There are several options for selling a product or service – direct, bidding, expos, dealer network, partner network, online, referral, affiliate, brand stores, shop-in-shop, etc.
1) Volume: What is the volume of business available in the channel? When is this channel going to get saturated? What percentage of my TAM (Total addressable market) can I get through this channel?
2) Predictability: Is the opportunity and sales closure predictable in this channel? Will this channel survive or sustain in the mid to long term? Do I have a competitive edge in the given channel?
3) Cost of Customer Acquisition: What will be my CAC through the given channel? Where can I maximise my LTV/CAC? Will it give me the unit economics that makes my business model sustainable?
4) Complexity, and ability/expertise: Some channels are more complex than others. And they may need more effort to build and manage them. You may or may not have the ability at the given point in time. Therefore there may be a risk of failure or execution risk in a given channel.
5) One more important aspect about choosing a channel is the impression of the medium in consumers’ minds. Mr. Ram Ray always used to emphasize – “Medium is the message”. The right medium gives (or destroys) the positioning.
At times you have to be present in a channel just to make your presence felt, and at times you have to choose a totally different channel to maximise your margins. You also need to choose non optimal channels to cover your risk of concentration.
Which considerations do you make when you choose a channel for sales/growth of your product/service?