Choosing & Managing Sales Channels for Your Startup - Masschallenge - 072814

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On Monday, July 28th I presented this workshop on "Choosing and Managing Sales Channels for Your Startup" to the 2014 class of startup companies at MassChallenge.

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

Stephen Davis is a business growth strategist – as well as the Founder of The CXO Advisory Group, a firm providing interim COO and VP Sales and Marketing services. He works with businesses, entrepreneurs and service providers who want to accelerate revenue growth to the next level and seize the most attractive growth opportunities. Steve has been a mentor and adviser to entrepreneurs over 20 years helping them improve business development, gain sales traction and has coached them on how to build profitable, scalable and efficient businesses in preparation for venture financing.

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Choosing & Managing Sales Channels for Your Startup - Masschallenge - 072814

  1. 1. Choosing & Managing Sales Channels 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 – 2014 ©CXO Advisory Group
  3. 3. 2000 – 2014 ©CXO Advisory Group
  4. 4. Not Having an Adequate Profile of Customers 2000 – 2014 ©CXO Advisory Group
  5. 5. Confusing the End-User with the Buyer 2000 – 2014 ©CXO Advisory Group
  6. 6. Confusing the Buyer With the Channel Partner 2000 – 2014 ©CXO Advisory Group
  7. 7. Channels NOT In-Sync with Targeted Buyers 2000 – 2014 ©CXO Advisory Group
  8. 8. Thinking Your “Value Proposition” is the Same as Theirs 2000 – 2014 ©CXO Advisory Group
  9. 9. Failure to Consider Licensing or Joint Ventures 2000 – 2014 ©CXO Advisory Group
  10. 10. NotC Eonmoumgho nM Saragliens F Sotrr Catheagnyn els 2000 – 2014 ©CXO Advisory Group Mistakes
  11. 11. InsCuoffmicmieonnt MSaarlekse tSintgra Bteugdyg et 2000 – 2014 ©CXO Advisory Group Mistakes
  12. 12. 2000 – 2014 ©CXO Advisory Group Not Aligning Marketing & Sales
  13. 13. Going to the Channel Before You’re READY 2000 – 2014 ©CXO Advisory Group
  14. 14. 11st Customer Contact st Customer Contact Only 2% of Sales are Closed on 1st 2000 – 2014 ©CXO Advisory Group Contact Source: National Sales Executive Association
  15. 15. 22nd Customer Contact nd Customer Contact Only 3% of Sales are Closed on 2nd 2000 – 2014 ©CXO Advisory Group Contact Source: National Sales Executive Association
  16. 16. 33rd Customer Contact rd Customer Contact 5% of Sales are Closed on 3rd 2000 – 2014 ©CXO Advisory Group Contact Source: National Sales Executive Association
  17. 17. 44th Customer Contact th Customer Contact 10% of Sales are Closed on 4th 2000 – 2014 ©CXO Advisory Group Contact Source: National Sales Executive Association
  18. 18. 5th - 12th Customer Contact 2000 – 2014 ©CXO Advisory Group Source: National Sales Executive Association
  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 – 2014 ©CXO Advisory Group  Internet sites  Extranets  e-Marketplaces  Direct Mail  OEM’s  Retail  Kiosk’s  Strategic alliances  Agents (consultants, affiliates, etc.)
  20. 20. Channel Costs Cost Freemium 2000 – 2014 ©CXO Advisory Group Minimal Touch Channel Sales Inside Sales Direct Sales Force
  21. 21. Computer Distribution Channels 2000 – 2014 ©CXO Advisory Group
  22. 22. What Do These Firms Have in Common? 2000 – 2014 ©CXO Advisory Group
  23. 23. Do You OFFER a Whole Product? 2000 – 2014 ©CXO Advisory Group Pre-Sales Support The Product Post-Sales Support
  24. 24. 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? • 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? 2000 – 2014 ©CXO Advisory Group
