advantages; you have complete control of the sales process, you determine what level of training and supervision will produce maximum results and you can intervene sales to assist the salesperson. Your company owns the relationship with the customer, and you can choose which niches to prospect for new business. The downsides are high expense and the risk of salespeople failing. You must have a lead generation system and may be unfamiliar with sales management, incentive design and sales motivation. Great salespeople are hard to find and expensive.

An indirect channel using dealers, sales agents or some other model is inexpensive, can be expanded and contracted easily and the risk of failure and marketing costs are shared with the channel. You have no labour implications, and you can enforce performance levels. Negatives include no control of the sales process, wild promises may be made to prospects without your knowledge, and the forecast may be wildly unrealistic. The relationship with the customer is now owned by the channel partner, and channel conflict becomes a problem, especially if you have your own sales force as well.

E-Commerce

Selling over the Internet is growing rapidly with books, travel and many other commodities being sold through self-service internet sites. The plusses are this is relatively low cost and low risk, the customer does most of the work and there is a lower need for premises and people. The downsides include the buyer making bad choices without guidance from a salesperson, no relationship with the customer, the rapid pace of change of search engine optimization and relatively low barriers to entry so competition is fierce.

Telesales can be outbound canvassing or inbound, supported by campaigns to generate enquiries. You can outsource the whole operation to a professional call centre and you can upscale or downscale very rapidly. The negatives include a high irritation factor and low conversion rate for outbound telesales and the cost of the telesales and lead generation campaigns for inbound telesales.

Which model is the right one for you? Which will move you towards your strategic goals? Be careful about selecting a channel simply because it is popular, out of frustration with the existing channel, or because you do not like selling. Do your homework and select what will move the business forward. Choose how much risk you are prepared to accept and how much cost you can bear. Do not focus on only parts of the solution, for instance getting on page one of Google without the infrastructure to respond to enquiries.

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