Engr 245 Session 05 Channel

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Engr 245 Session 05 Channel

  1. Engineering 245The Lean Launch Pad<br />Session 5: Channels<br />Professors Steve Blank, Ann Miura-Ko, Jon Feiber<br />http://e245.stanford.edu<br />
  2. Channels<br />How does each customer segment want to be reached?<br />Through which interaction points?<br />1<br />
  3. Test Hypotheses: Channel<br />2<br />
  4. Two Critical Questions about Channels<br />First one is obvious: How do you want to sell your product?<br />3<br />1<br />Second one is subtle, but more important than the first: How does your customer want to buy your product?<br />2<br />
  5. How Do You Want to Sell Your Product?<br />Yourself<br />Through someone else<br />Retail<br />Wholesale<br />Bundled with other goods or services<br />4<br />ü<br />ü<br />ü<br />ü<br />ü<br />
  6. How Does Your Customer Want to Buy Your Product?<br />Same day<br />Delivered and installed<br />Downloaded<br />Bundled with other products<br />As a service<br />…<br />5<br />ü<br />ü<br />ü<br />ü<br />ü<br />ü<br />
  7. Nature of Product Impacts Channel: Atoms or Bits?<br />Access to customers changes dramatically<br />Logistics related to product complexity<br />People as products<br />6<br />
  8. The Sales “Channel”<br />7<br />Web<br />System Integrators<br />Your Company<br />Your Customers<br />Direct Sales Force<br />Value-Added Resellers (VARs)<br />Dealers<br />Distributors<br />Retail/Mass Merchants<br />
  9. Types of Channels<br />OEM<br />VAR<br />Reseller<br />Distributor<br />8<br />Direct<br />Indirect<br />Licensing<br />
  10. The Channel as a Customer<br />Some products are embedded in others (OEM)<br />Some products are resold by others (VARs)<br />Some products are distributed by others<br />Who’s the customer?<br />9<br />
  11. Distribution Complexity<br />10<br />Evangelists<br />Global Systems<br />Systems Integrators<br />WANs<br />Mainframes<br />Direct Sales<br />Higher Volume<br />Minis<br />LANs<br />VARs<br />Marketing Complexity<br />PC Servers<br />Higher Value Added<br />Desktop PCs<br />Retail<br />Printers<br />Keyboards<br />ServiceTechnicians<br />Web, Telesales<br />Toner<br />Solution Complexity<br />
  12. How Are Channels Compensated?<br />Commission<br />Percentage of sales price<br />Discounted pre-purchase<br />11<br />
  13. How Are Channels Motivated or Incented?<br />Money! – what makes them the most?<br />Training<br />Marketing to the channel<br />SPIF<br />12<br />
  14. Channel Economics: “Direct” Sales<br />13<br />ListPrice<br />Revenue<br />Cost of Goods(Supply Chain)<br />Profit + SG&A + R&D<br />EU Discounts<br />End Consumer<br /> Source: Mark Leslie, Stanford GSB<br />
  15. Channel Economics: Resellers<br />14<br />ListPrice<br />Revenue<br />Cost of Goods(Supply Chain)<br />Profit + SG&A + R&D<br />Reseller<br />EU Discounts<br />End Consumer<br /> Source: Mark Leslie, Stanford GSB<br />
  16. Cost of Goods(Supply Chain)<br />Profit + SG&A + R&D<br />Channel Economics: Distributors/Resellers<br />15<br />ListPrice<br />Revenue<br />Reseller<br />EU Discounts<br />Distributor<br />End Consumer<br /> Source: Mark Leslie, Stanford GSB<br />
  17. Channel Economics: OEM or IP Licensing<br />16<br />ListPrice<br />Revenue<br />EU Discounts<br />Reseller<br />Distributor<br />Master Distributor<br />Profit + SG&A + R&D<br />Cost of Goods(Supply Chain)<br />End Consumer<br />Reseller<br />Profit + SG&A + R&D<br />Cost of Goods(Supply Chain)<br />Your Product Becomes Your Customer’s COGs<br /> Source: Mark Leslie, Stanford GSB<br />
  18. Example: Book Publishing<br />17<br />Publisher<br />National Distributor<br />Printer<br />Wholesaler<br />Retailer<br />Customer<br />
  19. Book Publishing<br />18<br />Publisher<br />National Wholesaler<br />Distributor<br />Retailer<br />Customer<br />Percent of Retail<br />35%<br />15%<br />10%<br />40%<br />$7.00<br />$3.00<br />$2.00<br />$8.00<br />$20.00<br />For their efforts, distributors take an additional 10% of retail. That means you get 35% of retail, the distributor gets 10%, the wholesaler gets 15% and the retailer gets 40% less any discount they offer the end customer<br />
