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Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
Engr 245 Session 05 Channel
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Engr 245 Session 05 Channel

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  • 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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