Electronics Firm Retail Channel Strategy

Building Retail Channel Strategy for A
Global Electronics Company
Date

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Copyright © by XYZ, 2000.
3
• Identify broad retail trends and analyze
the nature of specific retail channels
across Client X’s key categories
• Identify the impact on Client X of key
retail channel trends, issues, and
environmental changes
• Develop retail channel strategies to
build segment focus, profitability, and
competitive strength
• Identify areas of opportunity to build
retail channel relationships
• Identify broad retail trends and analyze
the nature of specific retail channels
across Client X’s key categories
• Identify the impact on Client X of key
retail channel trends, issues, and
environmental changes
• Develop retail channel strategies to
build segment focus, profitability, and
competitive strength
• Identify areas of opportunity to build
retail channel relationships
Four key objectives were addressed within a carefully managed scope
What do retailers expect from Client X
from a relationship and service
standpoint?
What are Client X’s competitors doing
to address changing retail models?
How are consumers changing and what
can Client X do to grow consumer
value?
How well is Client X positioned to
execute its channel strategy?
What do retailers expect from Client X
from a relationship and service
standpoint?
What are Client X’s competitors doing
to address changing retail models?
How are consumers changing and what
can Client X do to grow consumer
value?
How well is Client X positioned to
execute its channel strategy?
Project ObjectivesProject Objectives Project FocusProject Focus
This document is a partial preview. Full document download can be found on Flevy:
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Executive Summary:
Client X has a clear understanding of the retail channel environment
Retail Channel Foundation and Market Trends
• A broad set of retailers across channels are aggressively pursuing digital
merchandising strategies with very different business models, and vendor needs for
financial, strategic, and operational results
• We expect the digital market to evolve in at least three stages of market penetration;
Significant growth in Mass Merchant (Discount) and Direct to Consumer (B2C)
channels will not likely start until Stage 2 or 3
• Nine key retailer value drivers have been identified and evaluated, with “account
planning and management” growing in importance in the digital era, yet few competitors
currently serving these needs in an acceptable manner
• At least four levels of competitors exist in retailer and consumer minds, with Tier 1
competitors (as defined by strength of digital product, account servicing, and brand
image) commanding better trade support and higher profitability than weaker players
• A consumer value framework with 21 loyalty dimensions illustrates the types of
opportunities for retail-vendor partnerships that build profitable customer relationships

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Contents
• Channel strategy project Overview
• Review of channel dynamics and key trends
• Review of targeted retailers
• Review of consumer value proposition needs
• How competitors are going to market
• Strategic opportunities and examples of tactics
• Audit of existing channel plans and next steps

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The Retail Industry is facing five significant trends which are driving increasing
pressure for performance, competition, and speed of change.
Tighter retailer-vendor relations
for supply chain optimization
Tighter retailer-vendor relations
for supply chain optimization
• Free and easy consumer access to information and shopping convenience
• Fickle consumer loyalty based on most recent shopping experience
• Technology enabling “personalized market-of-one treatment”
• Retailers’ desire to enhance store staff job profiles and retention
• Free and easy consumer access to information and shopping convenience
• Fickle consumer loyalty based on most recent shopping experience
• Technology enabling “personalized market-of-one treatment”
• Retailers’ desire to enhance store staff job profiles and retention
• New channels such as Internet and Contact Center growing in consumer use
• Increasing customer expectations for channel consistency / personalized service
• Low cost and ease of leveraging multi-channel technology
• Multi-channel operations require evolving merchandising and service strategies
• New channels such as Internet and Contact Center growing in consumer use
• Increasing customer expectations for channel consistency / personalized service
• Low cost and ease of leveraging multi-channel technology
• Multi-channel operations require evolving merchandising and service strategies
Greater customer expectations
for more personalized service
Greater customer expectations
for more personalized service
• Retailers battling for consumer traffic, comp store sales increases, margin growth
• Vendors mitigating listings reliance on 1-2 dominant retailer per channel
• Consumer demand for (one stop) shopping convenience and time savings
• Opportunity for brands to partner together to expand reach and contact frequency
• Retailers battling for consumer traffic, comp store sales increases, margin growth
• Vendors mitigating listings reliance on 1-2 dominant retailer per channel
• Consumer demand for (one stop) shopping convenience and time savings
• Opportunity for brands to partner together to expand reach and contact frequency
Multi-channel integration to
provide one face to customer
Multi-channel integration to
provide one face to customer
Category proliferation
across retail sectors and
reinvention of formats
Category proliferation
across retail sectors and
reinvention of formats
• Margin pressures require cross-enterprise optimization
• Dramatically decreased transaction costs based on electronic processing
• Advent of web-based marketplaces to facilitate real-time buying and selling
• Margin pressures require cross-enterprise optimization
• Dramatically decreased transaction costs based on electronic processing
• Advent of web-based marketplaces to facilitate real-time buying and selling
Retail Trend Key Driver

