Aligning your channel tactics

© Linda Gorchels, BrainSnacksCafe.com
Channel
Tactics

In Memorial
This presentation represents a condensed version of
Managing Your Go-To-Market Strategy. The course,
and its predecessor versions, were offered by the
University of Wisconsin for decades. As the Center
shifted its mission to management and leadership
training, the marketing and sales courses were
discontinued. Since channel strategy is no longer
available as a public workshop, I am offering these
materials to you for your personal education.
Enjoy!

Questions? Contact:
Linda M. Gorchels
Emerita Director, Executive Marketing Education
UW-Madison School of Business
Center for Professional & Executive Development
www.BrainSnacksCafe.com

New in 2017
The Product Management ShortRead Series is an evolving
collection of “bite-sized” books (of about 100 pages) on
select product management topics. Product Management
101 and Product Strategy & Roadmaps were published in
January 2017. Creatively Innovative is scheduled for
release in May.

What you can expect
This channel management session
will hone your ability to:
• Assess channel fitness given
changing strategic and tactical
conditions
• Structure ideal candidate profile
templates
• Improve support programs
• Reduce channel conflict

Why you should care
Working with dealers
and distributors can
feel like herding cats –
unless you do it right!

What is channel management?
Stewardship
Differentiation
Efficiency

What is channel management?
• Stewardship of a go-to-market strategy
that provides value to end-users…
• local selling
• financing/credit terms
• delivery/installation/customization
• service support
• In a way that establishes differentiation
• through seamless customer experience
• And increases effectiveness or efficiency
• cost containment and channel segmentation

Range of channel issues
Is channel structure redesign
required due to:
• market dynamics?
• shifts in strategy?
• a new product launch?
How can you:
• better manage your
relationship with the
channel?
• motivate the channel to
attain objectives?
• evaluate channel
effectiveness and
performance?
• improve support within the
channel?
Strategic fit
(requiring changes)
Management issues
(on an ongoing basis)

Channel management process
1. Assess
performance of
existing channel
structure
2. Refine
channel and
coverage
requirements
3. Rethink
channel design
4. Prepare ideal
candidate
templates and
assess fit
5. Review
mutual
performance
expectations
6. Support
channel efforts
7. Monitor
performance
and adjust
plans

1. Assess
performance of
existing channel
structure

Too many process potholes?
• What can you
streamline?
• Automate?
• Simplify?
• Eliminate?
• Combine?

Excessive channel conflict?
• Are your
contracts,
guidelines
and
policies
working?
Picture from mediate.com

Lack of partner mindshare?
• Are your channel
partners willing to
push aggressively
for your sales?
• Why or why not?
Picture from michaelmccurry.net

Lack of trust & acceptance?
• What do your
partners say
about you when
you are not in
the room?

Customers jumping to new
channels?
• Do end-customers
want new services
or conveniences?
• Can they get what
they want with
your existing
channels?

So …
• Are you accomplishing
your objectives with
your existing channel?
• Do you need minor
tweaking?
• Or is more significant
structural change
necessary?

2. Refine channel and
coverage
requirements

Requirements of customers

Requirements of your products

Your importance to the channel
Major vendor Secondary vendor Minor vendor
Importance to
distributor’s business
high moderate low
Distributor willingness
to adapt
high moderate low
Manufacturer’s
marketing approach
push push/pull pull

Required sales tasks
Pre-sale Transaction Post-sale

3. Rethink channel
design

Consider your options

Distributor continuum
Generalist Specialist
•Product generalists
•Fast-moving inventory
•Reactive selling
•Heavy inventory resources
•Many customer orders
•Product specialists
•Full parts inventory
•Proactive selling
•Dedicated resources
•Fewer, larger customer orders

A common problem
Markets
Questions: How do you obtain coverage of Market #3?
Is Market #4 an opportunity or a hindrance?

Calculate effectiveness
• Product Fit: percent of total market your
product or service “fits”
• Distribution availability: percent of
opportunities where your product is
present
• Win rate: how often you win the sale
effectiveness = product fit x distribution availability x win rate
14% = 60% x 80% x 30%

Leverage your sales force
Key
accounts
General business
Small customers
Sales force
primary focus
Other
channels
(custom solutions)

4. Prepare ideal
candidate templates
and assess fit

Ideal candidate template
Description of “ideal” Candidate
evaluation
Market served
Product line fit
Territorial coverage
Sales capabilities
Business & managerial
stability
Marketing capabilities
Operational capabilities
Local service
Ease of doing business
Reputation

5. Review mutual
performance
expectations

Manage, motivate, evaluate
• Effectiveness usually increases when
expectations are mutual
– What was written into the contract?
– What specific measures are addenda
that change annually?
–Know what to expect and what NOT to
expect from your distributors or reps.

