How to find effective sales channels for your business

Selling goods and services on the market is a whole art that involves taking into account a huge number of parameters, nuances, and conditions. But still, the effectiveness of these works directly depends on how developed the distribution channel you have chosen is. This is what determines the speed of product sales and, as a result, the level of income of a particular company. That is, it is important for each business representative to devote a lot of time and effort to building the most effective channel for promoting goods and services. One that will lead you to a wide audience of target consumers.

We will dwell on how to create such a channel in detail in today's review. In particular, we will talk about what a sales channel is in principle, what functions it solves and how sales will be implemented with its help. We will get acquainted with its main varieties, as well as characteristics, properties, advantages and disadvantages. We will tell you how to choose the right sales channel for your business, how to analyze the efficiency of work. We will highlight a number of mistakes that business representatives most often encounter in practice when solving such problems.

What are sales channels

By such a term as "sales channels" we mean the ways of selling a product on the market. That is, this is the general chain of moving goods from the manufacturer to the consumer in one direction, as well as money in the opposite direction. Quite often, such interactions include additional links, namely intermediaries. That is, the manufacturer can send its products directly to stores or sell them wholesale to other companies, individuals who will be engaged in subsequent resale.

We would like to draw your attention to the fact that the market often also uses terms such as “distribution channel”, “sales channel”, “distribution channel”. But all these terms — these are just synonyms for sales channels, that is, they are all the same thing.

What tasks does the sales channel solve?

For the most part, a standard sales channel will be endowed with the following functional capabilities:

• research and comprehensive market analysis, including collecting information about the target audience, closest competitors, suppliers, intermediaries;
• ensuring contact with potential buyers, forming and maintaining feedback with them;
• stimulating sales by periodically rewarding consumers, providing them with additional discounts, bonus programs;
• establishing sales conditions, as well as their subsequent approval, including packaging, cost, service;
• search for funds to compensate for incurred costs;
• formation of a common logistics chain, which will include not only direct transportation, but also responsible storage;
• assessment and taking into account potential risks that the user may encounter when working with sales channels.

As you can see, the functionality here is quite broad. This means that this aspect must be taken into account when organizing sales of goods or services.

How sales are carried out

From an economic point of view, in order for the sale of goods or services to be successful, it is important to implement 5 main stages:

1. Launch an advertising campaign to attract the attention of the audience to your product, show its main advantages, focus on the affordability of the price.
2. Show what problems of the target market this product or service can solve, thereby emphasizing the benefits of use.
3. Emphasize the expertise and authority of the brand, the manufacturer, earn the trust of potential buyers.
4. Create such conditions for interaction between the consumer and the brand that would be convenient for both parties: a platform where you can get to know the product in detail, possible payment options, effective communication channels, etc.
5. Ensure timely delivery, get feedback.

But all this can be implemented only if you already have the most effective sales channels. We will tell you in as much detail as possible about the options that exist on the modern market.

Main types of sales channels

Getting to know the main classifications of sales channels, their characteristics and features is what will allow you to navigate the possible options and choose the most suitable solution for yourself. Remember: the effectiveness of the sale of goods or services will directly depend on the correctness of the decision made in this case. So, today experts distinguish 3 main types of sales channels:

1. Direct. It is also called a "zero length" channel. It excludes the use of intermediaries and all related levels. That is, the manufacturer uses its own retail network, direct marketing through a website, store or warehouse, social networks, e-mail, personal meetings, telephone communication to sell its products. In this case, its width will be directly determined by the number of points of sale: the more of them there are, the wider the sales route will be.
2. Indirect, also known as indirect. In such a sales scheme, intermediaries are already mandatory. Dealers, distributors, retailers, agents, partners, and delivery services can act as participants in the sales chain. The levels of complexity here can be completely different. Short channels are those where there are no more than 2 intermediaries. If their number is already 3 or more, then such sales channels are called long.
3. Combined. In such a channel, the features of the first 2 categories are already combined. In particular, its length will directly depend on the number of intermediaries present in the sales chain, and the width is from the number of participants in the process through which the distribution of the product will be carried out at each of the levels. The term levels here refers directly to the intermediaries themselves who participate in the movement of goods.