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Adding in the next eight largest retailers, 77 % of CE sales are made by the top 16
retailers
The Next Top 8 CE Retailers in 2000
3,096
1,1151,174
1,4261,470
1,568
2,092
2,634
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Sales($millions)
Office
Depot
Kmart Sam’s
Club
Costco Toys R Us PC
Connect
Office
Max
Fry’s
# of stores 851 2,105 475 349 708 0 950 17
Est Format Size 7,000 ft2 2,000 ft2 2,000 ft2 2,000 ft2 1,000 ft2 N/a 2,000 required
CE Sales/Store* 3.6 1.3 1.4 4.5 2.1 N/A 1.2 65.6
Growth (%) 12.6 1.8 8.1 10 -3.6 34.9 7.2 14.9
Digital Breadth Computer /
HHP Focus
Limited
Digital
Limited
Digital
Limited
Digital
Game Focus
(ie Nintendo)
Computer
Focus
Computer /
HHP Focus
Computer /
HHP Focus
* In millions
Source: TWICE Market Research: “Top 100 CE Retailers”, 2001

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In the United States, retail channels are typically differentiated based on category
breadth and price points of merchandise carried
Regional Electronic
Specialists
Electronic
Superstores
Electronic /
Computer
Specialists
Department
Stores
Mass Merch /
Discounter
B2C
Channel
Description
Destination retailer,
CE is 90-100% of
store; ~ 16,000 sq ft
CE - 100% of store
~ 40,000 sq ft
CE ~50% of store
RadioShack ~ 2000
sq ft; CompUSA –
35,000 sq ft
CE ~5-10% of
store ; ~ 5000 sq ft
CE ~5-10% of store;
~ 2000 sq ft
CE - 5 – 100%;
No Stores
Examples of
Retail Partners
The Wiz, Bernie’s HH
Gregg, Ultimate,
Fry’s
Best Buy, Circuit
City
Comp USA,
RadioShack
Sears Wal-Mart Amazon.com
Client X.com
Category
Assortment
Large variety and
SKU count
specializing in the
high end of bleeding
edge digital
Largest assortment
of CE across all
product categories.
Focus on middle
strata of product
quality. Some
high-end offerings
Highly specialized
electronic or
computer
merchandise.
Large variety,
skewed toward the
middle of the road
consumer. Few, if
any, high end
offerings, and
mostly low to
medium price
points
Limited low-middle
end offering.
Judicious selection
of products based on
price, value, and
volume potential
Stringent vendor
guidelines around
ability to efficiently
ship and service
Multiple category
and product listings
sold on line
Ability to
merchandise unique
products, slow
sellers, and skew
offer to unique
consumer profiles
and interests
Price profile High End pricing
(premium service)
Value pricing
based on large
selection with
frequent
promotions
Variable pricing from
high value based on
selection and
promotion, to high
pricing on electronic
basics
Mid-tier pricing
based on good
selection,
promotion, and
high cost base
Very aggressive
pricing to drive
volume
Average pricing
Apparent
Consumer
Profile
Upscale, early
entertainment tech
adopter, significant
disposable income
More college
educated, tech-
comfortable,
excellent
disposable income
More college
educated, PC tech-
enthusiast, good
disposable income
More non-college,
tech-interested, fair
disposable income
More non-college,
blue collar, tech-
wary, limited
disposable income
More college
educated, tech-
comfortable,
excellent disposable
income
Declining price points and consumer socio-demographics

