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What is Channel Sales and How is it Different Than Direct Sales?

what is channel sales

One of the most pressing concerns for startups is how to get a new product in front of the right customers without having a marketing budget blowout.

You’ll need to give some serious thought about whether to adopt a channel sales strategy or stick to a direct sales strategy. Which one is right for your startup? Do you have to choose between them, or can you find a balance of both strategies to cover all your bases?

In this post, we’ll take a closer look at direct and channel sales and how to use them effectively to grow your business.

What is direct sales strategy

direct sales strategy

Direct sales is the traditional method of sales – direct to consumers from your business. For the direct sales strategy to work, you need to hire a sales team that’s good at their job (selling!).

Your team needs to know your product down to the tiniest detail and be excited about selling it for you. It’s your sales team that will be directly responsible for the growth of your business.

Your main means of sales within the direct sales strategy are:

  1. Acquisitions

  2. Upselling

  3. Cross-selling

Unlike the channel sales strategy (more on this below), with direct sales you and your team are in control of the entire sales process from start to finish. As you have direct contact with your customers, you can refine these processes (and your core product) to make your sales cycle and acquisitions as efficient as possible.

Building and managing a sales team is expensive, and can quickly tie up your cash flow. If you’re looking to scale with this model, it means putting more money and effort into hiring and training extra in-house sales reps to do the work.

The biggest upsides are that you don’t have any external sales partners to manage, and can keep 100% of sales profits inside your business.

What is channel sales strategy

channel sales strategy

Channel sales strategy refers to the process of building partnerships with third parties in order to get a wider reach for your product.

Many startups and successful companies opt for this strategy to get their products into the hands of more end users. You might have come across the partnership programs offered by Hubspot, Slack, and Salesforce as examples.

Each of these partnership programs are great examples of channel sales opportunities for app developers and SaaS startups. For example, Salesforce has their AppExchange program, an online marketplace for apps and consulting services. Partners can tap into the Lighter Capital AppExchange Fund to get to the next level, but as a channel strategy they can add their products to the marketplace and take advantage of Salesforce’s customer base to increase exposure and sales of their product. For instance, the SurveyMonkey app integrates survey data into the Salesforce CRM. By partnering with Salesforce, the AppExchange marketplace is now a new “sales channel” for SurveyMonkey.

Companies like AppSumo are also becoming increasingly popular with many early-stage SaaS startups. AppSumo customers get lifetime subscriptions and heavily discounted products, and in return the startups can reach more prospects through AppSumo’s customer base and email marketing campaigns. The drawback to this channel strategy is that these startups must offer their product to AppSumo customers at discounted rates, lowering profit margins. The hope is that the increased sales volume is enough to make the effort worthwhile in the long run.

Partnering allows you to leverage the existing customer base of an established brand, so you can expand your own customer base. This lets you take your products to a wider market and increase your cash flow at low cost, without needing to scale your sales team.

There are a variety of different ways you can implement partnerships for your channel sales, including:

  1. Referrals

  2. Affiliate partners