Distribution channels
In short
Distribution channels are the paths through which a product or service reaches customers. They can be direct, where the company sells to the buyer itself, or indirect, where resellers, partners, or marketplaces handle part of the sale.
For software, the channel choice shapes price, sales cycle, margin, and how close you stay to the customer. It is a core part of a go-to-market strategy and should follow from who your buyers are and how they prefer to buy.
Types of distribution channels
Direct channels
The company sells through its own team or site. Examples include field and inside sales, and self-serve signup.
- Pros: Full control over pricing, messaging, and customer data.
- Cons: You carry all the cost of sales and coverage.
Indirect channels
A third party sells or delivers on your behalf. Examples include resellers, value-added resellers, distributors, system integrators, and app marketplaces.
- Pros: Wider reach and local expertise without hiring a large team.
- Cons: Lower margin per deal and less visibility into the customer.
How to choose a channel
- Buyer behavior: Do buyers research alone, ask peers, or rely on an advisor?
- Deal size: High-value deals often justify direct sales; low-priced products suit self-serve or marketplaces.
- Complexity: Products that need integration or training may need partners.
- Geography: New regions are often entered through local partners first.
Example: adding a partner channel
Say a software company sells directly to mid-sized firms in one country. To enter a new region, it signs a reseller that already serves those buyers. Revenue per deal is lower after the partner margin, but the company avoids hiring and learning the market from scratch. It then compares partner-sourced and direct deals on close rate and retention before expanding the program.
Common mistakes
- Adding channels before the direct motion works.
- Letting partners and direct reps compete for the same account.
- Not training or supporting partners.
- Judging channels on volume without comparing margin and retention.
Distribution channels vs. marketing channels
Distribution channels deliver the product or complete the sale. Marketing channels, such as email or ads, create awareness and demand. A single route, like a marketplace, can play both roles.
Distribution channels FAQs
What are distribution channels?
Distribution channels are the routes a company uses to deliver its product or service to buyers. They include direct sales, self-serve websites, resellers, distributors, partners, and online marketplaces, and each affects price, reach, and control over the customer relationship.
What is the difference between direct and indirect distribution channels?
Direct channels mean the company sells to the customer itself. Indirect channels use a third party, such as a reseller or marketplace. Direct gives more control and margin; indirect gives more reach with less internal headcount.
What are examples of distribution channels in SaaS?
Common SaaS examples are a direct sales team, a self-serve website, resellers, referral and technology partners, system integrators, and cloud or app marketplaces. Many companies combine several, using each for different customer sizes or regions.
How do you choose the right distribution channels?
Start from how your buyers prefer to find and purchase. Then weigh deal size, product complexity, geography, and the margin you can afford to share. Test one channel at a time and compare close rate, margin, and retention.