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Carrier retail stores and cellular specialists dominate the Hand Held Phones (HHP)
market, but sales growth in these channels has leveled off and new sales growth
channels are being sought
* Includes online sales, direct mail, telemarketing, catalog sales and TV shopping
networks
US Consumer Handset Market Unit Share by Channel,
Q4 2000
Electronic Specialty
Carrier Store
59.7%
Cellular Specialist
12.3%
8.3%
Mass Merchants
6.7%
Department Stores
0.4%
Remaining Channels*
12.6%
Source: XYZ Research and Analysis; TWICE Market Research, 2001
• The shift towards purchasing cellular/pcs phones through
direct carrier channels has leveled off: Most carriers are not
opening new stores in existing markets, but are seeking
growth through channels such as national retail chains
• About 50% of Sprint’s business is currently with national
retailers, while Verizon’s current focus is with smaller
agents. Both these carriers are trying to emulate each
other’s distribution strength to have a more balanced
channel strategy
• Product convergence such as MP3 Phone and PDA Phone
will add complexity to the merchandising and channel
decision, and may encourage retailers and HHP vendors to
work more closely together. The value added at POS may
increase as product explanation becomes more sought after
by consumers. As a result, the carrier message regarding
packages may become relatively less important
• Sophisticated Internet store-fronts are becoming an
important new sales channel for wireless carriers, not only
as a standalone retail opportunity but also as an
informational complement to traditional stores.
• Carriers are partnering with online marketers to increase
reach (Sprint PCS and Barnes&Noble.com/Verizon and
Barpoint.com)
• Recent Competitor 1 alliance could re-strengthen a key
competitive brand
Wireless Distribution Trends

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On-line purchases of CE products still accounts for less than 3% of total sales, and is
much less significant for management focus than the top 10 retailer sales concentration
• 58% of US households on-line (74% by 2005)
• 56% of on-line consumers make B2C
purchases (13.5 million households)
• Total on-line sales $27 billion (1999), $45
billion (2000), $ 65 estimate (2001)
• 80% gather information on-line about the CE
products they buy
• Consumers want convenience, access,
avoidance of retail hassles
• On-line CE spending $ 2.0 billion in 2001,
$ 5.5 in 2004 (IDC)
• Two on-line CE retailers of interest,
– Buy.com $675 million, 1 million skus
– Amazon $600 million, 2500 sku’s
Total CE Sales Top 10 retailers
$ 84.5 billion $ 57.0 billion
66%
(Top 25 retailers account
for 84% 0f the market)
$ 7 billion $ 970 million
8.3 % 1.7%
Internet portion
$ 2 billion, <3%
($5.5 billion by 2004)
“BrickandMortar”
RetailChannels
“ConsumerDirect”
RetailChannels
Sources; TWICE magazine, Forrester, Jupiter, BCG E-Marketer
Estimated Channel Dynamics for 2000

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We expect the penetration rate for digital products to be based upon price
commoditization in key digital categories, and manufacturers ability to rationalize
analog sku’s from their assortments
Years Since Introduction
U.S.HouseholdPenetration(%)
0
10
20
30
40
50
60
70
80
90
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
PC
Camcorder
Internet/On-line Services
DBS
VCR
Color TV
B&W TV
Cellular
CD Player
Penetration Rates of Consumer Electronics Products & Services
Sources: Consumer Electronics Manufacturers Association; Veronis, Suhler Associates; D&T Nielsen Study

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In Stage 2 of digital penetration and beyond, Client X will also need to monitor
creative new channel approaches
Potential Go-Forward Trends Implications or Options for Client X
• Mass Merchants such as Wal-Mart or Target
undertake strong “Digital” launch (ahead of typical
penetration curve) to regain channel strength
• Key brick and mortar players develop aggressive
multi-channel capabilities to serve consumers in a
B2C manner (see Future Shop / Canada)
• Major American players expand internationally
(Best Buy has announced significant expansion
into Canada)
• Internet distribution is consolidated with specialists
such as Amazon (Toys R Us, Barnes & Noble
announced)
• New convergence models whereby digital products
are bundled
• Consolidation of higher end electronics specialist to
create a national player
• New distribution models such as cable companies
and home builders becoming distributors of TV’s
(sale or lease)
• Potential need to service this Mass channel to reap
volume benefits, perhaps create another brand for
this channel to take advantage of sales opportunity
without adverse effect on Client X brand name
• Implement ways to share/move Client X website
researcher customers to the key retailer partner’s
websites for purchase transactions (ie, leading
edge functionality such as Comergent solution)
• Potential need to coordinate Client X account
planning and management across national borders
• Create “one-box” consumer solutions such as a
digital still camera and photo-quality printer as a
peripheral package
• Provide additional upscale brand offering exclusives
to these high-end players. As consolidation occurs,
the resulting combined entities will then have
consistent Sku assortments
• Proactively seek-out these companies with
proposed program offerings and solution packages

