Choosing and ManagingSales Channels   For Your            Startup   Stephen N. Davis   “Partnering With Clients to Drive  ...
9 Steps    To Sales    Success2000 - 2012 © CXO Advisory Group
The 9 Steps  1.      Get Into The Mind Of Your Buyer  2.      Develop Your Buyers Profile  3.      Be Where YOUR Prospects...
What We’ll be Covering      Developing your channel strategy         •   How to choose the right channels      Types of ...
Business Development Workshops   Choosing the Right Sales Channel for Your Startup   Secrets to Maximizing Your Marketin...
Get Into  1              The Mind                 Of Your                 Buyer2000 - 2012 © CXO Advisory Group
Develop  2                  Your                     Buyers                     Profile2000 - 2012 © CXO Advisory Group
Develop Your Buyers Profile   Who is your “ideal customer?”   Who is typically the “key decision maker?”   How do they ...
3                 Be                    Where                    YOUR                    Prospects                    Are....
Sales Channels – The Reality               “A product with better distribution will              always win over a superio...
Common Sales Strategy Mistakes             Not having an           adequate profile of              customers2000 - 2012 ©...
Common Sales Strategy Mistakes             Confuse channel             partners with final                 customers2000 -...
Common Sales Strategy Mistakes         Channels are not in           sync with your          targeted buyers2000 - 2012 © ...
Common Sales Strategy Mistakes          Thinking your       “value proposition”      is the same as theirs2000 - 2012 © CX...
Common Sales Strategy Mistakes           Failure to consider            licensing or joint-           venture agreement200...
Common Sales Strategy Mistakes         Insufficient channel               margins2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes                Insufficient              marketing budget2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes                   Not aligning                 marketing to the                  sales chan...
Common Sales Strategy Mistakes                 Channel conflict2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes    Going to the channel    before you’re READY2000 - 2012 © CXO Advisory Group
Plan Your Entry into the Channel        “If you don’t know        where you’re going        you’ll probably        wind up...
Types of Sales Channels           Direct field sales reps    Internet sites           Corporate resellers        Extra...
Channel Benefits/Risks                               Benefits                    Risks                     Control       ...
Channel Costs            Cost               Freemium Minimal Inside Channel Direct                        Touch Sales Sale...
Comparison of Major Channels                                 Retail   Agent/Rep   Distributor/VAR   Acquisition   Joint Ve...
Computer Distribution Channels2000 - 2012 © CXO Advisory Group
What Do These Firms Have in                       Common?2000 - 2012 © CXO Advisory Group
Do You OFFER a Whole Product?                                   Pre-Sales Support                                         ...
Choosing a Channel           Considerations             • Fill whole in product offering             • Link to end-user t...
Do You Have Enough Profit                   Margin for the Channel?                                     End User          ...
Do You Have Enough Profit                   Margin for the Channel?                                     End User          ...
Do You Have Enough Profit                   Margin for the Channel?                                     End User          ...
The Channel Marketing Plan      Strategy                     Program                 Execution           Goals           ...
Creating Effective Budgets      A program without a budget is a wish         •   Cancelled at any point         •   Not c...
Is Your Buyer Package up to Snuff?       Marketing materials       Price lists       Outline of your marketing campaign...
Joint Venture/ OEM / Private Label       Quick penetration – less risk       Established market presence       Provides...
Approaching a Potential       Joint Venture/ Private Label Partner   Be Ready to Explain Key Product Advantages   Do You...
Key Issues Licensing Agreement      Specs & Deliverables           Marketing Obligations      Acceptance               ...
Distributors/Wholesalers2000 - 2012 © CXO Advisory Group
Distributors       Sells to other channel players within designated        area       Takes title to goods and is compen...
What Distributors Look For       Products with proven demand       Products packaging, ease of use & install       Mark...
Manufacturers Agent/Commercial                      Agent   Alternative to own sales force   Both authorized to solicit ...
Typical Rep Territories - USA2000 - 2012 © CXO Advisory Group
Typical Rep Territories - Canada2000 - 2012 © CXO Advisory Group
Source to Identify GOOD Reps   Customers and potential customers   Known GOOD Reps   Companies with complimentary produ...
Rep Agreement Caveats      Most rep agreements have commissions due on order         •   Commissions should be paid ONLY ...
Retail2000 - 2012 © CXO Advisory Group
Retail2000 - 2012 © CXO Advisory Group
Retail2000 - 2012 © CXO Advisory Group
Retail Packaging that Sells2000 - 2012 © CXO Advisory Group
Slotting Fees2000 - 2012 © CXO Advisory Group
You Need to Satisfy All FOUR     Customers to Gain Retail Distribution   Corporate   Store   Salespeople   Customer   ...
