Choosing the Right

Sales Channel
For Your
Startup
Stephen N. Davis
“Partnering With Clients to Drive
Sustainable Profitab...
What We’ll be Covering


Developing your channel strategy



Types of sales channels



What it takes to succeed



Ma...
Get Into
The Mind
Of Your
Buyer

1

2000 - 2012 © CXO Advisory Group
2

Develop
Your
Buyers
Profile

2000 - 2012 © CXO Advisory Group
Develop Your Buyers Profile
Who is your “ideal customer?”
 Who is typically the “key decision maker?”
 How do they make ...
3

Be
Where
YOUR
Prospects
Are.

2000 - 2012 © CXO Advisory Group
Sales Channels – The Reality
“A product with better distribution will
always win over a superior product with
poor distrib...
Common Sales Strategy Mistakes

2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Not having an
adequate profile of
customers
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Confuse channel
partners with final
buyers
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Channels are not in
sync with your
targeted buyers
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Thinking your
“value proposition”
is the same as theirs
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Failure to consider
licensing or jointventure agreement
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Insufficient channel
margins

2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Insufficient
marketing budget

2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Not aligning
marketing to the
sales channel
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Channel conflict

2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes

Going to the channel
before you’re READY

2000 - 2012 © CXO Advisory Group
Types of Sales Channels











Direct field sales reps
Corporate resellers
Master or local
distributors
Inte...
Cost

Channel Costs

Freemium Minimal Inside Channel Direct
Touch Sales Sales
Sales
Force
2000 - 2012 © CXO Advisory Group
Comparison of Major Channels
Retail

Agent/Rep

Distributor/VAR

Acquisition

Joint Venture

Subsidiary

Time to Market

S...
Computer Distribution Channels

2000 - 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

The
Product

Post-Sales Support

2000 - 2012 © CXO Advisory Group
Choosing a Channel


Considerations
•
•
•
•
•






2000 - 2012 © CXO Advisory Group

Fill whole in product offering
...
Do You Have Enough Profit
Margin for the Channel?
End User

62%

Gross Profit

15%

S. G. & A.

23%

Cost of Goods

2000 -...
Do You Have Enough Profit
Margin for the Channel?
End User

Suggested List Price (SRP)
Street Price

50%

Consumer
Retaile...
Do You Have Enough Profit
Margin for the Channel?
End User

Suggested List Price (SRP)
Street Price

50%

Consumer
Retaile...
Is Your Buyer Package up to Snuff?

2000 - 2012 © CXO Advisory Group
Is Your Buyer Package up to Snuff?


Marketing materials
 Price lists
 Outline of your marketing campaign
 Product sam...
Strategic Partner/ OEM / Private Label

2000 - 2012 © CXO Advisory Group
Strategic Partner/ OEM / Private Label
Quick penetration – less risk
 Established market presence
 Provides localization...
Approaching a Potential
Strategic Partner/ OEM / Private Label


Be Ready to Explain Key Product Advantages
 Do Your Hom...
Key Issues in Licensing Agreement

2000 - 2012 © CXO Advisory Group
Key Issues in Licensing Agreement











Specs & Deliverables
Acceptance
Grant of License
Terms
Payments
Boo...
Grant of License

2000 - 2012 © CXO Advisory Group
Specifications & Deliverables

2000 - 2012 © CXO Advisory Group
Acceptance Testing

2000 - 2012 © CXO Advisory Group
Payment Terms

2000 - 2012 © CXO Advisory Group
Source Code Access

2000 - 2012 © CXO Advisory Group
Contract Termination

2000 - 2012 © CXO Advisory Group
Distributors/Wholesalers

2000 - 2012 © CXO Advisory Group
What Distributors Look For


Products with proven demand
 Product's packaging, ease of use & install
 Marketing budget
...
Manufacturer’s Representative


Alternative to own sales force
 Both authorized to solicit orders in designated area
 R...
Typical Rep Territories - USA

2000 - 2012 © CXO Advisory Group
Typical Rep Territories - Canada

2000 - 2012 © CXO Advisory Group
Source to Identify GOOD Reps


Customers and potential customers
 Known GOOD Reps
 Companies with complimentary product...
Rep Agreement Caveats


