Choosing The Right Sales Strategy

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This is a presentation that I gave on developing sales channels to a group of entrepreneurs at the Technology Capital Network in July 2007 in the Boston area

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Choosing The Right Sales Strategy

  1. 1. CXO Advisory Group Choosing the Right Sales Channel Stephen N. Davis “Partnering With Clients to Drive Sustainable Profitable Growth” July 2007
  2. 2. What We’ll be Covering Developing your channel strategy • How to choose the right channel(s) Types of sales channels • Capabilities & limitations What it takes to succeed Managing channel relationships Key points to remember CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  3. 3. Sales Channels – The Reality “A product with better distribution will always win over a product with poor distribution or customer access” It’s not fair. It’s not right. But, it’s reality. CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  4. 4. Common Sales Strategy Mistakes Confuse channel partners with final customers Channels are not in sync with end-user targets Channels do not fill company weaknesses No targeted value proposition to the channel Failure to treat sales channels on an equal basis Failure to consider licensing or joint-venture agreement Lack of sell cycle sales tools Insufficient start up costs Insufficient channel margins Channel conflict Treating the US as one homogenous market CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  5. 5. Plan Your Entry into the Channel “If you don’t know where you’re going you’ll probably wind up somewhere else” CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  6. 6. Critical Questions You Must Answer What is the customer profile? Do I offer a whole product solution? What is my average deal size? How complex is my solution? How long is my sales cycle? What are my company’s Strengths and Weaknesses? How much money is available for Marketing/Sales? How and where do my competitors sell effectively? What complimentary product sales opportunities exist? CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  7. 7. You Need a Whole Product Offering Pre-Sales Support C e on ar ftw su lti So ng The Product In Se te rv e gr ice ar at s dw io ar n H Post-Sales Support CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  8. 8. 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 Budget CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  9. 9. Have a Written Plan with Measurable Objectives Build a customer profile? What channel partners should I have? • Build a channel partner profile • Link to end-user targets • Fit with existing channels • What role do they play? • Influence • Sales • Support • Technical How do I choose them? How do I measure them? How do I generate business for them? Do the financial requirements make sense for our company? CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  10. 10. 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 investment CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  11. 11. 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 CXO agents Advisory Group 2000 - 2009 © CXO Advisory Group
  12. 12. Channel Benefits/Risks Benefits Risks Control Harder to scale Higher gross margins Higher fixed costs Direct customer relationship Less flexible – seasonal sales Direct Necessary for complex sale Can scale quickly Ongoing investment in Use established customer recruitment & training relationships Big margin sacrifice Fill product gaps Up front MDF investment Indirect Companion selling Loss of customer relationship opportunities & feedback Local support Fighting for mindshare Increased demand generation Quality of channel partner Offload financing risk CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  13. 13. Computer Distribution Channels CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  14. 14. What Do These Firms Have in Common? CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  15. 15. 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 support CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  16. 16. 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 won't carry competing product Tough sale – long sales cycle CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  17. 17. 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 • Training CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  18. 18. 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 Authority CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  19. 19. 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 basis CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  20. 20. 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 CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  21. 21. 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, References CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  22. 22. What does a good Reseller look for Product for their market Ways to increase revenue via • Consulting • Support • Reduced cost of sale Investment and commitment Good business proposition Training & technical support Sale & marketing support Territorial exclusivity Price stability CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  23. 23. VARs Choose Product On % VARs Considering Factor Extremely Important Product Quality 87% Order Fulfillment 55% Profit Margins 45% Price/Performance 45% Commitment 43% Technical Support 41% Business Documentation 29% Terms & Conditions 25% Channel Conflict 21% Sales Rep Assistance 17& Sales Leads 17% Co-op Advertising 6% Source: VARBusiness CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  24. 24. Manage Your Reseller Relationship Be selective – resellers won’t Reduce potential territorial conflicts Distributors will not maintain your reseller relationship • You have to do it directly Segment your resellers • That work on large accounts with your direct sales force • Markets that resellers will be your salesforce • Specialized vertical markets Resources should be based on this segmentation Set realistic sales targets and ramp up Provide sales cycle specific marketing tools Communicate regularly Train, Train, Train CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  25. 25. Cost of Market Entry Options Retailer Mark-up, 50% - 200%+ 5-10% MDF, Slotting Fees Agent/ Rep. Commission, 5%–30% Value Added Reseller Margin, 20-40%, 5-10% MDF (VAR) Distributor (stocks product) Margin, 10%–50%, 2-5% MDF CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  26. 26. 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 agressively Deliver channel value with the web • Demand creation • Quality leads • Support • Information • Links • Feedback CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  27. 27. When Worlds Collide: Misalignment of Marketing & Sales Marketing sales: “We spend millions generating qualified prospects and they fall into a black hole!” Sales says: “The collateral material is crap. It doesn’t help me in the sales cycle and the so-called leads they send us are a waste of my time.” CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  28. 28. When Worlds Collide: Misalignment of Marketing & Sales Company centric messaging doesn’t support sales effort 50% to 90% of marketing messages, collateral and sales tools go unused Sales people spend 40-60 hours each month creating their own materials, responses, presentations Only 10% of sales people present the “best answer” to a customer solution Solution: Produce sales-cycle relevant tools Source: AMA and collateral CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  29. 29. 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 politics CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  30. 30. 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 processes CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  31. 31. 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 programs CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  32. 32. Questions CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  33. 33. CXO Advisory Group 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
  34. 34. 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 CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  35. 35. 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 CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  36. 36. 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 CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  37. 37. 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 CXO Advisory Group 2000 - 2009 © CXO Advisory Group
  38. 38. CXO Advisory Group 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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