  25. 25. Do You Have Enough Profit Margin for the Channel? 2000 – 2014 ©CXO Advisory Group Gross Profit Cost of Goods Suggested List Price (SRP) or Street Price End User S. G. & A. 62% 15% 23%
  26. 26. Do You Have Enough Profit Margin for the Channel? 50% 12% 2000 – 2014 ©CXO Advisory Group Gross Profit Cost of Goods Suggested List Price (SRP) Your Revenue End User Consumer Retailer Street Price S. G. & A. 15% 23%
  27. 27. Do You Have Enough Profit Margin for the Channel? 50% 10% 2000 – 2014 ©CXO Advisory Group Profit + S.A Cost of Goods Suggested List Price (SRP) Your Revenue End User Consumer Retailer Distributor Street Price 15% 23% 2% Gross Profit Is NOT ENOUGH S. G. & A.
  28. 28. Is Your Buyer Package 2000 – 2014 ©CXO Advisory Group up to Snuff?
  29. 29. Is Your Buyer Package 2000 – 2014 ©CXO Advisory Group up to Snuff?  Marketing materials  Product Liability Coverage  Price lists  Outline of your marketing campaign  Product samples - Packaging  COOP/MDF funds and campaigns  In-store merchandising  Prospect & customer correspondence  Sales training & support for their personnel  End user training & Support
  30. 30. Strategic Partner/ OEM 2000 – 2014 ©CXO Advisory Group / Private Label
  31. 31.  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 – 2014 ©CXO Advisory Group
  32. 32. Approaching a Potential Strategic Partner/ OEM / 2000 – 2014 ©CXO Advisory Group 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
  33. 33. Key Issues in Licensing 2000 – 2014 ©CXO Advisory Group Agreement
  34. 34. Key Issues in Licensing 2000 – 2014 ©CXO Advisory Group Agreement  Marketing Obligations  List Price of Product  Performance Requirements  Warranties  Limitation of Liabilities  Development Support  Rights to Updates  Termination  Source Code Access  Specs & Deliverables  Acceptance  Grant of License  Terms  Payments  Bookkeeping Requirements  Ownership  Use of Trademarks  Training  Decision Making Authority
  35. 35. Grant of License 2000 – 2014 ©CXO Advisory Group
  36. 36. Specifications & Deliverables 2000 – 2014 ©CXO Advisory Group
  37. 37. Acceptance Testing 2000 – 2014 ©CXO Advisory Group
  38. 38. Payment Terms 2000 – 2014 ©CXO Advisory Group
  39. 39. Source Code Access 2000 – 2014 ©CXO Advisory Group
  40. 40. Contract Termination 2000 – 2014 ©CXO Advisory Group
  41. 41. Distributors/Wholesalers 2000 – 2014 ©CXO Advisory Group
  42. 42. 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 – 2014 ©CXO Advisory Group
  43. 43. 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 – 2014 ©CXO Advisory Group
  44. 44. Typical Rep Territories - USA 2000 – 2014 ©CXO Advisory Group
  45. 45. Typical Rep Territories - Canada 2000 – 2014 ©CXO Advisory Group
  46. 46. Sourcing 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.net 2000 – 2014 ©CXO Advisory Group
  47. 47. 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 renewal 2000 – 2014 ©CXO Advisory Group
  48. 48. 2000 – 2014 ©CXO Advisory Group Retail
  49. 49. 2000 – 2014 ©CXO Advisory Group Retail
  50. 50. 2000 – 2014 ©CXO Advisory Group Retail
  51. 51. Retail Packaging that Sells 2000 – 2014 ©CXO Advisory Group
  52. 52. 2000 – 2014 ©CXO Advisory Group Slotting Fees
  53. 53. 2000 – 2014 ©CXO Advisory Group Most Overlooked Marketing/Sales Opportunity
  54. 54. Association Marketing - Over 7600 Trade Associations - Over 21K Professional Associations - Over 151K Associations Worldwide 2000 – 2014 ©CXO Advisory Group
  55. 55. Cost of Market Entry Options Retailer Mark-up, 50% - 200%+ 2000 – 2014 ©CXO Advisory Group 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
  56. 56. How the Channel Views Vendor Internet Plans 2000 – 2014 ©CXO Advisory Group
  57. 57. Final Thoughts 2000 – 2014 ©CXO Advisory Group