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Targeted retailers summary
Key Observations and Issues Implications for Client X
• Existing retailer digital relationships have been
established with promising initial results
• Retailers still have a negative or at least suspicious
brand image and trust of Client X due to the historical
market follower approach with “me-too” opening
price-point products
• Nine value drivers (with multiple sub-components)
appear to influence retail image and loyalty
• Retailers stress that no vendor is doing an
adequate job of collaborative planning
• The influence of the store management and sales
staff on the prospective customer at the point of
purchase is very significant
•Retailers consider supply chain (delivery)
execution to be a key component in the
determination of vendor reliability
• A toolkit of financial levers such as listing and sell-
through incentives must be considered when building
retail partnerships and seeking consumer success
• No manufacturer routinely and pro-actively provides
a comprehensive score card to its retail partners with
contribution, market share, trend, growth and supply
chain performance information
• Client X divisions have independently
succeeded with key retail listings, but going
forward, may be able to help each other further
achieve growth objectives in targeted accounts
where one division has a strong relationship or
brand credibility
• In order to distance itself from this follower
image, Client X must prioritize new product
releases and stimulate innovation in both
product and trade relations.
• Client X needs to begin conducting 2-3 year-out
collaborative planning sessions with their retail
partners.
• Client X must begin communicating effectively
with, and training the retail store management
and sales staff.
• Client X needs to establish credibility by
consistently delivering in two critical areas:
– Complete, on-time PO quantity delivery.
– Timing of new product introductions.
• Client X can exceed retailers’ expectations by
providing regular (quarterly or monthly) reporting
as a demonstration of its sophistication,
concern, partnership and value-add capabilities.

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Initial Retail Partner Landscape – these accounts may have selected or niche
opportunities for all three divisions
Product Category Electronics Only Mass Merchants Consumer Direct Electronics/Appliance
Financial (1999)
Total Sales:
Electronics
Sales:
Sales/Average
sq ft:
Sq. feet devoted
to electronics:
# of stores:
$ 603,000
$ 603,000
N/a
N/a
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$ 166,809 million
$ 3,935 million
N/a
N/a
1722 discount stores,
868 Superstores and
472 Sam’s Club
$ 2,762 million
N/a
N/a
N/a
Online only
$ 1,300 million
$ 570 million
N/a
N/a
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Strategic
Attractiveness
•To create the first
truly 100% digital
cable
marketplace
(Cablevision,
owner is
committed to this)
•Feature a great
selection, high-
quality merchandise,
friendly service and,
strong commitment
to “Every Day Low
Prices”.
•The # 1 Internet book,
music and video
retailer
•Goal to become the
best place to buy, find
and discover products
and services online
•To be everything to
everyone-variety in
offering (vacuums,
electronics, drug
store items etc.) at
low prices
•Service not a strong
point
Significant
Developments
•Cablevision
(owner) continues
to utilize the WIZ,
which accounts
for about 50% of
high-speed data
subscriber
additions, as its
primary retail
sales channel
•Amazon and Wal-
Mart discuss
possible alliance
•Amazon and Wal-Mart
discuss possible
alliance
•DirectTV selects
Amazon as retailer
•Amazon to open
Wireless Phone Store
•Ranked on Forbes
500 list of private
firms in 2000 as #
135
•Notoriously bad
service is chronicled
on unaffiliated web
pages
Source: Onesource Business Browser, TWICE market research, Edgar 10K filings, Deutsche Bank, March 2000

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Order
Online
Accessories Order
Online
and
pickup
at store
Online
catalog
Product
Info
Digital
info
Store
locator
Warranty
Info
Retailer
Credit
Card
Technical
Support
Online
Help
Installation
and
Repairs
Overall
Impact
8=high
1=low
Best Buy 8
Circuit City 7
RadioShack 5
CompUSA 5
Sears 6
Wal Mart 5
The Wiz 3
Bernie’s 2
Fry’s 1
Office Max 4
Amazon.com 7
While most retailers have established an on-line customer order (B2C)
capability, the leading “Click and Mortar” players (Best Buy / Circuit City)
are ahead of their peers in overall on-line presence
Very strong
Present
Absent
Note: Ultimate and HH Gregg sites are under construction; Source: XYZ Research and Analysis;
Active B2C
Presence
Commitment
To Digital
Commitment to
Customer Service

