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How much control does your company have over its sales? How much direct contact does your company have with your customers?
The way you treat your customers can define your brand—and it can make or break your reputation.
If you’re not in direct contact with customers, how do you know they’re seeing your best side?
This is where the direct sales model comes in. With this sales model, your company is in direct contact with its customers, either through your website or through your sales reps.
The direct sales model describes businesses that sell their products or services directly to customers through their salespeople. This may mean hiring an inside sales team or working with independent sales consultants who set their own terms and earn a commission for each deal they close.
In the direct sales model, the product or service can’t be found by other means. So, the salesperson is a customer’s only connection to the product they want to purchase.
For example, if you’re a SaaS company selling a software product to other companies, their connection to your product will be through your website or your sales team.
Direct sales gives companies more control over how their products are being sold and by whom.
The indirect sales model involves businesses selling their products through a third party. In most cases, indirect sales is used by manufacturers to sell products through distributors or retail stores. This allows the company to focus on the quality of the product they sell, not the distribution of it.
With indirect sales, the company doesn’t have to think about getting their product to the masses—they let a third party take care of that. This means they have less worries about sales and marketing, but it also gives them less control over the price of the product, how it’s being sold, as well as their own brand image.
For example, a clothing company may produce quality products and ship them to retailers and distributors. Those stores then market and sell the clothes to get people into their stores.
While direct and indirect sales have some overlap, the main difference is the control your company has over the actual sales.
The direct sales model gives companies closer control over the work of salespeople, while indirect sales means the company relinquishes direct control over the sale of their product.
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While the actual sales process will vary from business to business, here is a general overview of how the direct sales model works in 4 steps:
First, the company produces a product. This could be a physical product, software, or SaaS product, or services like insurance policies or real estate.
Second, the company chooses who will distribute and sell that product. In the case of a SaaS product, this could be an inside sales team run by a sales manager or Director of Sales. In other cases, independent agents might run their own sales machine (like real estate and insurance agents).
Next, those salespeople hustle to sell the product you’ve given them. An inside sales team at a B2B SaaS company works through the sales playbook you’ve put together, collecting new leads from marketing or their own prospecting efforts and then working with them to close the sale. Independent sales agents in the direct sales model work independently to drum up business and create their own playbooks to close deals.
Finally, sales are reported back to the company, and the salespeople earn commissions from their closed deals. The company decides when to increase or decrease efforts, whether to pivot their sales process or target audience, and how much commission its salespeople earn for each sale.
The direct sales model can look very different depending on the company, the product, and the sales team running down new deals.
To give you a better idea of how this model works, here are four standard direct sales model examples you’ll see in the real world:
B2B companies that use an inside sales team to sell their products or services are one form of the direct sales model.
Whether the company is selling physical products like paper and pens, or they’re selling SaaS products like marketing or data warehousing software, their sales team is the only way for new leads and customers to purchase from the company.
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Real estate is an interesting form of direct sales since the main company doesn’t actually produce any product. In this case, the product is a building or piece of land, and it’s the company’s job to sell it.
Real estate companies often work with independent sales consultants (i.e. real estate agents) to sell for them. Real estate agents generate sales by either attracting their own clientele or employing their own strategies for successful selling, such as effective real estate marketing. But they still earn based on commissions coming down from the main company after every sale.
Insurance sales uses the direct sales model in a very similar way to real estate: both use independent sales agents to work with prospects and customers and close deals.
The interesting part about insurance is that the sales are recurring. So, an insurance agent earns a commission off their sales, but each new sale can earn them more over time as they develop and maintain a relationship with the customer.
If you’ve ever been invited to a party where your friend tried to get you to buy something you may or may not have needed, then you know what host sales are.
In this direct sales model example, the company works with many brand advocates (not necessarily salespeople by profession) who try to sell the product within their network of friends and acquaintances.
D2C, or direct-to-consumer, is becoming more popular with retail brands worldwide with a solid online presence. In this type of direct sales model, customers go directly to the companies to purchase the products they want rather than having their products available through distributors or stores.
Brands like Warby Parker, Stitch Fix, and Dollar Shave Club are examples of DTC brands killing this model.
Every sales model has its pros and cons. So, how do you know if the direct sales model is right for your business?
Take a look at these two lists, and then determine for yourself whether the benefits outweigh the challenges:
When the direct sales model works for your brand, here are the benefits you’ll see:
The direct sales model gives you control but also entails a hefty load of responsibility. Here are some of the disadvantages you’ll need to consider:
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So you’re an entrepreneur wondering which direction to take with your startup or company. The direct sales model takes more time and effort—so can it work for a startup?
In short, absolutely. Here are some clear signs that your business is a good fit for the direct sales model:
While it may be slightly more intimidating, direct sales can reap rich results for entrepreneurs who hustle to get things done.
Are you a startup founder wondering how to break into sales? Check out the Startup Sales Playbook, with insider tips from Steli Efti, CEO & Founder of Close.
