Choosing and Managing Sales Channels for Your Startup

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Choosing and Managing Sales Channels for Your Startup

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 advisor 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.

Choosing and Managing Sales Channels for Your Startup

  1. 1. Stephen N. Davis “Partnering With Clients to Drive Sustainable Profitable Growth”
  2. 2.  Finding your target market  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 – 2013 ©CXO Advisory Group
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  6. 6. “The most important strategic decision is targeting—nail this and everything else falls into place.” 2000 – 2013 ©CXO Advisory Group Phil Kotler, Northwestern University
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  9. 9. 2000 – 2013 - 2013 ©©CCXXOO AAddvviissoorryy GGrroouupp
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  14. 14.  Level of Competition  Substitute Products  Power of Buyers/Suppliers  Ease of Channel Entry Company Resources & Objectives  Customer Acquisition Costs 2000 – 2013 ©CXO Advisory Group
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  23. 23. Consumer Business 2000 – 2013 ©CXO Advisory Group Health Value Status Environmental Family Finance Convenience/Time Saver Usability Lower Risk Saving Money Productivity Customization Customer Engagement Market Penetration Competitive Advantage Increased Sales
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  33. 33. “A product with better distribution will always win over a superior product with poor distribution or customer access” 2000 – 2013 ©CXO Advisory Group
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  41. 41. Common Sales Strategy Mistakes 2000 – 2013 ©CXO Advisory Group
  42. 42. Common Sales Strategy Mistakes 2000 – 2013 ©CXO Advisory Group
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  44. 44. Common Sales Strategy Mistakes 2000 – 2013 ©CXO Advisory Group
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  46. 46.  Direct field sales reps  Corporate resellers  Master or local distributors  Integrators  Value-added resellers  Manufacturer’s agents  Brokers  Franchises  Telemarketers  Inbound telesales agents 2000 – 2013 ©CXO Advisory Group  Internet sites  Extranets  e-Marketplaces  Direct Mail  OEM’s  Retail  Kiosk’s  Strategic alliances  Agents (consultants, affiliates, etc.)
  47. 47. Cost Freemium 2000 – 2013 ©CXO Advisory Group Minimal Touch Channel Sales Inside Sales Direct Sales Force
  48. 48. 2000 – 2013 ©CXO Advisory Group Retail Agent/Rep Distributor/VAR Acquisition Joint Venture Subsidiary Time to Market Slow Slow Medium/Fast Medium Medium Slow Management Control Low Medium Low High Medium High Brand Control Low Low Low High Medium High Cost of Sales Medium Low Low High Medium High Development of In-House Expertise Low Low Low Medium Low High Access to New Partners Low Medium Low Medium Medium Low Risk Medium Low Low/Medium High Low High Hands-On Sales/Marketing Support High Medium High Low Low Low
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  51. 51. 2000 – 2013 ©CXO Advisory Group Pre-Sales Support The Product Post-Sales Support
  52. 52.  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 – 2013 ©CXO Advisory Group
  53. 53. 2000 – 2013 ©CXO Advisory Group Gross Profit Cost of Goods Suggested List Price (SRP) or Street Price End User S. G. & A. 62% 15% 23%
  54. 54. 50% 12% 2000 – 2013 ©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%
  55. 55. 50% 10% 2000 – 2013 ©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.
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  57. 57.  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 2000 – 2013 ©CXO Advisory Group
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  59. 59.  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 – 2013 ©CXO Advisory Group
  60. 60.  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 2000 – 2013 ©CXO Advisory Group
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  62. 62.  Specs & Deliverables  Acceptance  Grant of License  Terms  Payments  Bookkeeping Requirements  Ownership  Use of Trademarks  Training  Decision Making Authority 2000 – 2013 ©CXO Advisory Group  Marketing Obligations  List Price of Product  Performance Requirements  Warranties  Limitation of Liabilities  Development Support  Rights to Updates  Termination  Source Code Access
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  70. 70.  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 – 2013 ©CXO Advisory Group
  71. 71.  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 – 2013 ©CXO Advisory Group
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  74. 74.  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 – 2013 ©CXO Advisory Group
  75. 75.  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 – 2013 ©CXO Advisory Group
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  78. 78. - Over 7600 Trade Associations - Over 21K Professional Associations - Over 151K Associations Worldwide 2000 – 2013 ©CXO Advisory Group
  79. 79. Retailer Mark-up, 50% - 200%+ 2000 – 2013 ©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
  80. 80.  Treat them like they’re your own salesforce  Train channel partners well  Strengthen ability of channel partners to deliver solutions  Enhance communications  Enable partners to sell complementary services  Deliver channel value with the web 2000 – 2013 ©CXO Advisory Group
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  89. 89. Driving Profitable Growth 2000 - 2012 © CXO Advisory Group
  90. 90. We help companies optimize business development and marketing; accelerate sales; and seize the most attractive growth opportunities. 2000 – 2013 ©CXO Advisory Group
  91. 91.  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 – 2013 ©CXO Advisory Group
  92. 92. 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 – 2013 ©CXO Advisory Group
  93. 93. 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 – 2013 ©CXO Advisory Group
  94. 94. Venture Advisory Services • Fine tune operations, business strategy and market entry • Assist with due diligence • Strategic business assessment of portfolio companies 2000 – 2013 ©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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