Course : PGEMP - Batch 41 Contact 3
Marketing Management
Prof S K Palekar : November 2013
S P Jain Institute of Management...
In this contact we will cover the third leg of the marketing strategy.
1st leg was covered in Contact 1 and consisted of
u...
AGENDA
Introduction to Go-To-Market
Hunting and Gathering
Sales Funnel
Sales Management
Selling through channel
Dire...
Introduction
Go-To-Market

skpalekar@hotmail.com
MARKETING PROCESS
Description of “Go-To-Market” Activities
The “Marketing Budgets” of most companies are spent on such Go-To-Market
activiti...
Customers’ Buying Journey
The purpose of Go-To-Market activity is to help customers move on their buying
journey from left...
Consumer Process

Industrial Process
Problem Recognition

Problem Recognition

New Buying
Task

Gen Needs Description
Supp...
Generic Model “Customers’ Buying Journey”
: Visible Signs
1. Not aware that he needs to solve a problem
2. Recognizes the ...
Hunting
Gathering

skpalekar@hotmail.com
Company
Customer

B2C
Your
usual
soap

B2B
ERP
For
SME
B2C : Your usual soap.
Customer searches
actively.

GATHERING

B2B : ERP system for
SME firms. Marketing
company searches
...
Marketers use different approaches to the customers who
are at different stages in their “Buying Journey”
 For customers ...
If most of your customers are
at an early stages of their buying journey
Your focus needs to be on hunting and concept
se...
If most of your customers are
at the middle stages of their buying journey
your focus should be on COMPARATIVE SELLING
an...
If most of your customers are
Ready to transact
Your focus should be on GATHERING
This means you should
Expand your rea...
Remember
To use different approaches to the customers
who are at different stages in their “Buying Journey”
Hunting and
Co...
Hunter’s Journey
GATHERING

HUNTING

Customer Active / Searches

Customer inactive co searches

Appoint channel to sell

Appoint sales forc...
Go-To-Market : 2 Different Systems
Hunting ( Business Development / Sales Management)
•
•
•
•
•

Requires more own / dedi...
Metrics Used in Hunting / Gathering
Customers Come–To-Market on their own
• Try and use independent trade outlets to stoc...
Various Go-To-Market Capabilities
Capability to define who are the prospects
Capability to recognize the prospects easil...
Readiness to Buy

B2B

B2C

Low

You Search Actively
( You Hunt )

High

Customers Searching Actively
( You Gather )
Low

...
Readiness to Buy

B2B

B2C

Low

Push
You can deal
directly

You need a
channel

High
Low

High

Number of Customers
In B2...
4 Paradigms of Selling
Readiness to Buy

B2B

B2C

You need to hunt for
Customers - Reach
Low
Directly

You need to hunt f...
4 Paradigms of Selling
Readiness to Buy

B2B

Low

ERP
“No Buying Budget”

Common Machinery
High B2B Consumables
Low

B2C
...
Sales Funnel

skpalekar@hotmail.com
Prospecting
Planning
Contacting

Pre Sales

Presenting

Sales Cycle
Negotiating / QA
Closing
Transacting
Commissioning
Rev...
Best Practice : Lead Management


OBJ : Weed out people unlikely to buy ASAP
 Suspects (Target Audience ) who may buy
 ...
Best Practice : After Market Cultivation



Customer database maintenance / updation
Customer grading RFVR
Recency, Fre...
Best Practice for Revenue Over Time
TLV ( Total Life Time Value )

1st Purchase

2nd Purchase

13,

2003

After Sales Reve...
Best Practice for Revenue Generation
Value over cross-selling potential

1st Product

2nd Product

3rd Product

August

13...
Communication Mix Practice in FMCG
Step

FMCG

1 Prospect Identification

Brand Management based on MR

2 Pre-approach

Ad...
Communication Mix Practice in Durables
Step

Durables

1 Prospect Identification

Brand Management based on MR

2 Pre-appr...
Communication Mix in Tele-Shopping
Step

Tele Shopping Network

1 Prospect Identification

Brand Management based on MR

2...
Communication Mix in Life Insurance
Step

Insurance Policy

1 Prospect Identification

Agent

2 Pre-approach

Agent

3 App...
Communication Mix in PCB Makers
Step

PCB Maker

1 Prospect Identification

Electronic Mfg Directory, Exhibitions

2 Pre-a...
Ad Agency Looking For New Accounts
Step

Agency

1 Prospect Identification

Grapevine, Networking

2 Pre-approach

Checkin...
Best Practice : Separate Hunt & Gather
Teams

CUSTOMER ACQUISITION.
HUNTERS

CUSTOMER RETENTION
GATHERERS
Sales Management

skpalekar@hotmail.com
Definition of Selling

Presenting yourself and your product / service / idea
to your prospects, personally and interactive...
Checklist For Sales Managers Tasks
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.