Most rep agreements have commissions due on order
•



Commissions should be on NET Sales
•



...
Retail

2000 - 2012 © CXO Advisory Group
Retail

2000 - 2012 © CXO Advisory Group
Retail

2000 - 2012 © CXO Advisory Group
Retail Packaging that Sells

2000 - 2012 © CXO Advisory Group
Slotting Fees

2000 - 2012 © CXO Advisory Group
Most Overlooked
Marketing/Sales Opportunity

2000 - 2012 © CXO Advisory Group
Association Marketing

-

Over 7600 Trade Associations
Over 21K Professional Associations
Over 151K Associations Worldwide...
Cost of Market Entry Options

Retailer

Mark-up, 50% - 200%+
5-10% MDF, Slotting Fees,
Beware Consignment sales

Agent/ Re...
Key to Efficient Channel Management


Treat them like they’re your own
salesforce



Train channel partners well



Str...
How the Channel Views
Vendor Internet Plans

2000 - 2012 © CXO Advisory Group
Final Thoughts

2000 - 2012 © CXO Advisory Group
Take the Long Term View

2000 - 2012 © CXO Advisory Group
Train Your Channel Partners Well

2000 - 2012 © CXO Advisory Group
Align Sales & Marketing

2000 - 2012 © CXO Advisory Group
Open & Frequent Communications

2000 - 2012 © CXO Advisory Group
Review Channel Strategy Yearly

2000 - 2012 © CXO Advisory Group
Questions

2000 - 2012 © CXO Advisory Group
Driving Profitable Growth

2000 - 2012 © CXO Advisory Group
Driving Profitable Growth

We help companies optimize business
development and marketing; accelerate
sales; and seize the ...
The CXO Advisory Group


CXO Advisory Group is a strategic operations advisory
and management firm comprised of proven C-...
How Can CXO Help You?
Business Strategy Services
•
•
•

•

Audit business practices and organization
Evaluate product and ...
How Can CXO Help You?
Sales Channel Management
•
•
•
•

Review and revise sales channel strategies
Channel partner identif...
How Can CXO Help You?
Venture Advisory Services
•
•
•

Fine tune operations, business strategy and market entry
Assist wit...
Contact Information:

Stephen Davis
Interim COO/VP Sales & Marketing |
Business Consultant | Sales Channel and
Business De...
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Choosing and managing sales channels for your startup mc carterenglish - 09192012

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Once you have selected and developed a unique product, developed your packaging, the selection of your distribution channel and sales representation is key to successful revenue growth. Distribution decisions have significant implications for marketing plans, product pricing, margins, profits, customer support and sales management practices.

This workshop is designed to help managers and executives develop a better understanding of the strategic aspects of distribution and the relationship of channels to other parts of the organization.

Learn to:

• Choose the best channels to reach your customers
• Identify the strengths and weaknesses of your channel and partnering program
• Structure your sales organization to operate more effectively
• Build and manage successful partnering relationships
• Enable partnerships to fast track results
• Examine costs of channels and sales force options.
• Optimize market coverage at target levels of profitability
• Identify which marketing strategies best support your channel choices
• How to minimize destructive channel conflict

Published in: Sales, Business, Technology
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Choosing and managing sales channels for your startup mc carterenglish - 09192012

