Channels of distribution

Channels of distribution are the routes through which products travel from creators to end customers. In software, this includes direct sales, app stores, resellers, system integrators, OEM partnerships, and marketplaces. Channel strategy determines how customers discover, evaluate, purchase, and receive your product - decisions that shape everything from pricing to customer relationships to competitive dynamics.

Why it matters

Channel choices have far-reaching consequences:

Customer acquisition cost. Different channels have different economics. Direct sales is expensive but high-touch; app stores provide distribution but take significant cuts; partners share revenue but extend reach.

Customer relationship. Some channels give you direct customer access; others create intermediaries. This affects your ability to learn from customers, build relationships, and retain them.

Pricing flexibility. Channel economics constrain pricing. App store fees, reseller margins, and partner requirements all affect what you can charge.

Speed to market. Some channels require minimal setup; others require months of partnership development, certification, or integration.

Competitive position. Channel presence affects where customers find you. Being absent from a channel where competitors are present creates disadvantage.

Types of distribution channels

Direct channels

Self-serve. Customers find, evaluate, and purchase your product without sales involvement. Website sign-up, credit card purchase, self-onboarding. Scalable and low-cost but works best for simpler products.

Inside sales. Remote sales team engages prospects by phone, email, and video. Handles more complex sales than self-serve but more scalable than field sales.

Field sales. In-person sales team works with prospects through extended sales cycles. High-touch but expensive. Reserved for high-value deals.

Indirect channels

Resellers. Third parties that purchase your product and resell to their customers, often adding their own services. You reach their customer base; they take margin.

System integrators. Consulting firms that implement solutions for customers, often recommending and implementing products as part of larger engagements.

Technology partners. Companies whose products integrate with yours, creating mutual benefit. Partnerships drive customers in both directions.

Marketplaces. Platforms where customers shop for solutions - app stores, cloud marketplaces (AWS, Azure, Google Cloud), or vertical marketplaces. Provide discovery but take fees.

OEM/Embedded. Your product is built into another company's offering, often white-labeled. Reach customers you couldn't access directly.

Channel mix strategy

Most companies use multiple channels, with the mix evolving as the company grows:

Early stage. Often starts with direct channels (self-serve plus founder-led sales) to learn what works and maintain customer proximity.

Growth stage. Adds channels that extend reach - marketplaces, initial partnerships, inside sales scaling.

Scale stage. Full channel mix with enterprise sales, global partners, multiple marketplaces, and channel-specific products or pricing.

The right mix depends on product complexity, price point, customer preferences, and competitive dynamics.

Channel economics

Each channel has different economics:

Customer acquisition cost (CAC). What does it cost to acquire a customer through this channel? Self-serve might cost $50 in marketing; enterprise sales might cost $50,000 in sales effort.

Revenue share. What percentage of revenue goes to the channel? App stores take 15-30%. Resellers take 20-40%. Direct costs nothing to intermediaries but everything in internal investment.

Lifetime value impact. Do customers from this channel have different retention or expansion rates? Direct customers might be more engaged; channel customers might be more price-sensitive.

Velocity. How fast do deals close through this channel? Self-serve closes instantly; enterprise deals take months.

Channel conflict

Using multiple channels creates potential conflicts:

Direct vs. indirect. If customers can buy direct for less than from partners, partners stop selling your product.

Partner vs. partner. Multiple partners competing for the same customers may undercut each other or blame you for insufficient territory protection.

Channel vs. product. Features that help self-serve customers succeed might reduce the value partners add, undermining their motivation to sell.

Managing channel conflict requires clear rules, fair economics, and communication. Some conflict is inherent in multi-channel strategies - the question is whether it's managed productively.

Channel selection criteria

Choosing channels involves evaluating:

Customer presence. Are your target customers reachable through this channel? Does the channel serve your market segment?

Economics. Do the channel economics work with your pricing and margin structure?

Effort required. What investment does the channel require to enter and maintain? Partner development, integrations, certifications?

Control retained. How much visibility and control do you maintain over customer experience, pricing, and relationship?

Strategic fit. Does the channel align with your brand, positioning, and long-term strategy?

Digital distribution specifics

Software distribution has unique characteristics:

App stores. Apple and Google control mobile distribution. Their rules, fees, and approval processes significantly impact strategy.

Cloud marketplaces. AWS, Azure, and Google Cloud marketplaces offer enterprise distribution but require integrations and share economics.

API/Platform distribution. Being available through integration platforms extends reach but abstracts away your brand.

Open source. Distribution through open source creates adoption that can later convert to commercial. Different from traditional sales.

Channel and product strategy alignment

Channel strategy and product strategy must align:

Product complexity. Complex enterprise products need high-touch channels; simple tools work self-serve.

Price point. High-value products can support expensive channels; low-priced products need efficient channels.

Support requirements. Products needing implementation support benefit from partner channels that provide services.

Customer preference. Some customers prefer to buy through certain channels. Meet them where they want to buy.

Tools like Klero help product teams understand channel effectiveness by connecting customer feedback to acquisition source. When customers from a particular channel express different needs or satisfaction levels, that informs channel strategy refinement.