This part is covered in more detail in sales channel management. There are many other factors, which govern the decisions around sales channel mix. In this page, we will be covering the linkage of sales channel to sales cost and profitability (SCAP) in this page.
Sales channel mix related to sales profitability are influenced by following factors/Success drivers:
Sales productivity to cost ratio:
The straight question is – How many cents I have to spend per dollar of sale?. The sales channel, which can provide you a lower expense figure, will be preferred.
Variability and predictability of the cost:
This is typically a preferred mode. A sales channel, which can provide variability to sales cost and compensation, is more preferred especially in the dynamic sales environment and/OR cyclical nature of business. The predictability of sales cost is more to do with the marketing conditions and capabilities of your sales channel. For example, a 3rd party distributor with good network and distribution, is able to give a more predictable estimate of the cost of expanding into new locations.
Sales channel Synergies:
There is a again a cost as well as business strategy aspect to it. A sales channel mix which synergizes across channels leads to lower costs, is a preferred arrangement. For example- you can have tele-sales channel, which can also generate leads for direct sales channel OR a you can have 3rd party distribution channel, which can also provide sales closure (collecting filled-up application forms). This helps you to control costs.