  1. 1. Choosing the Right Sales Channel For Your Startup Stephen N. Davis “Partnering With Clients to Drive Sustainable Profitable Growth”
  2. 2. What We’ll be Covering  Developing your channel strategy  Types of sales channels  What it takes to succeed  Managing channel relationships We will not be talking about online sales 2000 - 2012 © CXO Advisory Group
  3. 3. Get Into The Mind Of Your Buyer 1 2000 - 2012 © CXO Advisory Group
  4. 4. 2 Develop Your Buyers Profile 2000 - 2012 © CXO Advisory Group
  5. 5. 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 their BUYING Cycle?  What are the “trigger events”  2000 - 2012 © CXO Advisory Group
  6. 6. 3 Be Where YOUR Prospects Are. 2000 - 2012 © CXO Advisory Group
  7. 7. 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
  8. 8. Common Sales Strategy Mistakes 2000 - 2012 © CXO Advisory Group
  9. 9. Common Sales Strategy Mistakes Not having an adequate profile of customers 2000 - 2012 © CXO Advisory Group
  10. 10. Common Sales Strategy Mistakes Confuse channel partners with final buyers 2000 - 2012 © CXO Advisory Group
  11. 11. Common Sales Strategy Mistakes Channels are not in sync with your targeted buyers 2000 - 2012 © CXO Advisory Group
  12. 12. Common Sales Strategy Mistakes Thinking your “value proposition” is the same as theirs 2000 - 2012 © CXO Advisory Group
  13. 13. Common Sales Strategy Mistakes Failure to consider licensing or jointventure agreement 2000 - 2012 © CXO Advisory Group
  14. 14. Common Sales Strategy Mistakes Insufficient channel margins 2000 - 2012 © CXO Advisory Group
  15. 15. Common Sales Strategy Mistakes Insufficient marketing budget 2000 - 2012 © CXO Advisory Group
  16. 16. Common Sales Strategy Mistakes Not aligning marketing to the sales channel 2000 - 2012 © CXO Advisory Group
  17. 17. Common Sales Strategy Mistakes Channel conflict 2000 - 2012 © CXO Advisory Group
  18. 18. Common Sales Strategy Mistakes Going to the channel before you’re READY 2000 - 2012 © CXO Advisory Group
  19. 19. Types of Sales Channels           Direct field sales reps Corporate resellers Master or local distributors Integrators Value-added resellers Manufacturer’s agents Brokers Franchises Telemarketers Inbound telesales agents 2000 - 2012 © CXO Advisory Group  Internet sites  Extranets  e-Marketplaces  Direct Mail  OEM’s  Retail  Kiosk’s  Strategic alliances  Agents (consultants, affiliates, etc.)
  20. 20. Cost Channel Costs Freemium Minimal Inside Channel Direct Touch Sales Sales Sales Force 2000 - 2012 © CXO Advisory Group
  21. 21. 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 Expertise Low Low Low Medium Low High Access to New Partners Low Medium Low Medium Medium Low Risk Medium Low Low/Medium High Low High Hands-On Sales/Marketing Support High Medium High Low Low Low 2000 - 2012 © CXO Advisory Group
  22. 22. Computer Distribution Channels 2000 - 2012 © CXO Advisory Group
  23. 23. What Do These Firms Have in Common? 2000 - 2012 © CXO Advisory Group
  24. 24. Do You OFFER a Whole Product? Pre-Sales Support The Product Post-Sales Support 2000 - 2012 © CXO Advisory Group
  25. 25. Choosing a Channel  Considerations • • • • •     2000 - 2012 © CXO Advisory Group Fill whole in product offering Link to end-user targets Fit with existing channels What role do they play in the sale? Geographic coverage 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?
  26. 26. Do You Have Enough Profit Margin for the Channel? End User 62% Gross Profit 15% S. G. & A. 23% Cost of Goods 2000 - 2012 © CXO Advisory Group Suggested List Price (SRP) or Street Price
  27. 27. Do You Have Enough Profit Margin for the Channel? End User Suggested List Price (SRP) Street Price 50% Consumer Retailer Your Revenue 12% Gross Profit 15% S. G. & A. 23% Cost of Goods 2000 - 2012 © CXO Advisory Group
  28. 28. Do You Have Enough Profit Margin for the Channel? End User Suggested List Price (SRP) Street Price 50% Consumer Retailer 10% Distributor 15% Profit + S. G. & A. S.G. A 23% Cost of Goods 2000 - 2012 © CXO Advisory Group Your Revenue 2% Gross Profit Is NOT ENOUGH
  29. 29. Is Your Buyer Package up to Snuff? 2000 - 2012 © CXO Advisory Group
  30. 30. Is Your Buyer Package up to Snuff?  Marketing materials  Price lists  Outline of your marketing campaign  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 support 2000 - 2012 © CXO Advisory Group
  31. 31. Strategic Partner/ OEM / Private Label 2000 - 2012 © CXO Advisory Group
  32. 32. Strategic Partner/ 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 won't carry competing product  Tough sale – long sales cycle  2000 - 2012 © CXO Advisory Group