Cost of Market Entry Options           Retailer                       Mark-up, 50% - 200%+                                ...
Key to Efficient Channel Management          Strengthen ability of channel partners to           deliver solutions      ...
Manage Channel Conflict         Areas of channel conflict           •   Multiple channels calling on same account        ...
How the Channel Views                        Vendor Internet Plans2000 - 2012 © CXO Advisory Group
Key Points That Can Make a Difference       Have realistic expectations       Top management commitment       Focus, Fo...
Key Points That Can Make a Difference          Take inventory of your partners             • Does the 80/20 rule apply?  ...
Questions2000 - 2012 © CXO Advisory Group
Driving Profitable Growth2000 - 2012 © CXO Advisory Group
Driving Profitable Growth             We help companies optimize business             development and marketing; accelerat...
The CXO Advisory Group      CXO Advisory Group is a strategic operations advisory       and management firm comprised of ...
How Can CXO Help You?      Business Strategy Services             •   Audit business practices and organization           ...
How Can CXO Help You?  Sales Channel Management         •   Review and revise sales channel strategies         •   Channel...
How Can CXO Help You?  Venture Advisory Services         •   Fine tune operations, business strategy and market entry     ...
Contact Information:             Stephen Davis   Interim COO/VP Sales & Marketing |   Business Consultant | Sales Channel ...
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Business Development For Startups - Part 1 - Choosing and Managing Sales Channels for Your Startup - MassChallenge - 07122012

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Part1 of Business Development For Startups. This was run at the MassChallenge Accelerator in Boston.

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Business Development For Startups - Part 1 - Choosing and Managing Sales Channels for Your Startup - MassChallenge - 07122012

  1. 1. Choosing and ManagingSales Channels For Your Startup Stephen N. Davis “Partnering With Clients to Drive Sustainable Profitable Growth”
  2. 2. 9 Steps To Sales Success2000 - 2012 © CXO Advisory Group
  3. 3. The 9 Steps 1. Get Into The Mind Of Your Buyer 2. Develop Your Buyers Profile 3. Be Where YOUR Prospects Are 4. Align Sales & Marketing 5. Develop Your Inbound Marketing Program 6. Automate And Track 7. Measure Marketing On Contribution to Revenue 8. Analyze Quality of Leads Generated And Tools 9. Improve Your Tools And Programs2000 - 2012 © CXO Advisory Group
  4. 4. What We’ll be Covering  Developing your channel strategy • How to choose the right channels  Types of sales channels • Capabilities & limitations  What it takes to succeed  Managing channel relationships We will not be talking about online sales2000 - 2012 © CXO Advisory Group
  5. 5. Business Development Workshops  Choosing the Right Sales Channel for Your Startup  Secrets to Maximizing Your Marketing ROI: Aligning Sales & Marketing • Thursday, July 19th  Networking Your Way to Business Success • Tuesday, July 24th  Maximizing LinkedIn for Business Development2000 - 2012 © CXO Advisory Group
  6. 6. Get Into 1 The Mind Of Your Buyer2000 - 2012 © CXO Advisory Group
  7. 7. Develop 2 Your Buyers Profile2000 - 2012 © CXO Advisory Group
  8. 8. Develop Your Buyers Profile  Who is your “ideal customer?”  Who is typically the “key decision maker?”  How do they make their decisions?  Where do they collect their information to make a decision?  What are their critical business issues?  What is their buying process?  Where do they buy?  What is the Sales Cycle?  What are the “trigger events”2000 - 2012 © CXO Advisory Group
  9. 9. 3 Be Where YOUR Prospects Are.2000 - 2012 © CXO Advisory Group
  10. 10. Sales Channels – The Reality “A product with better distribution will always win over a superior product with poor distribution or customer access” It’s not fair. It’s not right. But, it’s reality.2000 - 2012 © CXO Advisory Group
  11. 11. Common Sales Strategy Mistakes Not having an adequate profile of customers2000 - 2012 © CXO Advisory Group
  12. 12. Common Sales Strategy Mistakes Confuse channel partners with final customers2000 - 2012 © CXO Advisory Group
  13. 13. Common Sales Strategy Mistakes Channels are not in sync with your targeted buyers2000 - 2012 © CXO Advisory Group
  14. 14. Common Sales Strategy Mistakes Thinking your “value proposition” is the same as theirs2000 - 2012 © CXO Advisory Group
