7. How Do You Want Your Product to
Get to Your Customer?
Yourself
Through someone else
Retail
Wholesale
Bundled with other goods or services
6
10. How Does Your Customer Want to
Buy Your Product from your Channel?
• Same day
• Delivered and installed
• Downloaded
• Bundled with other
products
• As a service
• …
9
12. Distribution Complexity
Global Systems
Evangelists Systems Integrators
WANs
Mainframes
Marketing Complexity
Direct Sales
Minis
LANs
VARs
PC Servers
Desktop PCs
Retail
Printers
Keyboards
Web, Telesales Service
Technicians
Toner
Solution Complexity
11
13. How Do the Economics Work in
Different Sales Channel?
14. How Are Channels Compensated?
– Commission
– Percentage of sales price
– Discounted pre-purchase
13
15. Channel Economics: “Direct” Sales
List
Your Revenue Price
End Consumer
Discounts
Cost of Goods
EU
Profit + SG&A + R&D
(Supply Chain)
Source: Mark Leslie, Stanford GSB
14
16. Channel Economics: Resellers
List
Your Revenue Price
End Consumer
Discounts
Cost of Goods
EU
Profit + SG&A + R&D Reseller
(Supply Chain)
Source: Mark Leslie, Stanford GSB
15
17. Channel Economics: Distributors/Resellers
List
Your Revenue Price
End Consumer
Distributor
Discounts
Cost of Goods Profit + SG&A +
EU
Reseller
(Supply Chain) R&D
Source: Mark Leslie, Stanford GSB
16
18. The Channel as a Customer
– Some products are embedded in others (OEM)
– Some products are resold by others (VARs)
– Some products are distributed by others
– Who’s the customer?
17
19. Channel Economics: OEM or IP Licensing
List
Your Revenue Price
End Consumer
Cost of
Distributor
Distributor
Discounts
Master
Goods Profit + SG&A +
EU
Reseller
(Supply R&D
Chain)
Cost of
Goods Profit + SG&A
Reseller
(Supply + R&D
Chain)
Your Product Becomes Your
Customer’s Cost of Goods Source: Mark Leslie, Stanford GSB
18
20. How Are Channels Motivated or Incented?
– Money! – what makes them the most?
– Training
– Marketing to the channel
– SPIF
19
23. Book Publishing
National
Publisher Distributor Retailer Customer
Wholesaler
•Percent of 35% 15% 10% 40%
Retail
$7.00 $3.00 $2.00 $8.00 $20.00
• You get
-35% of retail
- the distributor gets 10%
- the wholesaler gets 15%
- the retailer gets 40%
-less any discount they offer the customer
22
24. Book Publishing Economics
National
Publisher Wholesaler Retailer Customer
Distributor
Allowances
Wholesale costs
Bills
Markup
Credit
guarantees
Payment
guarantees
Payment
guarantees
Return rights
Credits
Payments
23
25. Book Publishing Delivery
National
Publisher Printer Wholesaler Retailer
Distributor
Prepare film
Receive
(content)
Schedules
Print orders Determine Merchandise
Bundle allocations titles
counts
Film
Sell
Deliver orders
magazines
Establish Prepare
galleys Print and ship
identity
magazines
Create
demand
Dispose of Acknowledge
returns returns
24
27. Product flow/Channel
Electronic Partners/
Health Fluid Synchrony
OEMS
Records
Electronic Support Pump + Bundled
Records Services Controller Kits
Hospitals
(Anesthesiologists
Patients Neurosurgeons)
Pain Clinic
(Anesthesiologists
Neurosurgeons)
28. Hospitals
Pain Clinics
Channels (Direct)
• Direct to institutions
• Some formularies involved in purchase decisions
• Some doctors make purchase decision directly
• Device company/Doctor relationship is key
• Heavily influenced by :
• Clinical study results
• Regulatory approval
• Reimbursement
33. COST / PROFIT ANALYSIS
Licensing Revenue Model
Per unit cost and profit estimation
Our revenue 4-8% revenues List price
End user
Univ. Manufacturing
Maintaining Raw License
R&D License & Distribution
IP fee materials fee
Packaging
32
34. Licensing of Technology Ecosystem
University Insurance
Agencies
2-4% license fee
$$$
DMX
R&D
Products
Procedures
Health-Care
IPs
Providers: $$ End
4-8% royalty Hospitals User
~$40 Practitioners
Customer Clinics
segment: Large
corporations
J&J, GSK, 3M
33