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Client X only receives “average” ratings on its ability to serve retailers’
most important value drivers.
Value Proposition
Element
Importance
to Retailers
Current
Rating Observations / Comments
1. Financial
Contribution
High Medium To enhance brand perception, stimulate trade listings, and foster POS sell-through,
Client X must leverage its “toolkit” of trade promotion incentives, and build programs
to stimulate trade pull and push opportunities
2. Supply Chain
Execution
High Low Retailer concern exists as to whether Client X will take this highly visible issue
seriously, build capabilities and tools, and deliver consistently
3. Electronic Business
Communications
Medium Medium Client X typically meets minimum requirements of PO Receipt, PO Changes and
providing ASN’s, but has improvement potential with other functions (Invoicing, EFT,
Training) and will need to continue building electronic communication capabilities
4. Strategic Planning
and Market
Information
High Low Long-range collaborative planning is strongly desired by key retail partners, but is not
effectively provided today. Information around product innovation, consumer and
competitive trends, promotional opportunities, and unique offers are highly demanded
5. Weekly Account
Management
High Low Communication quality and timeliness is often viewed as inadequate compared to
retailers, due to communication lapses in inventory availability and new product
launch commitments.
6. Sales Facilitation,
Training and
Merchandising
High Low While retailers acknowledge that store training and detailing is most challenging
(especially in multi-store chains), they understand the loyalty impact of the retail sales
force, and are open to a variety of training tactics aimed at their in-store staff
7. Promotions
Management
High Medium Coordinated annual marketing and promotion planning is highly desired by retailers,
but not being aggressively pursued
8. Post-Purchase
Support
High Medium Product returns and customer satisfaction complaints are generally very low. Some
concern about Client X readiness to move from a “repair focus” to a “replace focus” in
handling product issues
9. Customer Loyalty
Management
Medium Medium Retailers are open to direct Client X contact with consumers providing it does not
undercut their ability to sell products (including B2C) and extended warranties.

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Retailer Quotes – Perceptions of Client X
“Client X has strong core competencies in product innovation and
manufacturing, although they have historically followed the marketplace
with ‘me-too’ products.”
“We view them as a sleeping giant and wonder whether they will actually do
what’s needed to be number one.”
Source: Retailer Interviews

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Client X should develop an overall retail partner attractiveness framework covering
financial, image, partnership, and operational elements
• Retailer attractiveness scorecard would include evaluations on the following dimensions:
– Financial model – the existing account P&L report
– Retail image / Brand positioning
– Strategic partnership / commitment
– Ease of serving (doing business)
– Operational capability
• Development of such a score card would provide many benefits to Client X:
– An ongoing side-by-side evaluation framework that would highlight changes in the retailer’s
relative contribution, positioning and importance over time
– An objective tool that can be used to evaluate potential future retail accounts that Client X may
be considering
– The future candidates are benchmarked against the best and the worst of the existing accounts

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In this Consumer Section, we will answer the following questions:
• What is important to the electronics consumer in terms of “value proposition drivers”?
• What are the key touchpoints though which a manufacturer / retailer partnership delivers these
value propositions?
• What are consumers’ feedback on their digital purchasing habits?
• How well is Client X delivering on these value propositions?

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Client X and its channel partners must now develop consumer value propositions
that reflect the 21 value elements
Added-Value Drivers
Client X
Personalized
Recognition
and Loyalty
Management
Digital Value
Proposition
Simplicity
Innovative
Digital
Technology
Digital Needs
Richness of
Product
Functionality
and Design
Brand
Credibility in
the Market
Basic Expectations
OpportunityforDifferentiation
Client X Managed
Retailer
Personalized
Recognition
and Loyalty
Management
Product
Assortment
Basic
Expectations
Added-Value Drivers
Complementary
Product
Solutions
Coordinated
Connectivity
Solutions
(Home, mobile,
Office)
Entertaining
Shopping
Experience
Consumer
Credit Terms
Multi-channel
Product
Availability/
Ubiquity
Retail
Employees
Knowledge and
Influence
Service Drivers
Extended
Warranty
Support
Relevant Pre-
purchase
Information
Value for
Money
After-sales
Customer
Service
Purchase
Convenience/
Simplicity
Basic Expectations
Warranty
Management
Digital Brand
Image
Co-Managed with Retail Partners
Retail
Managed
Service
Drivers
Added-Value
Drivers
Home
Delivery and
Installation
Initial framework for validation and refinement