  20. Book Publishing Economics<br />19<br />Publisher<br />National Distributor<br />Wholesaler<br />Retailer<br />Customer<br />Allowances<br />Wholesale costs<br />Bills<br />Markup<br />Credit guarantees<br />Payment guarantees<br />Payment guarantees<br />Return rights<br />Credits<br />Payments<br />
  21. Book Publishing Delivery<br />20<br />Publisher<br />National Distributor<br />Printer<br />Wholesaler<br />Retailer<br />Prepare film (content)<br />Receive<br /><ul><li>Schedules
  22. Print orders
  23. Bundle counts
  24. Film</li></ul>Merchandise titles<br />Determine allocations<br />Sell magazines<br />Deliver orders<br /><ul><li>Establish identity
  25. Create demand</li></ul>Prepare galleys<br />Print and ship magazines<br />Acknowledge returns<br />Dispose of returns<br />
  26. Bits vs. Atoms<br />21<br />Channel<br />Web<br />Physical<br />Bits<br />Product<br />Physical<br />
  27. Product and Channel Are Bits<br />22<br />Channel<br />Web<br />Physical<br /><ul><li>Rapid Agile and Customer development
  28. Fastest to acquire early customers and scale</li></ul>Bits<br />Product<br />Physical<br />
  29. Web 2.0 – Product and Channel Are Bits<br />23<br />Channel<br />Web<br />Physical<br /><ul><li>Google
  30. Twitter
  31. Facebook
  32. Zynga
  33. Cloud Services</li></ul>Bits<br />Product<br />Physical<br />
  34. Product Is Bits, but Channel Is People<br />24<br />Channel<br />Web<br />Physical<br /><ul><li>Rapid Agile and Customer development
  35. Fastest to acquire early customers and scale
  36. Rapid Agile and Customer development
  37. Traditional sales channel
  38. May require installation</li></ul>Bits<br />Product<br />Physical<br />
  39. Traditional Enterprise Software<br />25<br />Channel<br />Web<br />Physical<br /><ul><li>Google
  40. Twitter
  41. Facebook
  42. Zynga
  43. Cloud Services
  44. Microsoft
  45. SAP
  46. Oracle</li></ul>Bits<br />Product<br />Physical<br />
  47. Physical Products Sold Over the Web<br />26<br />Channel<br />Web<br />Physical<br /><ul><li>Rapid Agile and Customer development
  48. Fastest to acquire early customers and scale
  49. Rapid Agile and Customer development
  50. Traditional sales channel
  51. May require installation</li></ul>Bits<br />Product<br /><ul><li>Rapid Customer development
  52. Logistics, shipping and manufacturing critical
  53. Customer service</li></ul>Physical<br />
  54. Killing Traditional Storefronts<br />27<br />Channel<br />Web<br />Physical<br /><ul><li>Google
  55. Twitter
  56. Facebook
  57. Zynga
  58. Cloud Services
  59. Microsoft
  60. SAP
  61. Oracle</li></ul>Bits<br />Product<br />Zappos<br />Amazon<br />Cafepress<br />Netflix<br />Consumer electronics<br />Physical<br />
  62. The Factories May Be in China<br />28<br />Channel<br />Web<br />Physical<br /><ul><li>Rapid Agile and Customer development
  63. Fastest to acquire early customers and scale
  64. Rapid Agile and Customer development
  65. Traditional sales channel
  66. May require installation</li></ul>Bits<br />Product<br /><ul><li>Rapid Customer development
  67. Logistics, shipping and manufacturing critical
  68. Customer service
  69. Longer customer feedback cycle
  70. May require large capital requirements for scale</li></ul>Physical<br />
  71. We Still Make Things that Need Salespeople<br />29<br />Channel<br />Web<br />Physical<br /><ul><li>Google
  72. Twitter
  73. Facebook
  74. Zynga
  75. Cloud Services
  76. Microsoft
  77. SAP
  78. Oracle</li></ul>Bits<br />Product<br />Zappos<br />Amazon<br />Cafepress<br />Netflix<br />Consumer electronics<br /><ul><li>Cars
  79. Solar panels
  80. Wind turbines
  81. Bookstores
  82. Consumer electronics</li></ul>Physical<br />

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