2. GO TO MARKET STRATEGY
Lawrence G. Friedman’s influential book
states that:
The ability to make smart decisions about
going to the market depends on how well you
understand your customer.
Who are they?
What do they buy?
How do they buy?
How do they want to buy?
What would motivate them to buy from you?
3. Importance of Channel
Component
Selecting the channel design mix is challenging
1. The alternatives are numerous
2. Marketing goals differ between channel members
3. Business markets segments vary, thus it may
require numerous channels concurrently
4. Business market environment constantly changes
5. Competition is stiff
6. Customer requirements change
7. Internet technology is changing the landscape
All of this creates new opportunities and the
need for fresh channel strategies
4. Managing the Channel
• Once a channel structure is specified and goals set,
marketing managers need to:
a. Develop procedures for selecting intermediaries
b. Motivate them to meet goals
c. Resolve conflict between them
d. Evaluate performance
• The following discussion centers around
designing and administering the business
marketing channel.
5. The link between the manufacturer and the
customer is called the Channel of Distribution
The channel accomplishes all the tasks necessary
to get the product/service to market
Tasks can be performed by the manufacturer or
be delegated throughout the channel
The question is: “What is the best way to execute
the tasks?”
7. Direct and Indirect Channels
Direct is when the manufacturer
performs all the marketing functions
Indirect is when some type of
intermediary sells or handles the
product
8. Manufacturer
Direct Channels Indirect Channels
Direct
Sales
Online
Marketing
Telemarketing
Manufacturers’
Representatives
Industrial
Distributors
Customer Segments
9. Sale is complex
Product/service is highly
customized
Customers are large
Products are complex
Sales involve extensive
negotiations
Professionalism is required
Customer requires direct
contact
Then, seller must
control the process to
ensure proper
implementation of total
product package and to
guarantee quick
responses to market
conditions
10. Indirect Distribution:
Generally Found Where…
Markets are fragmented and widely dispersed.
Low transaction amounts prevail.
Buyers typically purchase a number of items.
11. Lead Generation Triggered by sales call, by customer’s response to direct mail, or by Web request
for information; firm makes initial contact with prospect.
Lead Qualification Potential customer screened: prospect’s need for product or service, buying
interest, funding, and timeframe for making the purchase are assessed.
Bid and Proposal Bid and proposal prepared to meet customer’s requirements (a complex task for
large technical projects).
Negotiations and
Sales Closure
Negotiation of prices, terms, and conditions, followed by agreement on a
binding contract.
Fulfillment
For standardized product or service, delivery of offering to customer.
Configuration, customization, and installation for more complex sales.
Customer Care and Support
Post-sale problem resolution, customer guidance, and ongoing contact to ensure
customer retention, loyalty, and growth.
SOURCE: Adapted from Lawrence G. Friedman, Go To Market Strategy: Advanced Techniques and Tools for Selling More Products, To More Customer, More Profitably (Boston: Butterworth-Heinemann, 2002), pp. 234-236.
12. Multi-channel strategy is used when it is
necessary to reach a large business market that
is composed of large, mid- and small-sized
customers.
First, arrange customers in terms of “relative
cost of sales” from top to bottom. Use:
1. Direct sales for large accounts
2. Indirect distribution for middle and smaller
accounts.
13. A key role is to generate leads for channel
members.
They can do it by:
Internet
Direct mail
Tele-channels, etc.
More complex roles will be performed by
more sophisticated members (professional
sales people – direct or indirect)
14. Simple Example of High-Coverage Partnering Model
Sales
task
Channel
Lead
generation
Qualification Bid &
proposal
Negotiation/
sale closure
Fulfillment Customer care
& support
Direct sales
channel
(field reps)
Business
partners
Tele-channels
Direct mail
Internet
Sales Cycle
High Expenses
Low Expenses
Occasional support
by sales reps to
help partners
close key
strategic deals
15. Distributors
There are two primary intermediaries:
1.Industrial distributors
2.Manufacturers’ representatives
These two groups handle a very
sizeable share of B2B sales.
16. Distributors
Industrial Distributors are:
a.Most pervasive
b.They are heavy into the Maintenance, Repair and
Operations (MRO) supplies businesses
c.Most are small, independent businesses serving
narrow geographic markets
17. Distributors
17
Distributors are full-service intermediaries,
that is they take title (carry inventory) for
the products they sell
They provide credit, deliver, offer an
assortment, offer technical skills, maintain
customers and find new ones
They employ both inside and outside sales
people
Most are small but some are very large
18. Distributors are in every industry.
For example they are in:
1. Food and Beverage
2. Maintenance, Repair and Operations (MRO)
supplies
3. Hardware, Electronics and Fabrication
4. Furniture, Clothing, and Personal products
19. EXPANDED DISTRIBUTOR ROLES
To add more value for their customers many large
distributors have expanded their roles to include
more services:
1. Inventory management
2. Automatic replenishment
3. Product assembly
4. In-plant stores
5. Design services
Many charge a separate fee for additional
services
20. Primary Distributor Classifications
General-Line Distributors
• Stock extensive variety of low tech
(commodity) products
Specialists
• Focus on one or few related lines geared
around high tech or industries demanding
complex customer requirements
Combination House
• Operates in two markets: industrial and
consumer
22. CHOOSING A DISTRIBUTOR
Choosing a distributor depends upon the market a
company wishes to target
What are some distributor qualifications?