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Consumer focus groups have identified the four particular value proposition
elements with the greatest improvement potential
Value Proposition
Element
Key Consumer
Touchpoint
Rating of
Client X
Observations / Comments
Value for Money Product pricing; Consumer
Reports
Low Due to lack of consumer awareness of the Client X brand, low
price is correlated to low quality and the brand not seen as value
for money
Retail employees
knowledge and
influence
In-stores; sales person Low Inconsistent delivery across channels; regional specialists have
more knowledgeable sales staff compared to national
superstores,
Richness of Product
functions
Consumer Reports; in-store
product demos; Client X web
site; retailer web site
Medium Client X should introduce product derivatives with rich
functionalities at comparable price points to tier 1 brands such
as Competitor 1 and Competitor 2
Purchase simplicity Web sites; Advertising; sales
person
Medium Collaborate with retailers to provide easy and user-friendly pre-
purchase information (retail locator, brand comparisons, 3rd
party appraisals) to consumers
Digital simplicity Consumer reports; trade and
consumer magazines; Sales
people
Medium Lack of consumer knowledge on digital products; Opportunity for
Client X to leverage Internet for consumer education of digital
products and capture consumer share of mind
After sales service Service center; product Medium Consumers would like the manufacturers’ to back their products
with longer warranties; Majority of the consumers do not want to
spend on extended warranties sold by retailers
Brand image All customer touch points Low Low awareness translating to diffused brand image; No
consumer had unaided ad awareness and less than 5% had
aided ad awareness

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Competitor summary – focused analysis
Key Observations and Issues Implications for Client X
• Four distinct tiers of competitive brands
exist, with trade loyalty and apparent
profitability varying significantly across tiers
• Based on its low-end legacy, Client X’s CE
products sit in Tier 3, however Client X’s
telecom and IT product divisions have
succeeded in achieving “Tier 2 status” with
digital credibility
• No competitor is meeting all of a typical
retailer’s value proposition drivers.
Competitor 1 for example sits in Tier 1, but is
viewed as arrogant and non-collaborative
• The top tier players have created derivative
sub-brands to provide customer choices and
further increase profitability
• Client X needs to execute a phased move up
initially to Tier 2, and ultimately to a Tier 1
position in order to optimize profitability and
achieve its leadership goals
• The Telecom and IT division success should be
leveraged to help move the CE division upward
• Client X can leap-frog competitors in the
retailers’ eyes by providing the best total
package of execution against the key value
propositions
• Revenue, gross margin % and gross margin $
production will improve due to the higher price
points that can be commanded
• Client X needs to take advantage of the
differentiation, channel conflict reduction and
potential increased profitability benefits that
these sub-brands can provideThis document is a partial preview. Full document download can be found on Flevy:

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Attainment of a Tier 1 brand status should result in improved
net product profitability
• Client X brand image
varies by division, but all
three have potential to
rise up to Tier 1 status
• Tier 1 brands can enjoy a
price premium of up to
20% over lower tiers,
translating to incremental
gross margin to retailers
and to the manufacturer
Source: XYZ Research and Analysis
ILLUSTRATION
DETAILED ANALYSIS
REQUIRED
Graph removed during cleansing to protect the client

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Client X’s telecom lineup is clearly in the forefront with retailers, however presence
is secured and controlled by carrier
Best
Buy
Circuit
City
Radio
Shack
Comp
USA
Wal-
Mart
Amazon Wiz
Competit
or 8 4 4 3 3 3 4 3
Client X
4 4 4 4 1 4 4
Competit
or 9 4 4 3 4 1 4 4
5= Strategic Partner (selection is both broad across categories and deep in functionality)
4= Strong presence (strong merchandising in at least one category)
3= Good presence (selected items are well displayed and competitive against others)
2= Some presence (selected items displayed, but lacking impact)
1= No apparent presence of the brand in the store
• There are no more than three carriers at any single retail outlet
• Client X has a dominant presence due to Sprint PCS, but Competitor 9 is the most dominant brand
cutting across carriers
• According to sales people, consumers are more interested in the rate plans than on the hand sets
• The Competitor 1 Alliance needs to be closely monitored
RETAIL LISTINGS ANALYSIS (Telecom)