We will now consider each of these options in as much detail as possible.

Direct sales channel

As we have already said above, the direct sales channel does not have intermediaries. That is, the manufacturer also acts as a supplier and seller on the market. It turns out that he himself will negotiate with buyers, deal with packaging, and deliver goods. To sell products, most businesses use their own sales offices or use Internet marketing capabilities: online stores, social networks, bulletin boards, etc.

In this case, the manufacturer is able to implement any of its own ideas and plans when organizing sales, without paying attention to the conditions that intermediaries may present, including the number of goods in the batch, price. But in any case, the manufacturing company must control the entire sales process, assess potential risks, select solutions to minimize them and quickly respond if they arise. All this will require quite serious internal transformations, which can cause additional costs of time, effort, money.

Direct sales have both advantages and disadvantages. First, let's talk about the strengths of such a channel. Here we will highlight the following points:

• The entire process of selling products, regulating their price, quality, providing additional discounts - this is what will be under the complete control of the manufacturer. Here you can ignore even competitors and the specifics of their work, act as your intuition, experience, knowledge suggests.
• Markups and overpayments to intermediaries for their services are excluded. Due to this, the final cost of the product for the consumer is reduced, along with this, the level of loyalty and trust in the brand increases. As a result, this will contribute to stable sales.
• Flexible pricing. Alternatively, the manufacturer can provide an additional system of discounts for wholesale buyers, regular customers, maintaining interest in their products.
• Direct interaction with consumers, the ability to receive feedback, respond to user requests, questions. This will also help increase customer loyalty.
• Full control over tracking your online reputation. No third party will have any influence on it, and you, in turn, will be able to instantly respond to any negativity, trying to smooth it out.

That is, in this case, customers will react more positively to the manufacturer's offer, learn to trust it, which will ultimately have a positive effect on sales figures. However, the direct sales channel also has certain disadvantages. And one of the most significant "disadvantages" here is that it will take time and considerable investment to form a truly effective direct channel. In addition, it is unlikely that you will be able to ensure large-scale market coverage without a small, fragmented network. Another disadvantage is the huge amount of work that will be assigned directly to the manufacturer. In addition to the direct process of manufacturing the goods, you will have to monitor the state of the market, evaluate it, track user behavior, and changing interests. And this again costs time and money.

All this allows us to confidently state that direct sales channels are options for small manufacturers, because this is the only way to ensure complete control over the products and their movement on the market.

Indirect or as they say, indirect sales channel

Such a sales channel already assumes the presence of intermediaries who will take on processes related to marketing, delivery of goods, direct sales or provision of services. It turns out that the manufacturer is engaged in its direct responsibility - it produces products, and other business representatives take on the remaining tasks. Among other things, they will increase turnover, expand the geography of sales.

Here, too, there are advantages and disadvantages. Of the main “pluses” in this case, it is worth highlighting:

• Scaling of sales. By cooperating with a large number of intermediaries, it is possible to ensure fairly large volumes of product sales, and in an expanded geolocation.
• Significant savings in money, because all issues related to transportation, storage of products, development of marketing strategies will already be shifted to intermediaries.
• The opportunity to discover new markets, including outside the country.
• Increased brand awareness in the global market, which can be called a direct consequence of the wide geography of sales.
• Fast delivery of goods to the buyer, which is largely due to the wide network of intermediary representative offices.

But the disadvantages here will also be quite significant. In particular, you, as a manufacturer, will have practically no influence on the pricing policy: All these nuances will necessarily be agreed upon with intermediaries. The level of business income will be significantly reduced, since your partners will also have a direct impact on the final price. It is also possible that the intermediary you trusted and established effective interaction with may at some point simply go to your competitors if they find their terms more attractive. As a result, the goods will simply lie in the warehouse until you find a new partner. It is also important to understand that here the intermediary takes on direct interaction with the consumer, while your influence on the market and buyers will be minimal.

But still, much here depends on the characteristics of the indirect channels themselves. In particular, they will differ from each other in various characteristics:

1. Channel width.
2. Types of intermediaries.

Let's get acquainted with such classifications in more detail.

