The Direct Sales Model: Is It Right for Your Business?
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.
- What is the direct sales model?
- How the direct sales model works
- 4 direct sales model examples
- Direct sales model advantages and disadvantages
- How to master the direct sales model at your company
What Is the Direct Sales Model?
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 through your sales team.
Direct sales gives companies more control over how their products are being sold, and by whom.
What Is the Indirect Sales Model?
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 out to retailers and distributors. Those stores then do the work of marketing and sales to get people into their stores to buy the clothes.
What’s the Main Difference Between the Direct Sales Model & the Indirect Sales Methodology?
While direct and indirect sales have some overlap, the main difference is the control your company has over the actual sales that are being done.
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.
How the Direct Sales Model Works
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 either be a physical product, a software, or a SaaS product. Or it might be 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, you might have independent agents running their own sales machine (like real estate and insurance agents).
Next, those salespeople hustle to sell the product you’ve given them. For an inside sales team at a B2B SaaS company, they’ll work 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. For independent sales agents in the direct sales model, they’ll work on their own 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 the deals they’ve closed. The company decides when to increase or decrease efforts, if they should pivot their sales process or target audience, and how much commission their salespeople earn for each sale.
4 Direct Sales Model Examples & Types
The direct sales model can look very different depending on the company, the product, and the sales team that’s running down new deals.
To give you a better idea of how this model works, here are 4 common direct sales model examples you’ll see in the real world:
1. B2B Sales
B2B companies who 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.
2. Real Estate Sales
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 make sales by drumming up some of their own business or working their own playbook to sell successfully, but they still earn based on commissions coming down from the main company after every sale.
3. Insurance Sales
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.
In insurance, the interesting part is that the sales are recurring. So, an insurance agent earns a commission off the sales they make, but each new sale has the potential to earn them more over time as they develop and maintain a relationship with the customer.
4. Host Sales
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 actually needed, then you know what host sales are.
In this direct sales model example, the company works with a large number of brand advocates (not necessarily salespeople by profession) who try to sell the product within their network of friends and acquaintances.
5. D2C Companies
D2C, or direct-to-consumer, is becoming more popular with retail brands across the globe with a solid online presence. In this type of direct sales model, the 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 that are absolutely killing this model.
Direct Sales Model Advantages and Disadvantages
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:
Benefits & Advantages of the Direct Sales Model
When the direct sales model works for your brand, here are the benefits you’ll see:
- Better control over your brand image: You’re in control of sales, so you’re in control of how customers see you.
- Ability to build relationships with customers: When you’re selling through another distributor, the customer isn’t loyal to you—they’ll be loyal to where they found your product. Direct sales offers the ability to form direct, deeper relationships with your customers.
- Easier collaboration across different teams: If you’re looking for better alignment between marketing, sales, product development, and other customer-facing teams, you’ll want to keep sales directly under your control.
- A more targeted approach to customers: Direct sales means direct access to your customers. That means you don’t need to rely on a distributor’s sales data to tell you how your product is being received by the market. You can take your own data and use it to adjust and adapt to target the right customers.
- Ability to pivot faster to meet market needs: With real-time updates on customer data, you can make faster decisions in your sales process (and your product) to meet the needs of your customers.
Challenges & disadvantages of the direct sales model
The direct sales model gives you control, but that also entails a hefty load of responsibility. Here are some of the disadvantages you’ll need to consider:
- Increased responsibility for distribution: When you rely on a distributor, marketing and sales fall under their umbrella. With direct sales, you need to build out separate teams for marketing, lead generation, and sales, as well as organize strategies for each.
- Extra costs for recruiting and retaining top talent: Hiring can be fierce. If you’re planning on developing a direct sales model for your business, you need to be willing to fight to keep top talent in your company.
- More leadership roles necessary: Along with building marketing and sales teams, you’ll need leadership for these teams. That means hiring a full-time sales director, as well as someone who can handle operations for both of these teams.
- Extra time spent developing and using a brand voice: Having a strong brand voice is key to success in direct sales. While it’s a great advantage when you can pull it off, it does require effort to do it right.
Is the Direct Sales Model Right for Your Business?
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:
- Your product can easily be discovered and purchased online
- You have marketing and sales experts in your founding team (or you can add them easily)
- Your company already has a strong brand voice
- Your product already has a solid following
- You, as the startup founder, are ready to get your hands dirty and sell your product directly to customers (and if you're an early-stage founder, we absolutely do recommend that you get involved in selling your product)
While it may be slightly more intimidating, direct sales can reap rich results for entrepreneurs who are willing to 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.