Role statement and competency specifica...
CONTACT MANAGEMENT ISSUES


What type of personality and capabilities we need at various levels in
our sales force
 Role...
People Management Objectives - A


Compute number of persons of each type needed at each
headquarter.



Interviewing po...
People Management Objectives - B


Motivating them to bring out their best and training them
to keep them abreast of late...
Selling Through Channel
What your customer wants =
What you can provide + what your channel can provide
skpalekar@hotmail....
Examples of Channel Services
 Availability



Want toothpaste at the shop downstairs
I don’t mind traveling but want to...
Examples of Channel Services
 Education and Updation



Latest advances in treating termites
Latest clinical tests of n...
Examples of Channel Services
 Training, handholding, coaching



How to use the latest software
How to use all the acce...
Examples of Channel Services
 Enquiry Response



Be able to register a complaint 24 x 7
Need to know fares of differen...
Review Question : Why channels ?

 Many customers; spread everywhere : soap

One company cannot reach all

 Customers b...
Main Channel Decisions

The 3 decisions are
1. Horizontal coverage of the market ?
Intensively or selectively?
2. Vertical...
When Selective ? When Intensive ?
Use selective (sparse) distribution when
 Generally high ticket (price) items
 Consume...
Selective or Intensive ?
 Product characteristics
 Intensive Distribution : For products purchased frequently , For
prod...
Channel Architecture : How Long ?
 Company  Customer ? ( DIRECT SALES)
 Used by industrial products and high value prod...
How many tiers ? 2 Extremes
 For industrial products, the number of customers are few and the
value of the order per deli...
Direct sales ( Zero Tier )







Own sales force selling direct to end user
Prevalent among industrial goods manufa...
Own Channel or Someone Else’s ?
 It is always a dilemma whether to use an existing trader or to
set up one’s own trading ...
Using Conventional Channels
 They invest in your stock, display your goods, deliver goods,
make invoices and extend credi...
Manufacturers manage these
disadvantages…
 STICK : agreements on sales terms and obligations like
 Price maintenance
 D...
“Fully Controlled Vertical”
 May be either Owned or Franchised
 Gas stations, Bata stores.
 Advantages
 List price mai...
Type of “Franchising”
 Product trade name franchising
 The right to market the franchisor’s product
within a designated ...
How “Franchising” Helps …
 Benefit to franchisees
 opportunity to be “own boss”
 “Pre-packaged” business with no prior ...
How “Franchising” Hampers …
 Problems to franchisees
 Fly-by-night franchisors.
 Inflated sales and profit projections....
Bata uses multiple channels
 Through their own “Bata” stores (Bata brand)
 Space, Stock, People .. All by Bata.
 Throug...
Tiered systems
Note : At each stage there is a buyer and a seller

Company

Direct Sales System : Company sells to end use...
Tiered systems
Note : At each stage there is a buyer and a seller

One tier system

Company

Retailer

Customer

2 tier sy...
Value Added By Sales Force is
Not only persuasion and promotion

C
O
M
P
A
N
Y

Transportation of physical goods
Title / O...
Industrial Products : Go To Market
Few and large customers – can contact direct.
Promotion is done personally.
Own

Channe...
Direct Promotion : Go To Market

Direct Response Ads

Channel
Options

Tele Marketing
Direct Marketing

Direct Mail
Catalo...
Direct Selling
Company  Customer
skpalekar@hotmail.com
Mass

Economics

Direct

TV

Demand

Mailer

Sale

Sale

Sale

Retailers

Supply

Courier
Direct Marketing Advantages
Can be individually targeted.
It is less wasteful than mass media.
The approach can be customi...
Direct Marketing Advantages
Can evaluate response from each contact

Whereas in mass media you need spend
huge sums before...
Direct Marketing
100 test mailers
1% response

1st improvement

1000 test mailers
2% response

2nd improvement

10000 mail...
Mass








vis-à-vis

Mass reach
Low cost per reach
Easy to organize
One way communication
Low impact per contact...
13% of all goods in USA








Catalog houses : Sears
Tele-shopping networks : Tele-Brands
Ads inviting phone cont...
CIRCUMSTANCES FOR DIRECT
MARKETING
 Concept / Complex products : extensive explanation
 Custom made product : customer p...
What only direct contact can do
 Customization ( DIRECT MAIL )
 Interactive ( DELL )
 Multi Sensory ( ARIAL SAMPLING )
...
Other Points

skpalekar@hotmail.com
Conveying Value : Limitations of Ad vs Selling
1.
2.
3.

