Most businesses that operate traditionally are still using some form of direct sales, but what about indirect sales? If direct sales are "simply" a business selling their product directly to the customer, then indirect sales are when an external intermediary is added to the mix.
Indirect sales provide the unique advantage of shifting some of the heavy marketing and sales work to third parties. These third parties or partners are typically known as resellers or affiliates that work off of a discount (resellers) or commission (affiliates) based on factors you set.
The idea behind indirect sales is that it adds a layer (channel) of marketing and sales while lowering overall costs. It also serves to reduce advertisement overhead as you are now using the indirect seller’s network or audience. This comes with positives and some negatives.
"Indirect sales provide the unique advantage of shifting some of the heavy marketing and sales workload to third parties."
Often, affiliates will have a closer connection with their audience which can immediately make them more receptive to the products and services that are indirectly sold. Resellers offer an existing network and customer base, making for an extremely valuable marketing resource.
That's where a good partner relationship strategy comes in...
There are a number of options when looking into indirect sales. You'll need to consider the goals and challenges that you're currently facing to understand how these can benefit your sales process. It's not a set-it-and-forget-it process; it takes consistent action to pull off.
Here are a few options to consider and their benefits:
Affiliates are becoming an increasingly popular resource for indirect sales, and from big brands: Amazon, Salesforce, HubSpot, Shopify, you name it. Affiliate marketing makes sense.
Because it dramatically reduces Customer Acquisition Cost (CAC) while increasing Customer Lifetime Value (LTV). These are two metrics you'll want to remember in the partner game:
Customer Acquisition Cost (CAC) is a simple equation that adds up the total cost of sales and marketing divided by how many customers you acquire. This makes it super simple to understand whether an indirect sales program is offering value as it shows exactly how much it costs you to acquire one single customer. Subtract that by their Lifetime Value (LTV) and you'll get how the net revenue made on that customer.
As a metric, Lifetime Value (LTV) is a bit more complex to calculate but still extremely powerful to understand how much value you're able to extract from each customer, and move on to calculate an eventual margin. You can think of LTV as the average value of one sale across all customers times the number of transactions times how long they keep making transactions with your business until finally ending their relationship.
A tool like Kiflo can help with keeping track of how many customers come through certain indirect sales channels so that you can calculate both of these metrics easily.
Affiliate marketers use a variety of content and platforms to showcase and market your products. They will have existing audiences of engaged people such as YouTube subscribers, Twitter followers, personally-built email lists, and more. These audiences are cultivated over time and the affiliates tend to know what and how to market to their followers.
This relationship makes the audiences warmer to the products and services they are being pitched organically. However, affiliates with some degree of experience understand that they can’t simply pitch . You should be prepared to prove that your business, services, and products are reputable and provide considerable value to the affiliate’s audience Once you find a good affiliate that has an audience made up of your ideal customers, you are good to go. This established audience can bolster your customer count considerably, add real value to your business, and keep that value coming for years. Since affiliates work off of commissions, you only have to pay when a sale is made. Win-win, right?
While affiliates tend to be more concerned about cultivating a following and maintaining their own audience, resellers are all about re-selling your products and services.
Resellers can range from online portals that will sell your product or service as is, all the way to white-label sellers that rebrand your product and sell it as their own. Resellers tend to have an established customer base with existing traffic that regularly visits their storefront.
These existing channels mean that your product is put in front of customers right away. The downside is that resellers don’t do too much marketing themselves, they're more focused on the sales process. There really isn’t a personal side to the reseller and their customers so you are partnering with them for access to their customer base and sales might.
"You are partnering with a reseller for access to their platform, customer base, and sales might."
Resellers can be quite effective though as they typically provide an existing storefront and interface for the customers. This can help save costs on your end if you don’t want to set up or maintain your own store or invest heavily in customer service.
The benefits of a reseller program range from an organically-extended sales team to expanded market reach as well as, in some cases, international reach based on the reseller's audience.
The majority of businesses tend to use a direct sales approach as it provides full control of the process and it’s easier to establish a relationship with your customers that way. However, more businesses are seeing the benefits of indirect sales as third-party marketing and sales becomes more effective via online experiences that are more engaging and personalized.
Indirect sales provide the opportunity to shift the responsibility and work of marketing and sales to a third party, leaving you with more time to focus on other aspects of the business.
This can be especially beneficial for those who want to focus on their products and services and rather not dabble in the sales process. Whether you choose to establish an affiliate program or partner up with a reseller, indirect sales can help grow your business considerably.
Using the authority established by an affiliate can also provide credibility to your brand and products, while resellers can provide a plethora of channels to showcase your products.
If you plan on venturing into the world of indirect sales, a Partner Relationship Management software tool like Kiflo can simplify your life considerably.
Managing affiliate and reseller programs takes time, so Kiflo can help you automate a large portion of your tasks while keeping track of all the information you need to know.
Request a demo today and see if we're the right fit for your business.
Frequently Asked Questions (FAQ)
What is the difference between direct and indirect sales?
Direct sales is one of the most popular sales methods and it takes place when a business sells its product directly to the customer. Indirect sales use third parties such as affiliates and resellers to bridge the gap between the business and potential customers.
How do you sell indirectly?
To sell indirectly, you need to establish a partnership with a third party. These partnerships are affiliates or resellers that will take your product and market it to their own audiences.
What are the types of direct selling?
For online service providers (software, consulting, etc.), common direct sales types are: 1) Cold email outreach; 2) 1-1 social media; 3) Cold calling, and; 4) Direct response advertising. These help with an immediate need to land new customers but are hard to scale for the long-term.
How do you apply indirect sales to a channel partner program?
Through the use of affiliates and resellers, you can sell your product or service indirectly. You can offer incentives to 3rd parties to showcase and market a product for compensation.