  15. 15. Common Sales Strategy Mistakes Failure to consider licensing or joint- venture agreement2000 - 2012 © CXO Advisory Group
  16. 16. Common Sales Strategy Mistakes Insufficient channel margins2000 - 2012 © CXO Advisory Group
  17. 17. Common Sales Strategy Mistakes Insufficient marketing budget2000 - 2012 © CXO Advisory Group
  18. 18. Common Sales Strategy Mistakes Not aligning marketing to the sales channel2000 - 2012 © CXO Advisory Group
  19. 19. Common Sales Strategy Mistakes Channel conflict2000 - 2012 © CXO Advisory Group
  20. 20. Common Sales Strategy Mistakes Going to the channel before you’re READY2000 - 2012 © CXO Advisory Group
  21. 21. Plan Your Entry into the Channel “If you don’t know where you’re going you’ll probably wind up somewhere else”2000 - 2012 © CXO Advisory Group
  22. 22. Types of Sales Channels  Direct field sales reps  Internet sites  Corporate resellers  Extranets  Master or local  e-Marketplaces distributors  Direct Mail  Integrators  OEM’s  Value-added resellers  Retail  Manufacturer’s agents  Kiosk’s  Brokers  Strategic alliances  Franchises  Agents (consultants,  Telemarketers affiliates, etc.)  Inbound telesales agents2000 - 2012 © CXO Advisory Group
  23. 23. Channel Benefits/Risks Benefits Risks  Control  Harder to scale  Higher gross margins  Higher fixed costs Direct  Direct customer relationship  Less flexible – seasonal  Necessary for complex sale sales  Can scale quickly  Ongoing investment in  Use established customer recruitment & training relationships  Big margin sacrifice  Fill product gaps  Up front MDF investment  Companion selling  Loss of customerIndirect opportunities relationship & feedback  Local support  Fighting for mindshare  Increased demand  Quality of channel partner generation  Offload financing risk2000 - 2012 © CXO Advisory Group
  24. 24. Channel Costs Cost Freemium Minimal Inside Channel Direct Touch Sales Sales Sales Force2000 - 2012 © CXO Advisory Group
  25. 25. Comparison of Major Channels Retail Agent/Rep Distributor/VAR Acquisition Joint Venture Subsidiary Time to Market Slow Slow Medium/Fast Medium Medium Slow Management Control Low Medium Low High Medium High Brand Control Low Low Low High Medium High Cost of Sales Medium Low Low High Medium High Development of In-House Low Low Low Medium Low High Expertise Access to New Partners Low Medium Low Medium Medium Low Risk Medium Low Low/Medium High Low High Hands-On Sales/Marketing High Medium High Low Low Low Support2000 - 2012 © CXO Advisory Group
  26. 26. Computer Distribution Channels2000 - 2012 © CXO Advisory Group
  27. 27. What Do These Firms Have in Common?2000 - 2012 © CXO Advisory Group
  28. 28. Do You OFFER a Whole Product? Pre-Sales Support The Product Post-Sales Support2000 - 2012 © CXO Advisory Group
  29. 29. Choosing a Channel  Considerations • Fill whole in product offering • Link to end-user targets • Fit with existing channels • What role do they play in the sale? • Influence • Sales • Support • Technical  How do I measure them?  How do I generate business for them?  Can I support them?  Do the financial requirements make sense for our company?  Do I have enough profit margin for them?2000 - 2012 © CXO Advisory Group
  30. 30. Do You Have Enough Profit Margin for the Channel? End User Suggested List Price (SRP) or Street Price 62% Gross Profit 15% S. G. & A. 23% Cost of Goods2000 - 2012 © CXO Advisory Group
  31. 31. Do You Have Enough Profit Margin for the Channel? End User Suggested List Price (SRP) Street Price Consumer 50% Retailer Your Revenue 12% Gross Profit 15% S. G. & A. 23% Cost of Goods2000 - 2012 © CXO Advisory Group
  32. 32. Do You Have Enough Profit Margin for the Channel? End User Suggested List Price (SRP) Street Price Consumer 50% Retailer 10% Distributor Your Revenue Profit + 15% 2% Gross Profit S. G. & A S.G. A. Is NOT ENOUGH 23% Cost of Goods2000 - 2012 © CXO Advisory Group
  33. 33. The Channel Marketing Plan Strategy Program Execution  Goals  Coverage model  Media Campaign  Target  Value proposition  Communication Market  Business rules  Incentives  Product  Sales model  Education  Competition  Pricing  Outsourcing  Channels  Sales Support • Roles model • Alignment  Customer Support Model  Budget2000 - 2012 © CXO Advisory Group