Ad : Same message / story / positioning for all
Ad : 1 way, durat...
Communication Mix
in Customer Acquisition & Retention
Advertising : Mass, trade, niche
Public Relations
Direct Marketing :...
4 Criteria for Media Selection
Reach in TA

Engagement

Cost / Reach

Personalized, 2 Way,
5 senses, Interactive
Persuasiveness

(15) Call Center

(10)Phone Call
(0.5) Media

Cost
August

13,

2003

(40)Salesman
Complete Guide - How to go to market
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Complete Guide - How to go to market

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Prof Palekar's "Executive MBA" course on selling for CMOs

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Complete Guide - How to go to market

  1. 1. Course : PGEMP - Batch 41 Contact 3 Marketing Management Prof S K Palekar : November 2013 S P Jain Institute of Management & Research, Mumbai In this contact we will cover the third leg of the marketing strategy. 1st leg : choosing target customers / competitors / collaborators 2nd leg : Using “Positioning” to arrive at the “Marketing Mix” 3rd leg (now) : arriving at “Go To Market” strategy
  2. 2. In this contact we will cover the third leg of the marketing strategy. 1st leg was covered in Contact 1 and consisted of using the 5Cs model to study the market In order to choose the target customers / competitors / collaborators 2nd leg was covered in Contact 2 . It consisted of “Positioning” the offer vis-à-vis chosen customers / competitors / collaborators In order to arrive at the “marketing mix” consisting of “7Ps” Product, Place, Price, Promotion,
  3. 3. AGENDA Introduction to Go-To-Market Hunting and Gathering Sales Funnel Sales Management Selling through channel Direct selling Other Points
  4. 4. Introduction Go-To-Market skpalekar@hotmail.com
  5. 5. MARKETING PROCESS
  6. 6. Description of “Go-To-Market” Activities The “Marketing Budgets” of most companies are spent on such Go-To-Market activities through their marketing, sales and service departments All activities “between the factory producing the products to the customers consuming them” Spending by the marketing , sales, distribution , service and CRM departments All manner of customer connect activities like media, promotions, sales force, channel margins, discounts, incentive schemes, PR, conferences, merchandising, web sites, digital media, exhibitions etc. All activities impacting various customers : end users, influencers, channel members, franchisees, agents etc
  7. 7. Customers’ Buying Journey The purpose of Go-To-Market activity is to help customers move on their buying journey from left to right and make them more ready to buy.
  8. 8. Consumer Process Industrial Process Problem Recognition Problem Recognition New Buying Task Gen Needs Description Supplier Search Search Proposal Solicitation Supplier Selection Evaluation Setting up procedures Routine Buying Task Purchase Routine Purchase
  9. 9. Generic Model “Customers’ Buying Journey” : Visible Signs 1. Not aware that he needs to solve a problem 2. Recognizes the problem and is open to discuss it 3. The problem is understood and gets defined 4. Search begins for solution options 5. Options narrowed : “consideration set” emerges 6. 1st Preference gets defined 7. Terms and Conditions agreed 8. Order placed 9. Transaction completed 10. Assessment of satisfaction post purchase You will need to create a model specific to your business
  10. 10. Hunting Gathering skpalekar@hotmail.com
  11. 11. Company Customer B2C Your usual soap B2B ERP For SME
  12. 12. B2C : Your usual soap. Customer searches actively. GATHERING B2B : ERP system for SME firms. Marketing company searches actively HUNTING Company Searches Actively Customer Searches Actively
  13. 13. Marketers use different approaches to the customers who are at different stages in their “Buying Journey”  For customers at the early stages of their buying journey ( Those who do not know that they have a problem, those who only have a vague idea of what they need); the approach is to help the customer to discover / own the problem  For customers who are at the middle stages of their buying journey ( who are weighing features, vendors and terms in order to narrow their options) the approach is to help the customer discover right criteria and enable comparison and choice between various features, vendors and terms  For those customers who are ready to transact, the approach is to work out deals, provide selling outlets, improve stock visibility, take orders, make delivery / collection / service arrangements. Where are most of your customers now? Is your Go-To-Market suitable?
  14. 14. If most of your customers are at an early stages of their buying journey Your focus needs to be on hunting and concept selling ( creating need and budget) Hunting Developing criteria for identifying prospects Using these rules to locate and contact prospects Engage and pave the way for concept selling Concept selling is needed when there is no existing BANT ( Budget, Authority, Need and Time Pressure) This is a very skilled level of selling “Art of complex sale”
