Sales Channel - Definition, Importance, Types & Example
What is Sales Channel?
Sales channel is a way or a medium taken to sell products or services to the end customers from a manufacturer. Sales channels can be direct or indirect depending upon how products reach customers. These channels can be platforms (online or offline), individuals, partners with an objective to close the sale.
Another way to look at it is that a sales channel is a source of revenue for a manufacturer through which products or services were sold.
A company can have multiple sales channels to sell the products e.g. resellers, ecommerce, partners, kiosks, branch etc. but all the sales channels may not give equal revenue. A company needs to plan its sales channels accordingly. A channel giving low revenue may still be beneficial to some customers and profit may be high and low cost.
Importance of Sales Channel
There is little difference between a sales channel and a distribution channel, except for the fact that distribution channel has more to do with physically getting products across to consumers whereas sales channel is involved mainly in helping to increase and close sales. The type also defines the type of marketing to be done. If the channel is direct, then the type of marketing to be done is Business-to-Consumer or B2C marketing.
If the sales channel depends on an intermediary then a Business-to-Business marketing B2B is involved. However, if intermediaries play a major role, but final customer are individual people, then a combination of B2B and B2C marketing is involved.
Source: salesbenchmarkindex
The picture above depicts a typical hierarchy of direct sales channel with respect to value added and cost involved. As we can see, more personalized the channel, higher the cost involved.
Types of Sales Channels
There are multiple types of Sales channels which a business can use. They can be divided into Direct and Indirect.
Direct Sales Channels
A company can use direct sales channels to sell its products and services like
1. Retail Store
2. Kiosks- These can be self service channels where people can buy and make the payment
3. Showrooms
4. Sales team which is employed by the company to sell products to its clients and customers
Indirect Sales Channels
There are many indirect channels which a company can deploy to make sales
1. Resellers are the ones who sell products on your behalf by adding value e.g. a software developer selling his/her solution using a product. The license sales will add to revenue of the product company.
2. Online Market places like Amazon would help a business to do sales on their platform
3. Partnership and outsourcing- The sales team can be outsourced to a third party
Example of Sales Channel
For elaborating, we can take the example of ecommerce companies like Amazon, Flipkart, Caratlane etc. It is a jewelry website which delivers products to your house as per your order. Here, the website is one channel that they use to reach consumers. They also have the offer of trial at home, which is another channel- customer service. On confirming, the final order is delivered to the customer. Here Caratlane uses different types of sales channel to reach out to the consumer.
Hence, this concludes the definition of Sales Channel along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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