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Client X requires a proactive customer call center strategy to
become a leader in the digital market place
Pre-
purchase
product
info
Digital
focus and
eductaion
Good
overview of
where to
buy
IVR quality Where to
repair
Multi-
lingual
Queue
length
CSR
knowledge
CSR
friendliness
Call
center
timings
Overall
Impact
Competitor
1
7
Competitor
2
3
Competitor
8
5
Competitor
3
5
Competitor
4
5
Competitor
9
1
Client X 3
Competitor
6
5
Competitor
5
1
Competitor
7
7
= Very strong
= Average
= Poor impact

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Perceptions of Client X’s Competitors – Retailer and Consumer quotes
Source: Retailer Interviews; XYZ/Client X Consumer focus groups, April 2001
• Text deleted during cleansing.

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In the section, we will answer the following questions:
• What are the key retail channel issues facing Client X today?
• What channel strategies could address the issues raised, and with what types of tactics?
• On a relative basis, how important is each strategy?
• How capable is Client X today at implementing each strategy?
• To what degree is management focused on each strategy?

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Our recommendations and next steps are based on the following channel strategy
assumptions
• Client X has developed a leading edge assortment of digital consumer products, in terms of
functionality, design, and value
• Client X plans to leverage its digital product assortment to build significant channel sales growth, in
the range of 2-3 times the current sales base
• A profitable business model (combination of net product profit and volume) is attainable with a digital
product focus and minimal analog listings
• Client X divisions have no underlying barriers to work together where market synergies exist
• Flexibility exists to manage the marketing mix between global brand investments and trade or
consumer-focused promotion
• Supply chain capacity exists to meet aggressive channel demand requirements and flexibility exists
to create retailer-specific SKUs or brands

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Strategy Theme:
Disciplined Channel Growth
Key Issues Specific Strategies Examples of potential tactics
• Weak communication links and
practices exist between divisions,
resulting in lack of awareness of each
other’s skills, strategies and market
learnings
• Channel execution is not coordinated,
periodically resulting in missed
opportunities for retail synergy, and in
some cases, risk of tarnishing trade
relations and brand image and sales
momentum
• Retailer expectations on new products
are mis-managed
• Formation of cross-divisional task force
to identify and execute mutual
opportunities with key channel partners
• Creation of communications
infrastructure to share ideas, news, and
learning about mutual issues and
opportunities
• Annual conference and quarterly
update meeting of key channel
managers to compare strategies
and learnings
• Coordinated account plans where
divisions are serving one retailer
• Coordinated retail executive
interaction at strategic and
corporate levels
• Cross-divisional success metrics /
scorecard to monitor and manage
synergy and risk opportunities
Relative Importance Current Capability Current Management Focus
High Low Low
Strategy 3, Implement Cross-Divisional Channel Opportunities

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Strategy Theme:
Retail Loyalty Management
• While retail sales staff play the most
influential role in the consumer
purchase decision, and they proactively
go to web sites for information, Client X
lacks a cost-efficient web-based
interactive training program
• Retailers believe that no single
manufacturer does a good job on
training
• As product convergence matures, retail
staff training will become even more
complex and important across divisions
• Web-based capabilities and aggressive
program for interactive retail sales staff
training, training material development
and sales support
• Aggressive mini-trade shows and cross-
category training seminars for targeted
retailers (core component of key
account planning)
• Client X managed sub-contracted in-field
detailing force on a regional and store
basis (coordinated across divisions
where practical)
• On-line training / technical support
information and e-newsletter
• Interactive call center help desk
• Retailer-specific sales tips / ad-ons
/ product solutions
• Development of training courses in
the retailers’ format that can be
easily integrated into their existing
process
• Combine detailing activities for all
Client X divisions under one group
High Low Medium
Strategy 6, Turn-Key Retail Staff Training

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Strategy Theme:
Channel Support Infrastructure
• While positive usage experience with
brands plays an influential role in future
brand purchase decisions, Client X
lacks the ability to directly identify and
reach out to its loyal consumer base
• Independent customer loyalty
strategies are being pursued across
divisions
• Proactive customer loyalty marketing
initiative based on a cross-divisional
customer database (collected through
warranty registration, other means)
• Limited B2C sales (in Stages 1-2)
through retail partner web sites (explore
Comergent opportunity)
• Evaluate longer term (Stage 3) direct
sales to consumer, either through direct
B2C or direct Client X retail stores
• Proactive communication
• Credit / Leasing programs
• Aggressive warranty registration
incentives
• Product bundling offers
• Post purchase reinforcement
• Low margin / subsidized sales of
accessories across divisions to
generate consumer database
Medium Low High
Strategy 9, Proactive Consumer Loyalty Marketing

