Distribution (DIrect) or Reseller (Indirect)
If you want to get your product out there and in the hands of your target audience, then you need to focus on your distribution channel. This is easier said than done, and sometimes you might find yourself torn between reseller partners and distributors. With SaaS expected to achieve over 17.7% growth in the future, it’s now more important than ever for you to start exploring your options.
Pros of Working with a Distributor
Some of the pros of working with a distribution channel include the fact that you may not have the expertise, financing, or resources to invest in your marketing. This is okay, and that is why resellers exist. They are capable of marketing your products. If you pay them a commission for every sale you make, you have a better option when compared to having zero customers.
Exposure to the Bigger Market
Depending on the goals you have, working with the right distributor can give you access to a much bigger market. If you can find a reseller or distributor who matches your long-term goals, then this will help you to meet your long-term business objectives far more than you realise.
They have a Digital Infrastructure
If you are starting out and you do not have the infrastructure to invest in a website or a booking system, then working with an online distributor can help you to get the temporary solution you need. They have a digital infrastructure, and they have the payment facilities you need to grow your company. The only thing that you need to do is be mindful of how much commission you are being charged per customer.
Cons of Working with a Distributor
There are also some cons to working with a distribution channel. Some of them include the fact that you are now dependent on various external factors. Part of working with a distribution channel means that you rely on other companies to do what they say they are going to do. Even though they may not make some abrupt changes to the way that you work, they can make minor tweaks. You need to find ways to try and mitigate any risks if possible, so you can ensure that it’s a win-win for everyone who is involved.
It Takes Time to Setup
It can be very time consuming for you to work with a distribution channel. You need to decide if it’s worth it to you and your business. You shouldn’t think about working with a distribution channel if you’re having a knee-jerk reaction. You shouldn’t do it if your competitors are doing it either. You have to make sure that it aligns with your goals and your overall objectives if possible.
It Can be Hard to Convince Distributors to Partner with You
Some distribution channels can be picky, to say the least. This is especially the case when it comes to working with your activity operators. The main reason for this is because resellers do not want to work with any products that they do not want to sell. If you want to work around this then you need to do your research. Find out what your distributors actually want to sell, and then tweak your products so you can meet their target needs.
Direct Distribution VS Indirect Distribution
A distribution channel is a chain of businesses that a product or service runs through until it gets to the end consumer. Channels can be direct or indirect. Distribution channels in the consumer world can include everyone from the retailer to the shipping center and the warehouse. Direct allows the customer to buy goods from the manufacturer and indirect channels move the product through other channels before it reaches the consumer. There are bonuses to both types of channels. In the SaaS world, this translates into a Distributor being a company that has hundreds of resellers who come to them to access multiple products to sell and focus on, but also offer extra services such as full managed service offerings.
Direct Distribution
Direct channels can be more expensive to set up, to begin with, That being said, direct distribution is shorter and less expensive to run. You will also need to pay for marketing. With spending on devices expected to decline by 1.3%, this is harder to do in the current climate.
Indirect Distribution (Reseller)
Indirect distribution channels rely on other companies to perform a lot of the distribution functions. The challenge here is that you need to trust another company with your products and your consumer interaction. They free you from any starting-up costs and if you have the right relationship, they are easy to manage. That being said, after all of your costs, you may find that you need to increase the price of your products to your customers.
The Pros of Working with a Reseller
For a lot of SaaS providers, working with a reseller can be a good option. This is especially the case in the early days of getting established but also taking your product out to a wider geographic market or extending your service capabiliteis.
Established Customer Base
If you are just getting started, then resellers can give you the established customer base you’re looking for. They may well have established reviews so that you don’t need to start from scratch.
Sales Experience and Marketing
Larger resellers tend to be well-versed in selling SaaS products, and they may have some very good strategies which will help you to get your product out there.
The Cons of Working with a Reseller
Working with a reseller can come with some cons. If you want to find out more about them, then look below.
You Have No Control over How Resellers represent you.
While your reseller may well be experienced in sales and marketing, they may not be doing it the way you want. If you have a premium brand, then this can be somewhat problematic as you may find yourself relying heavily on your overall branding to bring in new customers.
Smaller Margin
Even though you need to make quick cash, it’s not going to be as profitable if you work through a reseller when compared to selling your product yourself. Obviously, this will depend on the price of your product and how much service costs you have to get your product running and embedded into a new client.
Bottom Line
Choosing between the classic partner model and the route of distribution will ultimately come down to the industry you work in and your business model. All in all, channel sales models are ideal for software and technology companies who want to expand their reputation or their product offerings. Distributors are a subset, and are able to offer a wide range of products but ultimately act as a middleman. If you can understand the pros and cons of both, you can be sure to make the right decision overall.
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