  34. 34. Creating Effective Budgets  A program without a budget is a wish • Cancelled at any point • Not credible to reseller • Cannot be strategic or justified to management • Costs cannot be measured or controlled  Must estimate costs of program design, implementation and management • Coverage, sales model, support model, value proposition • Calculate as both cost of sales and return on investment2000 - 2012 © CXO Advisory Group
  35. 35. Is Your Buyer Package up to Snuff?  Marketing materials  Price lists  Outline of your marketing campaign – Demand Creation  Product samples - Packaging  COOP/MDF funds and campaigns  In-store merchandising  Prospect & customer correspondence  Sales training for their personnel  Sales support  End user training  End user support2000 - 2012 © CXO Advisory Group
  36. 36. Joint Venture/ OEM / Private Label  Quick penetration – less risk  Established market presence  Provides localization of product  Handles all marketing, sales, distribution & support  Provides ongoing market analysis  Provides ongoing competitive analysis  Usually wont carry competing product  Tough sale – long sales cycle2000 - 2012 © CXO Advisory Group
  37. 37. Approaching a Potential Joint Venture/ Private Label Partner  Be Ready to Explain Key Product Advantages  Do Your Homework • Why should they be interested? • Fills competitive hole • Enhances existing product line • Prevents having to compete against you • You could develop market in your home country for their products  How easy it will be to work with you  Support you will give them • Technical • Training2000 - 2012 © CXO Advisory Group
  38. 38. Key Issues Licensing Agreement  Specs & Deliverables  Marketing Obligations  Acceptance  List Price of Product  Grant of License  Performance Requirements  Terms  Warranties  Payments  Limitation of Liabilities  Bookkeeping Requirements  Development Support  Ownership  Rights to Updates  Use of Trademarks  Termination  Training  Source Code Access  Decision Making Authority2000 - 2012 © CXO Advisory Group
  39. 39. Distributors/Wholesalers2000 - 2012 © CXO Advisory Group
  40. 40. Distributors  Sells to other channel players within designated area  Takes title to goods and is compensated by mark-up upon sale  Sells suppliers goods to his own customers  No authority to act on your behalf  Maintains Inventory  Sells in original packaging  May or may not provide after sales services  Many products are taken on consignment basis2000 - 2012 © CXO Advisory Group
  41. 41. What Distributors Look For  Products with proven demand  Products packaging, ease of use & install  Marketing budget  Quality tech & Customer support  Ability to scale up to demand  Financial stability  Training  Distributor staff time required Only 1% - 2% of products presented get chosen2000 - 2012 © CXO Advisory Group
  42. 42. Manufacturers Agent/Commercial Agent  Alternative to own sales force  Both authorized to solicit orders in designated area  Receive salary or commission  Usually bear no credit risk  Maintains no inventory  Requires same support & training as internal salesforce  Carries several lines  References, References, References2000 - 2012 © CXO Advisory Group
  43. 43. Typical Rep Territories - USA2000 - 2012 © CXO Advisory Group
  44. 44. Typical Rep Territories - Canada2000 - 2012 © CXO Advisory Group
  45. 45. Source to Identify GOOD Reps  Customers and potential customers  Known GOOD Reps  Companies with complimentary products to yours  MANA (Manufacturers Agents National Association) • Manaonline.org  ERA (Electronic Representatives Association) • Era.org  AIM/R (Association of Independent Manufacturers/Representatives) • aimr.net2000 - 2012 © CXO Advisory Group
  46. 46. Rep Agreement Caveats  Most rep agreements have commissions due on order • Commissions should be paid ONLY AFTER YOU COLLECT  Commissions should be on NET Sales • Sales MINUS returns and any upfront market development funds paid to the retailer  Splitting commissions • Between rep territories  Territory definition  National (House) accounts  Termination issues  Automatic renewal2000 - 2012 © CXO Advisory Group
  47. 47. Retail2000 - 2012 © CXO Advisory Group
  48. 48. Retail2000 - 2012 © CXO Advisory Group
  49. 49. Retail2000 - 2012 © CXO Advisory Group
  50. 50. Retail Packaging that Sells2000 - 2012 © CXO Advisory Group
  51. 51. Slotting Fees2000 - 2012 © CXO Advisory Group
  52. 52. You Need to Satisfy All FOUR Customers to Gain Retail Distribution  Corporate  Store  Salespeople  Customer – End User2000 - 2012 © CXO Advisory Group
  53. 53. Cost of Market Entry Options Retailer Mark-up, 50% - 200%+ 5-10% MDF, Slotting Fees, Beware Consignment sales Agent/ Rep. Commission, 5%–30%, Wants to be paid on order Value Added Reseller Margin, 20-40%, 5-10% MDF (VAR) Distributor (stocks product) Margin, 10%–50%, 2-5% MDF2000 - 2012 © CXO Advisory Group