  15. 15. If most of your customers are at the middle stages of their buying journey your focus should be on COMPARATIVE SELLING and you should help the customers discover what are the criteria he should use in selecting • the right features • The right vendors • The right terms and conditions
  16. 16. If most of your customers are Ready to transact Your focus should be on GATHERING This means you should Expand your reach : more distributors, more retailers, more agents Improve visibility and presence on the street and inside the outlet Work out better arrangements for • • • • • order-taking Delivery Payment Service Ease of access
  17. 17. Remember To use different approaches to the customers who are at different stages in their “Buying Journey” Hunting and Concept selling Comparative selling Gathering and Distribution
  18. 18. Hunter’s Journey
  19. 19. GATHERING HUNTING Customer Active / Searches Customer inactive co searches Appoint channel to sell Appoint sales force to sell Sales force manages channel Sales Force sells to Customers Demand created thru ads / display Demand created thru conversation Std simple mass products Customized complex products Low Price, High volume High Price, Low Volume “Product selling” “Consultative selling”
  20. 20. Go-To-Market : 2 Different Systems Hunting ( Business Development / Sales Management) • • • • • Requires more own / dedicated people They cover a large portion of the customer journey 2 stage process : filter (leads) and focus (conversion) They are skilled in customer / problems / solutions They have order-creation capabilities Gathering ( Channel Management ) • • • • • Channel provides manpower - but not dedicated They cover only a small portion of customer journey 2 stage process : Appoint channel member & manage They are skilled in working capital management They have order-taking and not selling capabilities
  21. 21. Metrics Used in Hunting / Gathering Customers Come–To-Market on their own • Try and use independent trade outlets to stock and display where and when the customers come • Example of metrics in TV business : counter enquiries, calls at the call center, off take of brochures, price quotations, demonstration, sale Customers who don’t come on their own to market • • • • Universe  suspects  prospects Contact  present  QA  Negotiations  Close Transact  Install  Train Customer Relationship Management / Aftermarket
  22. 22. Various Go-To-Market Capabilities Capability to define who are the prospects Capability to recognize the prospects easily Capability to locate them at relatively low cost Capability to Contact them Capability to Engage their attention Capability to communicate when engaged Capability to persuade and take the order Capability to conduct he transaction Capability to maintain relationship and give service Capability to eplace, up-sell, cross-sell, referrals…
  23. 23. Readiness to Buy B2B B2C Low You Search Actively ( You Hunt ) High Customers Searching Actively ( You Gather ) Low High Number of Customers When customers search actively, structures to meet their demand come up. Retailers, wholesalers who supply to these retailers, the company warehouses and distributors who supply to these wholesalers .. All these come up as independent businesses. When customers do not search actively for you, there are no readymade “gathering points”.
  24. 24. Readiness to Buy B2B B2C Low Push You can deal directly You need a channel High Low High Number of Customers In B2B businesses you can deal directly with a few large customers and you can customize for them and you can first take order and then make to order. But for mass products, the channel is a more economical option to reach the market. In such case you are available through channel but reach through mass media. There are multiple tiers in the channel and multiple handling points. The products are standardized and made to stock and have many packaging layers.
  25. 25. 4 Paradigms of Selling Readiness to Buy B2B B2C You need to hunt for Customers - Reach Low Directly You need to hunt for the Customers – Use channel Customers are searching - Reach High Directly Customers are searching – Use channel Low High Number of Customers
  26. 26. 4 Paradigms of Selling Readiness to Buy B2B Low ERP “No Buying Budget” Common Machinery High B2B Consumables Low B2C Insurance Concept Products Match Box Staples High Number of Customers
  27. 27. Sales Funnel skpalekar@hotmail.com
  28. 28. Prospecting Planning Contacting Pre Sales Presenting Sales Cycle Negotiating / QA Closing Transacting Commissioning Revisiting Servicing Post Sales
  29. 29. Best Practice : Lead Management  OBJ : Weed out people unlikely to buy ASAP  Suspects (Target Audience ) who may buy  Prospects : who have the need, budget & desire  Hot Prospects : who are favorably considering us  Lead Management  Generation : Separate prospects from suspects  Qualification : Separate hot prospects from prospects For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  30. 30. Best Practice : After Market Cultivation   Customer database maintenance / updation Customer grading RFVR Recency, Frequency, Value, Referrals  Direct Marketing of “offers”  To sell AMC To sell accessories To sell someone else’s products To replace To upgrade To dispose or sell off For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  31. 31. Best Practice for Revenue Over Time TLV ( Total Life Time Value ) 1st Purchase 2nd Purchase 13, 2003 After Sales Revenue 3rd Purchase August After Sales Revenue After Sales Revenue