Channel width

Here we are talking about the branching of the system, in which several intermediaries work simultaneously. Today, there are 3 main channel widths:

• Intensive distribution. Here, a huge number of intermediaries are involved in interaction in order to ensure the widest possible market coverage. This is how we get high profits. That is, the company launches interaction with various online and offline trading platforms, dealers, large supermarkets and individuals, ultimately ensuring maximum market coverage.
• Exclusive distribution. Unlike the previous option, here the interaction is carried out with a limited number of partners. The brand selects intermediaries with special care, choosing only those who will meet its strict criteria and requirements. Thanks to this, it is possible to maintain the company's image at a high level, as well as keep the turnover under its own control.
• Selective distribution. The essence of this method is a combination of the first 2 options. In this case, the brand will carefully select partners for itself, try to control the movement of products, but at the same time aim at the widest possible market. It is not always easy to implement such an idea in practice. Mostly, such distribution is resorted to by companies that have been operating in the market for a long time and have managed to earn a good reputation. It will be much easier for them to attract reliable business partners.

But intermediaries can also differ from each other.

Main types of intermediaries

When discussing indirect sales channels, first of all, we need to clearly understand who the intermediaries are and what business tasks they can solve. So, the following categories are distinguished here:

• Dealer. This can be either a separate company or an individual who will conduct all transactions at his own expense and on his own behalf. That is, the dealer purchases the manufacturer's products directly for sale to the end consumer.
• Distributor. It is a completely independent wholesale company operating under a specific agreement and on the basis of the nuances and requirements that are spelled out in the document.
• Retail network. This is a trading enterprise of varying sizes that can independently sell your products to consumers. It turns out that they can purchase goods both directly from the manufacturer and from a dealer or distributor.
• Agent. This is a private person who will conduct sales on behalf of the manufacturer and under his financial management. For successful transactions that will bring additional profit to the manufacturer, agents receive certain material rewards.
• Partner. This is a legal entity that will work for a percentage. Work here is carried out on a permanent basis and in accordance with the contract.
• Wholesaler. This is also a legal entity, like a partner, but work here will be carried out from time to time, when the organization has a corresponding need. Products can be purchased from manufacturers, dealers, distributors and then resold to different networks.
• Marketplace. This is a trading platform through which it will be possible to distribute the manufacturer's products. Here we are talking about creating a kind of store on the site with the delegation of such tasks as sending orders, working with returns, monitoring availability in the warehouse, etc.
• Specialized intermediaries. These are those who will perform service, auxiliary functions. As an option, this includes IT agencies, advertising services, logistics and transport centers.

By and large, a manufacturer can establish interaction with one intermediary or with different ones if he believes that this will bring tangible benefits to his business. It is also determined what tasks can be delegated to the intermediary. As an option, this could be collecting information about potential clients, maintaining constant contact with them, storing and transporting goods, placing orders, directly distributing goods or services, collecting payments from buyers and settling accounts with the manufacturer.

To choose a reliable intermediary for yourself, you need to understand what market share you plan to cover, what audience you will work with. You should also pay attention to the conditions that the future partner offers you and his financial situation, attitude towards competitors. It is important that the reputation of the intermediary is also at a high level, since otherwise all the negativity towards him from the audience will automatically be distributed to you, as a manufacturer of goods. That is, before concluding a cooperation agreement, you should obtain as much information as possible about potential partners and make sure that interaction with them will not harm your image.

Combined sales channel

Already from the name, one can judge that such a sales channel will combine the features of both the direct and indirect options. In most cases, we are talking about the fact that the manufacturer prefers to sell its products in its own region, while their delivery to other markets will be the responsibility of intermediaries.

Among the main advantages of this option are:

• ensuring the widest possible market coverage;
• the ability to organize an individual approach to each segment of your target audience;
• forming a kind of competition between different sales channels, which can ultimately have a positive impact on the promotion of goods on the market;
• reducing your own costs for logistics, delivery of products, marketing research.