  54. 54. Key to Efficient Channel Management  Strengthen ability of channel partners to deliver solutions  Train channel partners well & often - for free  Enhance communications  Treat them like they’re your own salesforce  Enable partners to sell complementary services aggressively  Deliver channel value with the web • Demand creation • Quality leads • Support • Information • Links • Feedback2000 - 2012 © CXO Advisory Group
  55. 55. Manage Channel Conflict  Areas of channel conflict • Multiple channels calling on same account • Specify territories or vertical markets - segmentation • Company selling directly to reseller accounts • Specify company owned accounts - reserved • Specify reseller owned accounts - reserved • Compensate direct sales force on sales through resellers • Have them work on accounts with key resellers • Pricing not consistent across channels • Get your pricing structures in line  Conflict can not be eliminated  Changing business objectives  Company politics2000 - 2012 © CXO Advisory Group
  56. 56. How the Channel Views Vendor Internet Plans2000 - 2012 © CXO Advisory Group
  57. 57. Key Points That Can Make a Difference  Have realistic expectations  Top management commitment  Focus, Focus, Focus  Long Term View  Clear understanding of end-user targets and their alignment with channel partners  Reduce channel conflict by clearly defining roles and responsibilities for each channel  Develop comprehensive business rules for managing program processes2000 - 2012 © CXO Advisory Group
  58. 58. Key Points That Can Make a Difference  Take inventory of your partners • Does the 80/20 rule apply? • Build profiles based on successful partners • Align internal resources based on contribution  Invest in your partners • Marketing • Training • Support • Web  Use the Internet to enhance partner sales  Review your channel strategy yearly • Identifies potential destructive channel conflict • Tune channel support programs2000 - 2012 © CXO Advisory Group
  59. 59. Questions2000 - 2012 © CXO Advisory Group
  60. 60. Driving Profitable Growth2000 - 2012 © CXO Advisory Group
  61. 61. Driving Profitable Growth We help companies optimize business development and marketing; accelerate sales; and seize the most attractive growth opportunities.2000 - 2012 © CXO Advisory Group
  62. 62. The CXO Advisory Group  CXO Advisory Group is a strategic operations advisory and management firm comprised of proven C-level executives with both breadth and depth of experience.  CXO Advisory Group Team members have achieved success in positions ranging from: President/CEO to COO, and VPs of Sales, Marketing, Corporate Development and Human Resources.  Has proven success in business development and in building US sales and distribution channels2000 - 2012 © CXO Advisory Group
  63. 63. How Can CXO Help You? Business Strategy Services • Audit business practices and organization • Evaluate product and pricing strategies • Evaluate effectiveness of sales channel • Assess effectiveness of existing sales and marketing programs Market Entry Program • Analyze competitive landscape • Market launch strategy and plan • Channel strategy and programs • Establish sales channels • Generate sales and manage relationships • Identify and develop strategic partnerships2000 - 2012 © CXO Advisory Group
  64. 64. How Can CXO Help You? Sales Channel Management • Review and revise sales channel strategies • Channel partner identification, prospecting and recruitment • Eliminate channel conflict • Channel contract development and negotiation Interim Management Resources • Interim CEO, COO, CMO, CSO • Interim VP of Sales and Marketing • Consultant on staff • Launch team coaches2000 - 2012 © CXO Advisory Group
  65. 65. How Can CXO Help You? Venture Advisory Services • Fine tune operations, business strategy and market entry • Assist with due diligence • Strategic business assessment of portfolio companies2000 - 2012 © CXO Advisory Group
  66. 66. Contact Information: Stephen Davis Interim COO/VP Sales & Marketing | Business Consultant | Sales Channel and Business Development Expert | Author & Speaker “Partnering With Clients to Drive Sustainable Profitable Growth”Phone: (508) 528-7571Email: sdavis@cxoadvisorygroup.comWebsite: www.cxoadvisorygroup.comLinkedin: www.linkedin.com/in/stephendavisTwitter: twitter.com/stephendaviscxo

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