  32. 32. Best Practice for Revenue Generation Value over cross-selling potential 1st Product 2nd Product 3rd Product August 13, 2003
  33. 33. Communication Mix Practice in FMCG Step FMCG 1 Prospect Identification Brand Management based on MR 2 Pre-approach Ad & Concept testing 3 Approach / Contact TV / Mass Media 4 Presentation TV / Mass Media 5 Pre-close, Q/A, Negotiation TV / Mass Media 6 Close TV / Mass Media 7 Transaction Retailer 8 Install / Commission Not Applicable 9 Post sales activity Not Practicable For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  34. 34. Communication Mix Practice in Durables Step Durables 1 Prospect Identification Brand Management based on MR 2 Pre-approach Ad & Concept testing 3 Approach / Contact Mass Media 4 Presentation Mass Media builds traffic 5 Pre-close, Q/A, Negotiation Retailer negotiates and closes 6 Close Retailer 7 Transaction Retailer 8 Install / Commission Company Service 9 Post sales activity Company Service For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  35. 35. Communication Mix in Tele-Shopping Step Tele Shopping Network 1 Prospect Identification Brand Management based on MR 2 Pre-approach Demo documentary 3 Approach / Contact Mass Media 4 Presentation Mass Media 5 Pre-close, Q/A, Negotiation Demo documentary + Call center 6 Close Demo documentary + Call center 7 Transaction Call center 8 Install / Commission Franchised Service 9 Post sales activity Telemarketing For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  36. 36. Communication Mix in Life Insurance Step Insurance Policy 1 Prospect Identification Agent 2 Pre-approach Agent 3 Approach / Contact Agent 4 Presentation Agent 5 Pre-close, Q/A, Negotiation Agent 6 Close Agent 7 Transaction Agent / Office 8 Install / Commission Agent 9 Post sales activity Agent For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  37. 37. Communication Mix in PCB Makers Step PCB Maker 1 Prospect Identification Electronic Mfg Directory, Exhibitions 2 Pre-approach Net Research 3 Approach / Contact Sales Rep 4 Presentation Sales Rep 5 Pre-close, Q/A, Negotiation Sales Manager + Technical Manager 6 Close Sales Director 7 Transaction Accounts & Logistics 8 Install / Commission Initial handholding by technical 9 Post sales activity Supply department For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  38. 38. Ad Agency Looking For New Accounts Step Agency 1 Prospect Identification Grapevine, Networking 2 Pre-approach Checking with clients / references 3 Approach / Contact Casual and informal 4 Presentation Formal pitch by Directors 5 Pre-close, Q/A, Negotiation Modalities and Fees 6 Close Contract signed 7 Transaction Contract signed 8 Install / Commission Briefs, Budgets, etc 9 Post sales activity Account Servicing For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  39. 39. Best Practice : Separate Hunt & Gather Teams CUSTOMER ACQUISITION. HUNTERS CUSTOMER RETENTION GATHERERS
  40. 40. Sales Management skpalekar@hotmail.com
  41. 41. Definition of Selling Presenting yourself and your product / service / idea to your prospects, personally and interactively, in the light of their needs / beliefs / alternatives, and persuade them to come to a conclusion Favorable to you.
  42. 42. Checklist For Sales Managers Tasks 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Role statement and competency specifications Prospecting and qualification criteria and methods Classification and prioritization of customers Who calls on whom, what frequency & depth, which product and how. How do we measure contact and sales performance Number of persons of each type needed at which headquarter. Interviewing and selection Inducting, training and deploying Wastage of time on administrative chores Time spent traveling vs for customer contact Motivation, Meetings, Performance Reviews, Corrective actions Refresher training for latest market, product information. Creation of relationship assets with customers Development of future leaders For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  43. 43. CONTACT MANAGEMENT ISSUES  What type of personality and capabilities we need at various levels in our sales force  Role statement and competency specifications  How do we prospect and qualify our customers, how do we classify them so that appropriate salesperson and method can be used, how do we prioritize them.  Prospecting and qualification criteria and methods  Classification and prioritization of customers  Who in the sales force and what kind of time spends with which customer.  Who calls on whom and with what frequency and depth  To sell which product and how.  And achieves the call objectives  How do we measure contact performance  Result or efforts, quality or quantity, short term or long term For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  44. 44. People Management Objectives - A  Compute number of persons of each type needed at each headquarter.  Interviewing potential candidates  and selecting the ones that fit the role and capability statement in terms of personality, knowledge, attitude, behaviour and motivation.  