Indirect vs Direct Sales: How To Make Them Work in Tandem
Most businesses look into the direct vs. indirect sales argument at some point in their growth. eCommerce has allowed us to go direct to our customers, but that doesn’t mean an indirect sales approach isn’t a viable option. In fact, there are many advantages to indirect sales that are otherwise lost with direct sales.
One of the most significant benefits is the lower upfront costs associated with indirect sales.
Rather than having to purchase email lists, build a following, spend an arm and a leg for advertisement, and the timing issues derived from direct sales, indirect sales allow you to get right into the game using other people’s networks.
What Are Indirect Sales?
Indirect sales involve intermediaries or third-party entities to sell products or services instead of directly interacting with customers. With indirect advertising, companies rely on distributors, wholesalers, retailers, or independent sales agents to reach consumers and make sales.
The intermediaries are vital in the indirect sales process. They buy products from the company at a wholesale price and sell them to customers at a higher price, earning a profit. These intermediaries often have their own sales teams and marketing strategies to promote the products and generate sales.
One good example of indirect sales would be that of a reseller like Dell Technologies. You can apply to join the Dell Technologies Partner Program ecosystem and resell products to the market, adding a unique service or building a cloud service platform powered as-a-service with them.
3 Types of Indirect Sales Strategies
There are 3 main types of indirect sales strategies that businesses can use to increase sales.
One type of indirect sales strategy is through reseller partners. Reseller partners are companies or individuals collaborating with a company to sell its products or services. Instead of the company selling directly to customers, resellers act as intermediaries.
As suggested above, resellers can be retailers, online stores, or anyone who can take your product and sell it to others.
There are several different agreements that resellers use when considering selling your product:
- Purchase your product at a discount, then mark it up to make a profit;
- Request a contract in which they pay nothing upfront, and then pay for products as they are sold on their end.
Reseller partner programs play a valuable role in the sales process. They have market and customer preference knowledge, allowing them to showcase and sell the company's products or services effectively. Resellers may also provide additional services such as customer support, training, or customization based on their expertise.
There are several other possibilities for resellers, but profiting from resellers can be difficult as they control a lot of the bargaining power.
Using affiliate partners is another way to help facilitate indirect sales. Affiliate partners work alongside your company to market and sell your products/services. Once they make a sale, they are credited with a commission based on your agreement.
Affiliate partners tend to have their own network and audience that they sell to, which means finding affiliate partners within your customer base is key to success.
Affiliate partnerships can be beneficial because they don´t require any upfront costs. All payments are based on actions that your visitors take, such as clicking through, purchasing, or signing up. That means you are guaranteed to get something in return before you payout.
When you collaborate with affiliate partners, you can tap into the power of online marketers with wide reach and influence. By doing so, you can expand your customer base and boost sales. The human touch in affiliate partnerships comes from the affiliate partners themselves.
They have the ability to create interesting and captivating content, build trust with their audience, and make recommendations based on their own experiences and expertise. This personal touch helps connect with potential customers and encourages them to trust and try your products or services.
Referral partners are similar to affiliate partners, but they tend to be on a more personal level than affiliates. Referrers are typically customers who want to share their experiences with others. They understand the value of your products or services and are genuinely enthusiastic about recommending them to others. With that said, referrals could also be partners with similar or complementary business proposals.
Affiliates, on the other hand, can be just about anyone with a blog, social media account, or existing audience.
The human aspect of referral partnerships lies in the personal connection between the partner and the referred customer. Referral partners often have firsthand experience with your offerings, making their recommendations more genuine and trustworthy. They can share their positive experiences and explain how your products or services have benefited them.
When you collaborate with referral partners, you tap into their network and gain access to potential customers who may not have discovered your business otherwise. The power of word-of-mouth recommendations is significant, as people tend to trust the opinions and suggestions of those they know and respect.
How Do Indirect Sales Work?
Indirect sales work differently, depending on the specific program or partnership you choose.
Resellers usually require discounts to make a profit when selling your products or services. They buy your products and services at a lower price and sell at a higher price.
Affiliates and referral partners, on the other hand, earn rewards based on their sales performance. They promote your offerings and get compensated for each successful sale they generate.
To make the most of indirect sales, it's crucial to find the right partners and establish mutually beneficial terms. With resellers, negotiate pricing and discounts that work for both sides. For affiliates and referral partners, provide incentives and commissions that motivate them to promote your products or services actively.
By collaborating with these partners, you can tap into their networks and reach customers you may not have otherwise reached. Their recommendations and efforts can significantly boost your sales and expand your customer base.
What Are Direct Sales?
Direct sales refers to selling products or services directly to the end consumer, bypassing intermediaries or distributors. It is a form of transaction that can take place either in physical locations or through online platforms.
This can be done through various channels, such as physical stores, e-commerce, websites, social media, or social platforms. With direct sales, the company takes on the responsibility of creating and maintaining its own commercial, as well as building an audience or customer base.
What Are the Differences Between Indirect Vs. Direct Sales?
The key difference between direct and indirect sales lies in the level of involvement and control. Direct sales give the company full control over the sales process, customer interactions, and branding. Indirect sales, on the other hand, rely on the expertise and reach of partners, allowing the company to leverage existing networks and benefit from their established platforms and customer relationships.
Direct sales take place between the company and the consumer. This most often occurs via an online store, sales team, or direct marketing. There are upfront costs associated with direct sales as you will need a platform to sell from, and a network and audience to sell to.
Indirect sales use the platform and network of someone else to do the legwork. Instead of selling directly to the customer, a middleman is used to facilitate the sale and the partner is rewarded based on the sales procured.
How Your Company Can Benefit From Both at the Same Time
Companies can take advantage of the benefits of both systems quite easily. For direct sales, businesses should ensure there is a quick and easy way to purchase products or services directly. This can be through an online store, a direct marketplace like Fiverr, or an outbound sales team with some big fees.
Indirect sales do require a little more work before they start generating leads and sales. Partnership programs should be designed and laid out and then can be pitched to potential partners.
The process can take a few months, but PRM software like Kiflo can make it much easier and more straightforward.
How The Combination of Both Can Grow Your Firm
When it comes to the direct-vs-indirect-sales model, the answer is usually a combination of the two. Companies that can effectively utilize both techniques will often see great success without limiting their profit margins.
Having multiple sales channels helps to canvas the marketplace and ensure you are throwing your net as wide as possible. A wider net = more potential customers reached, and more sales made.
Direct and indirect sales both have their place in the sales process. Each one offers a unique advantage over the other, but in the end, it can be very effective to have both in place.
Establishing a direct sales process can be as simple as opening up an online store, while indirect sales partnerships can take time and effort to set up. Building an effective partnership program is key to running a successful indirect sales program.
Combining direct and indirect sales strategies can be highly beneficial for businesses. Direct sales provide control and convenience for customers, while indirect sales leverage partner networks. This approach maximizes reach, diversifies revenue streams, and targets a broader customer base. By establishing direct channels like online stores and complementing them with reseller partnerships, affiliate programs, or referrals, companies can optimize sales efforts. This combination allows for cost-effective expansion, increased profitability, and a competitive edge in the market. It's a strategic approach that harnesses the advantages of both sales methods, leading to overall business growth.