  58. 58. Take the Long Term View 2000 – 2014 ©CXO Advisory Group
  59. 59. Train Your Partners Well 2000 – 2014 ©CXO Advisory Group
  60. 60. Frequent Communications 2000 – 2014 ©CXO Advisory Group
  61. 61. Avoid Channel Conflict 2000 – 2014 ©CXO Advisory Group
  62. 62. Align Marketing 2000 – 2014 ©CXO Advisory Group & Sales
  63. 63. 2000 – 2014 ©CXO Advisory Group
  64. 64. 2000 – 2014 ©CXO Advisory Group Sales Says
  65. 65. Marketing Says “We Send Qualified Leads To Sales & They Fall into a Black Hole” 2000 – 2014 ©CXO Advisory Group
  66. 66. 10 More Min/Week = $57,000 Additional Revenue Per Year Source: IDC Sales Enablement Research 2000 – 2014 ©CXO Advisory Group
  67. 67. Better Aligned Faster Growth Year-to-Year Basis Than Competition Source: MarketingProfs 2000 – 2014 ©CXO Advisory Group
  68. 68. Close More Business Better at Closing than Non-Aligned Competition Source: MarketingProfs 2000 – 2014 ©CXO Advisory Group
  69. 69. Less Customer Churn Than Competition Source: MarketingProfs 2000 – 2014 ©CXO Advisory Group
  70. 70. Sales & Marketing View the World Differently 2000 – 2014 ©CXO Advisory Group
  71. 71. Marketing Looks for 2000 – 2014 ©CXO Advisory Group Mr. Right
  72. 72. Sales Wants Mr. RightNOW 2000 – 2014 ©CXO Advisory Group
  73. 73. When There isn’t a Common Profile 2000 – 2014 ©CXO Advisory Group
  74. 74. Get Them Talking 2000 – 2014 ©CXO Advisory Group
  75. 75. Jointly Define a “Sales-Ready Lead” 2000 – 2014 ©CXO Advisory Group
  76. 76. Develop Sales Tools Specific to Buying Cycle 2000 – 2014 ©CXO Advisory Group
  77. 77. Have a Formal Lead Management System 2000 – 2014 ©CXO Advisory Group New Lead Registered Lead Phone Ready Lead TeleQualify Leads Sales-Validate Lead Demo/Meet/Proposal Enter Sales Forecast Closed Deals Hand Off to Sales Buying Cycle Lead Nurturing
  78. 78. Lead Nurturing Campaign 2000 – 2014 ©CXO Advisory Group
  79. 79. 2000 – 2014 ©CXO Advisory Group Source: National Sales Executive Association
  80. 80. 2000 – 2014 ©CXO Advisory Group Source: National Sales Executive Association
  81. 81. 2000 – 2014 ©CXO Advisory Group Source: National Sales Executive Association
  82. 82. 2000 – 2014 ©CXO Advisory Group Source: National Sales Executive Association
  83. 83. Develop a Customer Retention Program 2000 – 2014 ©CXO Advisory Group
  84. 84. 2000 – 2014 ©CXO Advisory Group Post Mortem On Lost Business
  85. 85. Lost Customer Reactivation Program 2000 – 2014 ©CXO Advisory Group
  86. 86. 2000 – 2014 ©CXO Advisory Group Everyone is In SALES
  87. 87. Review Channel Strategy Yearly 2000 – 2014 ©CXO Advisory Group
  88. 88. 2000 – 2014 ©CXO Advisory Group
  89. 89. Driving Profitable Growth 2000 - 2014 © CXO Advisory Group
  90. 90. 2000 – 2014 ©CXO Advisory Group Driving Profitable Growth We help companies optimize business development and marketing; accelerate sales; and seize the most attractive growth opportunities.
  91. 91. 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 – 2014 ©CXO Advisory Group
  92. 92. How Can We 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 – 2014 ©CXO Advisory Group
  93. 93. How Can We 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 – 2014 ©CXO Advisory Group
  94. 94. How Can We Help You? Venture Advisory Services • Fine tune operations, business strategy and market entry • Assist with due diligence • Strategic business assessment of portfolio companies 2000 – 2014 ©CXO Advisory Group
  95. 95. 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) 528-7571 Email: sdavis@cxoadvisorygroup.com Website: www.cxoadvisorygroup.com Linkedin: www.linkedin.com/in/stephendavis Twitter: twitter.com/stephendaviscxo

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