  33. 33. Approaching a Potential Strategic Partner/ OEM / Private Label  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 Training 2000 - 2012 © CXO Advisory Group
  34. 34. Key Issues in Licensing Agreement 2000 - 2012 © CXO Advisory Group
  35. 35. Key Issues in Licensing Agreement           Specs & Deliverables Acceptance Grant of License Terms Payments Bookkeeping Requirements Ownership Use of Trademarks Training Decision Making Authority 2000 - 2012 © CXO Advisory Group          Marketing Obligations List Price of Product Performance Requirements Warranties Limitation of Liabilities Development Support Rights to Updates Termination Source Code Access
  36. 36. Grant of License 2000 - 2012 © CXO Advisory Group
  37. 37. Specifications & Deliverables 2000 - 2012 © CXO Advisory Group
  38. 38. Acceptance Testing 2000 - 2012 © CXO Advisory Group
  39. 39. Payment Terms 2000 - 2012 © CXO Advisory Group
  40. 40. Source Code Access 2000 - 2012 © CXO Advisory Group
  41. 41. Contract Termination 2000 - 2012 © CXO Advisory Group
  42. 42. Distributors/Wholesalers 2000 - 2012 © CXO Advisory Group
  43. 43. What Distributors Look For  Products with proven demand  Product's 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 chosen 2000 - 2012 © CXO Advisory Group
  44. 44. Manufacturer’s Representative  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, References 2000 - 2012 © CXO Advisory Group
  45. 45. Typical Rep Territories - USA 2000 - 2012 © CXO Advisory Group
  46. 46. Typical Rep Territories - Canada 2000 - 2012 © CXO Advisory Group
  47. 47. Source to Identify GOOD Reps  Customers and potential customers  Known GOOD Reps  Companies with complimentary products to yours  MANA (Manufacturers Agents National Association) •  ERA (Electronic Representatives Association) •  Manaonline.org Era.org AIM/R (Association of Independent Manufacturers'/Representatives) • aimr.net 2000 - 2012 © CXO Advisory Group
  48. 48. Rep Agreement Caveats  Most rep agreements have commissions due on order •  Commissions should be on NET Sales •  Commissions should be paid ONLY AFTER YOU COLLECT 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 renewal 2000 - 2012 © CXO Advisory Group
  49. 49. Retail 2000 - 2012 © CXO Advisory Group
  50. 50. Retail 2000 - 2012 © CXO Advisory Group
  51. 51. Retail 2000 - 2012 © CXO Advisory Group
  52. 52. Retail Packaging that Sells 2000 - 2012 © CXO Advisory Group
  53. 53. Slotting Fees 2000 - 2012 © CXO Advisory Group
  54. 54. Most Overlooked Marketing/Sales Opportunity 2000 - 2012 © CXO Advisory Group
  55. 55. Association Marketing - Over 7600 Trade Associations Over 21K Professional Associations Over 151K Associations Worldwide 2000 - 2012 © CXO Advisory Group
  56. 56. 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 (VAR) Margin, 20-40%, 5-10% MDF Distributor (stocks product) Margin, 10%–50%, 2-5% MDF 2000 - 2012 © CXO Advisory Group
  57. 57. Key to Efficient Channel Management  Treat them like they’re your own salesforce  Train channel partners well  Strengthen ability of channel partners to deliver solutions  Enhance communications  Enable partners to sell complementary services  Deliver channel value with the web 2000 - 2012 © CXO Advisory Group
  58. 58. How the Channel Views Vendor Internet Plans 2000 - 2012 © CXO Advisory Group
  59. 59. Final Thoughts 2000 - 2012 © CXO Advisory Group
  60. 60. Take the Long Term View 2000 - 2012 © CXO Advisory Group
  61. 61. Train Your Channel Partners Well 2000 - 2012 © CXO Advisory Group
  62. 62. Align Sales & Marketing 2000 - 2012 © CXO Advisory Group
  63. 63. Open & Frequent Communications 2000 - 2012 © CXO Advisory Group
  64. 64. Review Channel Strategy Yearly 2000 - 2012 © CXO Advisory Group
  65. 65. Questions 2000 - 2012 © CXO Advisory Group
  66. 66. Driving Profitable Growth 2000 - 2012 © CXO Advisory Group
  67. 67. 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
  68. 68. 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 channels 2000 - 2012 © CXO Advisory Group
  69. 69. 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 partnerships 2000 - 2012 © CXO Advisory Group
  70. 70. 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 coaches 2000 - 2012 © CXO Advisory Group
  71. 71. 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 companies 2000 - 2012 © CXO Advisory Group
  72. 72. 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: Email: Website: Linkedin: Twitter: (508) 528-7571 sdavis@cxoadvisorygroup.com www.cxoadvisorygroup.com www.linkedin.com/in/stephendavis twitter.com/stephendaviscxo
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