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A Client X Self Assessment Scorecard for each key retailer would
demonstrate awareness and concern about Client X’s
contribution to their business
Global Client X Contribution
to:
Best Buy Company, Inc.
Home
Products
Office
Products
Mobile
Products
Total
Report Period: 1/1/01 – 3/31/01
Comments
Financial Contribution
Elements:
Total Revenue $ $239,341 $87,523 $24,096 $350,960 +6% over prior year
Total GM$ $39,784 $16,338 $5,788 $61,910 +8% over prior year
Ad Coop$ $3,935 $2,249 $1,644 $7,828 +6% over prior year
MDF$ $5,379 $1,704 $829 $7,912 +2% over prior year
Total Units Sold 988 1,870 2,077 4,935 +9.8% over prior year
Supply Chain Execution
Elements
On-Time PO % 93% 96% 97% 95.4% +.4% over prior year
Average PO Lead Time (days) 14 12 11 12.5 -2% below prior year
PO Fill Rate % 100% 99.5% !00% 99.8% +5% over prior year
Market Share 16% 52% 65% 46% + 2% over prior year
Upcoming Collaborative
Planning Dates
6/3 7/9 5/16 ~ Review 2002 products, features &
introduction dates
Upside Inventory Available
(units)
200 500 220 920 Two Ads planned for 2nd
Quarter
ILLUSTRATIVE TEMPLATE
Preliminary Tactical
Planning for Discussion
with Management

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Client X has selected opportunities to leverage its product range
across divisions to strengthen retailer relationships and grow
benefits (Continued)
Strategy Bucket Opportunities Potential Benefits Potential Risks/Costs
Staged growth of
digital products
across channels
Open doors for
other divisions to
increase retail
share
• SKU expansion at low costs
• Leverage existing relationships
• Supply chain synergies
• Brand dilution
• More complex logistics
Retail Account
Management
Annual planning
meetings
• Key stakeholders aware of cross-
divisional activities and hence
take advantage of opportunities
• Divisional bias
Supply chain
coordination –
Weekly trucking
• Cost savings on new smaller
weekly shipments
• Meeting retailers’ expectations
• Increased and more
complex coordination
Convergence
Product Planning
• Preempt competition in the
introduction of new digital
convergence products
• Product ownership
confusion
Global Client X
Bracket Pricing
• Encourages retailers to carry
broader range of all division’s
SKUs
• None
Single Account
Team
• Potential cost savings
• Avoid divisional bias
• Better account planning and
management
• Shared support staff
• Complexity of operations
under the current
infrastructure
Preliminary Tactical
Planning for Discussion
with Management

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In this section, we will answer the following questions:
• What is our overall assessment of management’s current channel focus?
• What channel building blocks should be adopted for go-forward management?
• In what manner should the initiatives be implemented ?
• What are the potential next steps?

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Our Channel Strategy Audit reveals that three particular strategies merit immediate
Client X management attention
Current Capability
RelativeImportance
High Medium Low
LowMediumHigh
1
4
5
9
Two strategies in particular are
characterized as low in capability yet
high in importance and could merit
much more management focus
• 2, Coordinated brand / Trade Advtg
• 3, Cross Divisional Synergy
• 5, Coordinated Account Teams
High Focus Today
Medium Focus Today
Low focus Today2
37
Strategy
1. Key retail partner focus
2. Coordinated Brand/Trade
advertising
3. Cross-divisional channel
synergy
4. Channel-specific product
management
5. Coordinated account teams
6. Turn-Key retail staff training
7. Supply chain effectiveness
8. Pre / Post purchase consumer
information
9. Proactive consumer loyalty
marketing
6 8

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In addition to this core presentation, a variety of supporting project insights are
contained in a separate appendix document
• The Appendix document includes,
– Listing of interviews conducted
– Interview Guideline
– Interview notes
– Summary of XYZ internal research
– Qualitative consumer research summary
– Competitive profile work sheets
– Selected third party articles and sources

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