Inducting them through training and handholding.  Deploying them  in the market in such a way that they waste less time on administrative chores & travelling;  and more time in front of the customers so that they can create value for the customers and revenue for the company. For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  45. 45. People Management Objectives - B  Motivating them to bring out their best and training them to keep them abreast of latest market, product information.  Conduct meetings communicating, motivating and directing the salespersons so that not only sales targets are achieved  but even the relationship assets in terms of customers and the manpower assets in terms of existence of skilled leaders are created which lay foundation for the future growth. For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  46. 46. Selling Through Channel What your customer wants = What you can provide + what your channel can provide skpalekar@hotmail.com
  47. 47. Examples of Channel Services  Availability   Want toothpaste at the shop downstairs I don’t mind traveling but want to see wide range of sarees  Delivery   Want my monthly grocery delivered to my home I don’t want to order and wait for it to be shipped  Financing   Want installment scheme to buy LCD CTV I want to try it and then own it  Awareness   Want to know new types of insurances plans Want to see all variety of chocolates before I select S K Palekar : Contact : skpalekar@ hotmail.com
  48. 48. Examples of Channel Services  Education and Updation   Latest advances in treating termites Latest clinical tests of new medicines  Consulting / Diagnostic   Shall I repair my fridge again or… Annual check up… do I need any proactive medical help  Customization   Measure my hall and supply carpeting Assess wall condition and recommend treatment and paint  Commissioning   Install the garden sprinkler system Fitting the modular kitchen in my house S K Palekar : Contact : skpalekar@ hotmail.com
  49. 49. Examples of Channel Services  Training, handholding, coaching   How to use the latest software How to use all the accessories of my vacuum cleaner  Upgradation   want to fit GPS on my car Want to renovate my house  Replacement , Disposal   Take away my old fridge and give new Garbage disposal  Repair and maintenance   Annual pest control contract for my flat Electrician when something goes wrong with my wiring S K Palekar : Contact : skpalekar@ hotmail.com
  50. 50. Examples of Channel Services  Enquiry Response   Be able to register a complaint 24 x 7 Need to know fares of different airlines  Order taking   Take my order on the phone Visit me and see how many tiles I need to buy  Status / alert information   Flight delays Pending Bills  Convenience   I don’t want to wait too much in the queue I want tickets delivered to my house S K Palekar : Contact : skpalekar@ hotmail.com
  51. 51. Review Question : Why channels ?  Many customers; spread everywhere : soap One company cannot reach all  Customers buy from local / trusted middlemen Customers don’t know the company  Customers buy assortment / bundle of products Company cannot supply this  Company does not know all customers well enough Hence may not be able to extend credit and facilities  Company not close / good enough to serve well Local proximity : better response time  Company’s person not be in the market all the time Channel members are in the local market all the time  Costs of a separate channel unsustainable Channel works for multiple firms hence cost effective For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  52. 52. Main Channel Decisions The 3 decisions are 1. Horizontal coverage of the market ? Intensively or selectively? 2. Vertical Length of the chain. How long ? Number of tiers in the chain? 3. Own (full control) ? Use others (part control)? Use existing outlets or set up own outlets?
  53. 53. When Selective ? When Intensive ? Use selective (sparse) distribution when  Generally high ticket (price) items  Consumers’ perceived risk high ( cars )  Consumer rely on technical advice ( Professional camera )  Assurance of post-purchase service important ( durables )  frequency of purchase is low ( luggage).  brand loyalty is high (Levi’s)  Retail personal influence important ( fashion ) Use Intensive (Mass) distribution When the situation is opposite.
  54. 54. Selective or Intensive ?  Product characteristics  Intensive Distribution : For products purchased frequently , For products purchased with a minimum effort , for Convenience goods  Selective Distribution : consumers shop around extensively before final purchase, shopping or specialty goods  Degree of control  Intensive Distribution : Manufacturers willing to relinquish significant control over the marketing of their products within the channel might prefer an intensive strategy.  Selective Strategy : for close control over selling prices, type and extent of selling assistance at point of sale, display standards and product image
  55. 55. Channel Architecture : How Long ?  Company  Customer ? ( DIRECT SALES)  Used by industrial products and high value products  Company  Retailer  Customer ? ( 1 TIER )  Used by consumer durables and brand showrooms  Company  Distributor  Retailer  Customer ? (2 TIER )  Used by fast moving packaged goods companies