Are there any risks or disadvantages here? Of course there are. In particular, if you work with several intermediaries, disagreements may well arise between them. In most cases, this is due to the sale of goods to different partners at different prices. Also, we must not forget that intermediaries may not be particularly conscientious. And if you take into account the fact that they will be located far away from you, then the control will be minimal, which can ultimately harm your reputation. It is also worth considering the fact that it will be possible to ensure the maximum level of sales only by attracting a large number of partners. As a result, it may turn out that your payments to intermediaries will be too high, which will negatively affect the level of income as a whole.

Selecting the most effective sales channels for business: tips and recommendations

Choosing a sales channel that will be most effective in practice for your business is a rather complex and labor-intensive task. In particular, much here depends on both internal and external factors that have a direct impact on the market. In particular, when performing these works, it is necessary to pay attention to:

1. Consumer characteristics.
2. Competitor characteristics.
3. Product characteristics.
4. Manufacturer characteristics.

Consumer characteristics

This category includes the location of the target audience, its capabilities, requests, wishes, problems, tastes, frequency of purchases. In this case, the distribution between channels will be as follows:

1. Direct. This option can be used if your potential buyers live in approximately the same area. As regular customers, you should mainly have legal entities that are interested in constant deliveries of large batches of orders, as well as for ordinary people who are afraid of buying a fake. If you are ready to constantly monitor the market, conduct marketing research, update your advertising, then you can use this option to sell your goods or services.
2. Indirect. Used where buyers are scattered across different regions. In this case, delivery will be as fast as possible. Here you get rid of the need to control advertising, promotion of your products. Here, sales volumes are mostly smaller. Suitable for customers who prefer to buy the goods they need in one place.

Characteristics of competitors

Ensuring effective sales will in any case involve a comprehensive analysis of competitors. Practice shows that many business representatives copy the channels used by other companies operating in the same niche. But in some cases, a more effective solution will still be an attempt to stand out from the crowd. Here, you should also take into account the features of sales channels:

1. Direct. To stand out from the competition in this case, you will have to put in a lot of effort, spend a certain amount of money. Here you will have to constantly monitor competitors, follow their strategies so as not to repeat themselves, show your creativity, an extraordinary and creative approach. You will also need to monitor market trends and take appropriate measures as quickly as possible if this becomes necessary.
2. Indirect. With their help, you will be able to more easily maintain your high competitiveness in the market, which is largely due to a wider sales network, the presence of different strategies among different intermediaries. Moreover, you will not need to monitor the work of competitors, because this is directly the responsibility of your partners. The only thing is that if there are changes in the market, including the level of solvency of the population, then it will be necessary to review your strategy and agree on it with partners.

Product characteristics

Here we are talking about the analysis of the price of your goods, as well as its technical characteristics, including shelf life, the possibility of custom manufacturing, and complexity of use. In this case, choose sales channels based on the following points:

1. Direct channels. Suitable for perishable products, complex goods, which, among other things, also require individual production. This can also be expensive products for the end consumer: involving intermediaries here, on the contrary, will further increase the final price.
2. Indirect channels. Suitable for products with a long shelf life. Most of these are so-called mass-market products, i.e. uniform products in mass demand.

Company characteristics

These are already directly the financial capabilities of the manufacturer itself, the management experience that it has in organizing trade, managing a business and more. In this case, the choice of channels will depend on the following points:

1. Direct. Suitable for a company that is ready to monitor all stages of product promotion, those who are distinguished by high financial stability, have significant experience in business management and produce a fairly wide range of products to meet the needs of different consumers.
2. Indirect. It is worth choosing for companies that have recently worked on the market, do not have certain knowledge and skills, are not ready to take risks, including financial resources, which may not be enough for effective independent work. It is also a choice for companies with a narrow product line.

Evaluate all these characteristics personally in relation to your own business, and you will be able to easily select the sales channel format that will be most effective in your case.

Analyzing the efficiency of sales channels

Timely analysis will help make sure that you have done all the work as correctly as possible, that your sales channels are working effectively and contribute to business development. To conduct it, it will be necessary to measure a fairly large number of criteria, and then monitor them in dynamics. In particular, we are talking about the following parameters:

• sales volumes going through a particular channel;
• average stock level of goods constantly available in your warehouses;
• sales growth rate (can only be determined in dynamics);
• the capacity of each of the sales channels that you use in practice;
• the percentage of sales of products to the target audience;
• return on investment;
• the ratio of product inventory to sales volumes.