Price & performance expectations
• The target street price is the price you feel
is attractive to the end user while providing
acceptable compensation to the channel.
• Compensation may include discounts from
the target price along with allowances,
rebates and other programs

Classic Discount Structure
List Price
Target Street Price
Dist Buy Price / Mfr Sell Price
Distributor Rebate Program
Standard Cost
1.00
.90
.60
.57
33%
Channel Margin
5% Rebate
47%
Manufacturer
Margin
Multiplier
10%
.40%
43%
70%
Discount
0%
Source: Sam Shapiro,
Channel Pricing Associates
.30

6. Support channel
efforts

How strong is
your support?
Those who sell for you
require lots of support …
– Training (product and sales)
– Ordering/sales management systems
– Marketing “air cover”
– Advertising support (“co-op”)
– Selling support
– Promotional programs
– Logistics (delivery/expediting, parts, returns,…)

Channel receptivity to change
• Self-growing
• Growable
• Not growable
– Sustainable
– Not sustainable
(Source: Frank Lynn & Associates, Inc.)

Rep Business Life Cycle
Birth
Struggle
Rapid growth
Maturity
Decline
“Death”
The comfortable
lifestyle driven rep
The growth
driven rep
Longevity
Source: Harry Novick,
Selling through Independent Reps

Planning a dealer/rep meeting
• One way to learn about how your reps and
distributors evaluate you is through
advisory councils
– Survey past attendees
– Be sure senior managers attend
– Obtain feedback on company effectiveness.
– Follow up on meeting ideas
Source: Joseph Conlin, “The Art of the Dealer Meeting,” Sales & Marketing Management

Ensure organizational support
• Quick response to
questions and RFQs
• Follow through on
promises
• Technical support
• Accurate and prompt
payment (for reps)
• Plant visits (as
appropriate)

What incentives might we use?
• Discounts
• volume
• contractual
• functional
Picture from ecigarettedirect.co.uk

• Discounts
• Sales promotion
– Contests
– Spiffs
• Promotional funds
Picture from thebusinessboosters.blogspot.com

• Discounts
• Sales promotion
• Promotional funds
– MDF (market development funds)
– Coop advertising

Managing promotional programs
• Provide pass-through materials
• templates, ad slicks, catalogs, videos, bulletins,
CDs, DVDs, downloads
• Design direct response campaigns
• Email newsletters, social media support
• Increase home office promotions
• website, press releases, national advertising / PR
• Support distributor promotions
• coop/MDF, yellow pages, customer seminars,
trade shows, open houses, website hosting

Managing promotional programs
• Think in terms of a CAMPAIGN
rather than piecemeal efforts!
 Keep it simple.
 Coordinate with manufacturer efforts.
 Compare with competitive
programs

Management
& contracts
• Distributors
– contractual agreements, mutual business
planning & support
• Reps
– commission packages & support
• Direct
– sales management (with marketing support)

Build sales support
• Lead generation & qualification
• Provide sales tools
– “Elevator pitch”
– Killer demo
• Conduct joint sales calls
• Provide training
• Coach performance
• cross selling
• suggestive selling

7. Monitor
performance and
adjust plans

7. Monitoring & adjusting
• How will plans be adjusted to
accommodate performance and
conflict issues?
• Develop a “report card”

Evaluate channel performance
• Define metrics appropriate to
your sales cycle
– Sales revenue, units
– Demos, proposals, etc. for
longer cycles
• Ability to meet plan objectives
• Functions performed
– Showroom, counter displays,
events, etc.

Manage conflict between …
Manufacturer and channel
Clarify national account
strategies
Players in the same channel
Define APR and related performance measures
Different channels
“Build fences” through defined-customer
strategies, brand or product differences, etc.

Key points
• Stay on top of the dynamics that may suggest a need
for channel re-evaluation, and follow the steps in
redesign:
1. Assess structure 4. Assess and/or select partners
2. Refine requirements 5. Review expectations
3. Rethink channel design 6. Support channel efforts
7. Monitor & adjust
• Manage channels on an ongoing basis
1. Maintain good two-way dialog
2. Use incentives that motivate the right behaviors
3. Measure and monitor effectiveness
4. Coordinate and improve marketing, sales and operations
support activities
5. Reduce conflict to an acceptable level

Based on sections of
The Manager’s Guide to Distribution Channels
Authors:
Linda Gorchels
Ed Marien
Chuck West

There are several people who taught in and/or contributed to this
course over the years. I would like to thank the main contributors as
listed below.
Jon P. Christiansen
Susan Heintz
Jack Nevin
Harry Novick
Bob Segal
Chuck West

Just as we routinely upgrade computer systems, we must upgrade our own knowledge systems.
Linda has helped over 10,000 people over a 25+ year period with these educational upgrades,
merging anecdotal client experience with researched “best practices,” and sharing the resulting
insights with managers and executives. After working in the office products, publishing and
insurance industries, she joined UW-Madison’s Center for Professional and Executive Development,
both as a corporate trainer and program director. Now, as a director emerita, she provides
workshops for select clients.
An award-winning author of The Product Manager’s Handbook, she has also written The Product
Manager’s Field Guide, The Manager’s Guide to Distribution Channels, Business Model Renewal,
and The Product Management ShortRead Series.
Linda is now a blogger, mystery author and Creativity Curator for her own company, Tomorrow’s
Mysteries, LLC.
Linda M. Gorchels

For more information, refer to the following books
on Amazon, follow my blogs, and download several
free articles from my website,
BrainSnacksCafe.com.

Aligning your channel tactics

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