  56. 56. How many tiers ? 2 Extremes  For industrial products, the number of customers are few and the value of the order per delivery is high. Yhey use DIRECT SALES system where the vertical length is zero (company directly sells to the end user).  For FMCG products like WIMCO matchboxes, virtually everyone in the country is a potential customer and the behavior of these customers is such that they don’t want to walk and plan much to purchase a matchbox! Therefore WIMCO wants to make their products available in smallest of the paanwalla shops ( 20 Lakh nationally in over 5000 towns) and it is impossible for the company to do this on their own. They have 3 Tier system : company selling to 2000 wholesalers who in turn sell to 20 Lakh outlets.
  57. 57. Direct sales ( Zero Tier )       Own sales force selling direct to end user Prevalent among industrial goods manufacturers If large volume per customer, this is cost effective More control over own sales force than of distributor’s Customers prefer to deal directly with the manufacturer. Direct touch with market : better / faster feedback.
  58. 58. Own Channel or Someone Else’s ?  It is always a dilemma whether to use an existing trader or to set up one’s own trading establishment ( store)  2 extreme options are : Setting up one’s own store. You can select the location, the interiors, how to display, what to display, how many people of what kind to employ, how much moving space to keep, whether you want the store only for your brand exclusively. Using someone else’s existing store but then you have to learn to live with his location, interiors, display facilities, what he stocks and displays, his people. And he is of course stocking and selling existing brands (your competitors).
  59. 59. Using Conventional Channels  They invest in your stock, display your goods, deliver goods, make invoices and extend credit on your behalf.  Many of them also feed marketing information back to you.  Advantages of using existing channels.  They are more efficient marketers : They know local customers.  Their costs are shared by many brands : They are more efficient.  They can respond faster to local requests.  You don’t need to invest in space, stock, people and administration.  You incur only variable costs - you don’t spend if you don’t sell  Disadvantages to manufacturers  Channel members independent : not bound by contracts  Co-ordination through power, bargaining, negotiation  Low concern towards what happens to you : before &after  Low member loyalty, low entry and exit barriers  Less control, less systemic economies, and less stability
  60. 60. Manufacturers manage these disadvantages…  STICK : agreements on sales terms and obligations like  Price maintenance  Demonstration facilities that meet certain technical requirements  Qualified sales staff  Refraining from illegal, deceptive, and unethical practices.  CARROT : Working closely in planning and carrying out  inventory plan  advertising plan  sales training plan.  OVERALL ATTEMPT IS TO BE THE “CHANNEL CAPTAIN”  responsible for achieving systemic coordination within the channel.  The more success manufacturers have with these attempts, the closer will a conventional system resemble corporate and contractual systems.
  61. 61. “Fully Controlled Vertical”  May be either Owned or Franchised  Gas stations, Bata stores.  Advantages  List price maintaninence  Quality control ( gasoline quality, baking, freshness )  Market feedback from stores on new design  Better services offered at the outlets  Disadvantages  Investment in real estate, stock and human resources  inflexible in adapting quickly to new opportunities
  62. 62. Type of “Franchising”  Product trade name franchising  The right to market the franchisor’s product within a designated market area using the franchisor’s trade name.  Examples : Automobiles and truck dealers, soft drink bottlers.  Business format franchising.  All above plus the franchisee acquires the right to utilize the business know how - operating manuals and standards, quality control, information systems, or marketing plans  Examples : fast foods, motels and hotels, personal services, rental services, stores, real estate services.
  63. 63. How “Franchising” Helps …  Benefit to franchisees  opportunity to be “own boss”  “Pre-packaged” business with no prior business experience.  A well-recognized trade name  Assistance in starting up : site, layout, equipment, training  continuing support : new products, promotions, operations  Benefit to franchisor  Rapid scaling up without losing control  expand the business using someone else’s time and money  Yet exercise control / coordination on local marketing policy.  Franchisees are more motivated and willing than dealers
  64. 64. How “Franchising” Hampers …  Problems to franchisees  Fly-by-night franchisors.  Inflated sales and profit projections.  Overcharged by franchisors in buying supplies.  vulnerability : franchisor may pull the plug for no reason.  Problems to franchisors  Franchisees are “independent minded” : hard to control  Large-chain franchisees can exert considerable pressure  Legal costs / battles over franchisee autonomy/ termination clauses