These 7 indicators are considered the main ones in marketing research. But to get a more visual, detailed picture, additional metrics can also be used. In particular, this includes delivery time and customer feedback, the overall product life cycle, and return rates. It will also be useful to assess the competitive environment and learn about the needs of potential buyers. With the help of special marketing tools, you can also analyze how effectively your products are distributed on the market within a particular region and in general.

The first such analysis will need to be carried out about a couple of weeks after the start of work. Subsequently, check the effectiveness of the sales channel monthly. For some businesses, the interval between checks can reach six months or even a year. If, as a result of the checks, you see that the actual figures do not match the predicted ones, it is necessary to perform a thorough analysis of all the tools and methods that are used in practice, to evaluate the quality of the intermediaries' work. That is, here it is necessary to identify the weak link and make the appropriate adjustments. If you see good growth dynamics, then you have implemented everything correctly and you have all the prerequisites for scaling, expanding production capacities.

What errors can occur when working with sales channels

After you have completed all the necessary settings, your sales channels will work according to an established scheme, requiring a minimum of time and effort to manage them. Most of the errors occur directly at the stage of selecting suitable options and launching them. But if you know what aspects to pay special attention to, you can minimize such problems. In particular, the following errors are most often observed when managing sales channels:

• The business manager takes on the maximum amount of responsibility. This is often very common when working with direct channels. Here the manufacturer strives to keep all processes under full control, but this leads not only to physical and emotional burnout, but also increases the risk of management errors related to the human factor. This problem can be solved by delegating some of the powers to the relevant personnel.
• Cooperation is launched without a contract. Work with intermediaries must be carried out on a contractual basis. Such a document specifies all the conditions for subsequent interaction. Otherwise, the intermediary will not provide you with timely reports, you will not be able to respond quickly to market trends. In addition, he will make many decisions that have a direct impact on your business on his own. And this is what can worsen your reputation in the market, lead to a loss of loyalty from the audience.
• Work with intermediaries is launched without preliminary development. The whole secret of success in indirect and combined sales is that you work together with reliable and responsible contractors. That is, it is important for you to approach their selection very responsibly, to assess whether they are capable of providing the desired sales figures and promoting your products on the market as a whole.
• Frequent conflict situations with intermediaries, employees. The working atmosphere in the team is very important for ensuring the stable and efficient operation of any business. If quarrels and discontent begin, then mistakes will be made, including deliberate ones, which will negatively affect sales as a whole. Therefore, it is important for you, as a manager, to create a comfortable working environment, to take an active part in the occurrence of disputes, helping to find a solution that would satisfy both parties. This way, you will only increase your authority in the eyes of subordinates or suppliers and will be able to minimize all the risks associated with conflict situations.
• Failure to take into account long-term tasks and goals. You cannot think only about how to sell a ready-made batch of goods. You should look at the business in the long term, assessing your own capabilities and the needs of the market. This is the only way you can estimate the funds needed to develop sales channels and calculate the appropriate number of intermediaries for yourself.

You must understand that your business intermediary is really your partner who will provide your products to the public. Therefore, interaction with him should be as comprehensive and professional as possible. You must say how you want your product to be seen in the eyes of consumers, and also constantly monitor his work. This is the only way to achieve good results.

Let's sum it up

We hope that the information we presented in today's review will help you understand in more detail what sales channels exist on the market today, in which areas of business it is worth using this or that option. But we would like to draw your attention once again to the fact that only through comprehensive and constant monitoring will it be possible to keep the entire process under control and respond to various changes as quickly as possible. And here you will need a fairly large number of specialized tools. For stable and effective work with them, we recommend additionally using mobile proxies from the MobileProxy.Space service. This way you can avoid various blockages, restrictions in work, monitor the work of intermediaries in a certain country or region, track the actions of competitors, analyze new sales markets and much more.

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