1. Financial
2. Good functional operations
3. Skills & technical expertise
4. Contacts
In other words, “What can they do & who do they
know?”
E-collaboration between manufacturer and distributor
from planning to servicing is a critical strategic force in
the B2B arena
23. Outsourcing of manufacturing, high cost of
salaried people and for other reasons, the
result is that B2B is substantially increasing.
This leads us into the next type of B2B player:
Manufacturers’ Representatives
25. Manufacturers’ Reps
Manufacturers’ Reps fill a different role than
Industrial Distributors.
They perform a much higher level of service.
They:
1. Are more technically advanced
2. Know their territory better
3. Are able to sell professionally
4. Are experienced in the industry
5. Usually represent several companies
26. Manufacturers’ Reps
Used by small, medium and large firms.
Small and medium firms cannot support a full
time salesperson.
Large firms use them to supplement their direct
force for introducing new products to an area not
covered by their sales force.
The main reason for using Reps is because it is
economically correct to do so. Little or no training
costs, no benefits, no outrageous risks, and Reps
are highly motivated vs. employees.
27. • Product is not standard—closer to made-to-order
• Reps do not take title nor hold inventory
• Reps are normally paid commission, however deals
can be made to be paid a monthly minimum
• Commission rates can range from 3%, 20% or more
• Gross margin is not large
• Relatively few customers or concentrated
geographically or concentrated in few industries
• Customers order relatively infrequently and allow
fairly long lead times
28. Channel design is a dynamic process:
1. They can be developed (new channels) where
none existed (i.e., Internet)
2. Or modify existing channels
Channel design is a vigorous activity rather
than passive one.
One of the most difficult jobs in marketing is to
develop a channel(s) of distribution
Channel Design Process
29.
30. Primary goal is to satisfy (solve) end users’
needs (problems)
Define target market segments
Isolate each segments’ buying and usage behavior
What do they buy
How do they buy
How do they use their purchases
31. Don’t consider channel members as customers.
Instead, look beyond them to the buying unit
who has the real need.
Example: A manufacturer of ball bearings
should not consider the wholesaler as their
customer. They should consider the various
OEMs or repair shops that need good bearings
as their customer.
32. STEP 2: CUSTOMERS’ CHANNEL NEEDS BY SEGMENT
Identify and prioritize channel functions
requirements for each segment.
Next, align the function with the customer’s
needs.
Example: One customer may need product
information as their top priority while another
may need product quality assurance as their
top priority.
33. STEP 2: CUSTOMERS’ CHANNEL NEEDS BY SEGMENT –CON’T.
Channel Function Customer Need
1. Product Information Customer seeks more information for new or more complex
products especially in rapidly changing environments.
2. Product Customization Some products must be technically modified or need to be
adapted to meet the customer’s unique needs.
3. Product Quality
Assurance
Because of its importance to a customer’s operation, product
integrity & reliability might be given special emphasis.
4. Lot Size Purchase of products with a high-unit value or those used
extensively represents a large dollar outlay, thus being
important.
5. Assortment Customer may need a broad range of products and may assign
special importance to “one-stop shopping.”
6. Availability Some customers’ environment demands that the seller support a
high level of product availability.
7. After-Sale Service Customers require a range of services from installations and
repair to maintenance and warranty.
8. Logistics Customer may require special transportation and storage
services to support its operations strategy.
Table 11.2
34. Step 3: Assess the Firm’s Channel Capabilities
Once segment is defined, functional requirements
isolated and prioritized, the next step is to:
Analyze the segment’s channel strengths and weaknesses
Identify gaps between what the segment functionally
desires and what the channel is providing
Fill that gap!
Customers base their choice on the bundle of benefits
(channel functions) the channel offers.
35. Step 4: Benchmark to Competitors
What go-to-market strategies are key
competitors using?
Understanding what competitors are
doing, or not doing, offers
opportunities to discover gap(s) that
might need to be closed.
36. Step 5: Create Channel Solutions for
Customer's Latent Needs
Sometimes, by reviewing what competitors are doing, or
not doing, latent customer needs emerge.
Latent needs are those that are not obvious. Sometimes
discovering them can even lead to a whole new service.
Example: An office products supplier that mainly sold
print cartridge products to the copy repair industry
noticed that some of their customer also supplied
“magnetic platters” (hard drives) to mainframe users.
They informed some of their other copy repair
customers about this related service. Some of them
decided to try it and became successful. These
customers now had a new service to sell, and the office
products supplier had a new product (platters) to market
37. Channel options need to be considered in light of a
cost/benefit analysis.
Some gaps may offer opportunities.
More often, channel members can work together to better
align themselves with their customers.
The idea is to enhance value for their customers.
Channels must be open to change as customers and
competitors change.
Channel management is an ongoing process.