  65. 65. Bata uses multiple channels  Through their own “Bata” stores (Bata brand)  Space, Stock, People .. All by Bata.  Through multi-brand stores ( BSC brand)  Space, Stock, People belong to the independent store  Through multi-brand stores under other brand names  Bata manufactures for other labels  Also sells direct to customers (some areas)  In some stores when people cannot find the color and the size they want in the style of shoes they like, they take orders direct along with an advance and delivers shoes straight to customers via couriers.
  66. 66. Tiered systems Note : At each stage there is a buyer and a seller Company Direct Sales System : Company sells to end user Customer Adopted when number of customers are low And when order size is high. Example : B2B. One tier system Company Retailer Customer Adopted when number of customers are many But not high and order size is average. Example : Durables : Cars, CTV 2 tier system Company Distributor Retailer Adopted when number of customers are high And when order size is low. Example : Match Boxes S K Palekar : Contact : skpalekar@ hotmail.com Customer
  67. 67. Tiered systems Note : At each stage there is a buyer and a seller One tier system Company Retailer Customer 2 tier system Company Distributor Retailer S K Palekar : Contact : skpalekar@ hotmail.com Customer
  68. 68. Value Added By Sales Force is Not only persuasion and promotion C O M P A N Y Transportation of physical goods Title / Ownership of the goods Payments Intelligence and Information Persuation and Promotion Outbound Services, Inbound complaints / enquiries Waste, Reconditioning, Buy Back, Disposal For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com C U S T O M E R
  69. 69. Industrial Products : Go To Market Few and large customers – can contact direct. Promotion is done personally. Own Channel Options Direct Selling Force Another firm’s Channel members’ S K Palekar : Contact : skpalekar@ hotmail.com
  70. 70. Direct Promotion : Go To Market Direct Response Ads Channel Options Tele Marketing Direct Marketing Direct Mail Catalog Selling S K Palekar : Contact : skpalekar@ hotmail.com
  71. 71. Direct Selling Company  Customer skpalekar@hotmail.com
  72. 72. Mass Economics Direct TV Demand Mailer Sale Sale Sale Retailers Supply Courier
  73. 73. Direct Marketing Advantages Can be individually targeted. It is less wasteful than mass media. The approach can be customized for better impact.
  74. 74. Direct Marketing Advantages Can evaluate response from each contact Whereas in mass media you need spend huge sums before you can conclude if it is working or not.
  75. 75. Direct Marketing 100 test mailers 1% response 1st improvement 1000 test mailers 2% response 2nd improvement 10000 mailers 3% response Commercial success
  76. 76. Mass        vis-à-vis Mass reach Low cost per reach Easy to organize One way communication Low impact per contact Response comes late Response requires huge money Suitable For Mass consumption items Items well stocked by the trade Items well understood by people       Direct Individually targeted Less wasteful Can be customized for impact Ease of evaluation of response High cost per contact Difficult to organize Suitable For Niche products Items not easily available Items requiring concept selling
  77. 77. 13% of all goods in USA        Catalog houses : Sears Tele-shopping networks : Tele-Brands Ads inviting phone contact : Citibank Net shopping : Dell computers Telemarketing : Nationwide insurance House to house selling : Electrolux Multi-level marketing : Amway
  78. 78. CIRCUMSTANCES FOR DIRECT MARKETING  Concept / Complex products : extensive explanation  Custom made product : customer presence  Custom made service : pre or after sales  Customers don’t know where it is available  Too few potential customers : mass market wasteful  High priced product : makes personal contact viable  High scope for after-market revenue : good TLV Eureka Forbes / SKP
  79. 79. What only direct contact can do  Customization ( DIRECT MAIL )  Interactive ( DELL )  Multi Sensory ( ARIAL SAMPLING )  Context Sensitive ( AMAZON . COM )  Sensitive to body language, tone of voice ( SELLING )  Engaging and Relational ( LIFE TIME VALUE )  Referrals Potential ( PROFESSIONAL SERVICES ) Eureka Forbes / SKP
  80. 80. Other Points skpalekar@hotmail.com
  81. 81. Conveying Value : Limitations of Ad vs Selling 1. 2. 3. Ad : Same message / story / positioning for all Ad : 1 way, duration short, attention poor, simple message Selling : more time, 2 way dialogue, 5 senses 1. Complex products 2. Abstract services 3. Demonstration For Private Circulation Only : Sales & Distribution Course By S K Palekar : skpalekar@hotmail.com
  82. 82. Communication Mix in Customer Acquisition & Retention Advertising : Mass, trade, niche Public Relations Direct Marketing : mail, call, letter Personal Selling : Trade Shows, Events, Seminars, p call
  83. 83. 4 Criteria for Media Selection Reach in TA Engagement Cost / Reach Personalized, 2 Way, 5 senses, Interactive
  84. 84. Persuasiveness (15) Call Center (10)Phone Call (0.5) Media Cost August 13, 2003 (40)Salesman

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