Choosing the right sales channel

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Choosing the right sales channel

  1. 1. Choosing the RightSales Channel Stephen N. Davis “Partnering With Clients to Drive Sustainable Profitable Growth”
  2. 2. What We’ll be Covering  Developing your channel strategy • How to choose the right channels  Types of sales channels • Capabilities & limitations  What it takes to succeed  Managing channel relationships  Key points to remember We will not be talking about online sales2000 - 2011 © 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.2000 - 2011 © CXO Advisory Group
  4. 4. Common Sales Strategy Mistakes Not having an adequate profile of customers2000 - 2011 © CXO Advisory Group
  5. 5. Common Sales Strategy Mistakes Confuse channel partners with final customers2000 - 2011 © CXO Advisory Group
  6. 6. Common Sales Strategy Mistakes Channels are not in sync with end-user targets2000 - 2011 © CXO Advisory Group
  7. 7. Common Sales Strategy Mistakes Thinking your “value proposition” is the same as theirs2000 - 2011 © CXO Advisory Group
  8. 8. Common Sales Strategy Mistakes Failure to consider licensing or joint- venture agreement2000 - 2011 © CXO Advisory Group
  9. 9. Common Sales Strategy Mistakes Insufficient channel margins2000 - 2011 © CXO Advisory Group
  10. 10. Common Sales Strategy Mistakes Insufficient marketing budget2000 - 2011 © CXO Advisory Group
  11. 11. Common Sales Strategy Mistakes Not aligning marketing to the sales channel2000 - 2011 © CXO Advisory Group
  12. 12. Common Sales Strategy Mistakes Channel conflict2000 - 2011 © CXO Advisory Group
  13. 13. Common Sales Strategy Mistakes Going to the channel before you’re READY2000 - 2011 © CXO Advisory Group
  14. 14. Plan Your Entry into the Channel “If you don’t know where you’re going you’ll probably wind up somewhere else”2000 - 2011 © CXO Advisory Group
  15. 15. 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?2000 - 2011 © CXO Advisory Group
  16. 16. You Need a Whole Product Offering Pre-Sales Support The Product Post-Sales Support2000 - 2011 © CXO Advisory Group
  17. 17. 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  Budget2000 - 2011 © CXO Advisory Group
  18. 18. 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?2000 - 2011 © CXO Advisory Group
  19. 19. 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 investment2000 - 2011 © CXO Advisory Group
  20. 20. 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 agents2000 - 2011 © CXO Advisory Group
  21. 21. 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 investmentIndirect  Companion selling  Loss of customer relationship opportunities & feedback  Local support  Fighting for mindshare  Increased demand generation  Quality of channel partner  Offload financing risk2000 - 2011 © CXO Advisory Group
  22. 22. Computer Distribution Channels2000 - 2011 © CXO Advisory Group
  23. 23. What Do These Firms Have in Common?2000 - 2011 © CXO Advisory Group
  24. 24. 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 support2000 - 2011 © CXO Advisory Group
  25. 25. 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 wont carry competing product  Tough sale – long sales cycle2000 - 2011 © CXO Advisory Group
  26. 26. 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 • Training2000 - 2011 © CXO Advisory Group
  27. 27. 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 Authority2000 - 2011 © CXO Advisory Group
  28. 28. 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 basis2000 - 2011 © CXO Advisory Group
  29. 29. What Distributors Look For  Products with proven demand  Products 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 chosen2000 - 2011 © CXO Advisory Group
  30. 30. 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, References2000 - 2011 © CXO Advisory Group
  31. 31. Typical Rep Territories - USA2000 - 2011 © CXO Advisory Group
  32. 32. Typical Rep Territories - Canada2000 - 2011 © CXO Advisory Group
  33. 33. Source to Identify GOOD Reps  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.net2000 - 2011 © CXO Advisory Group
  34. 34. Rep Agreement Caveats  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 renewal2000 - 2011 © CXO Advisory Group
  35. 35. 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 stability2000 - 2011 © CXO Advisory Group
  36. 36. 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: VARBusiness2000 - 2011 © CXO Advisory Group
  37. 37. 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, Train2000 - 2011 © CXO Advisory Group
  38. 38. Cost of Market Entry Options Retailer Mark-up, 50% - 200%+ 5-10% MDF, Slotting Fees, Beware Consignment sales Agent/ Rep. Commission, 5%–30%, Wants to be paid on order Value Added Reseller Margin, 20-40%, 5-10% MDF (VAR) Distributor (stocks product) Margin, 10%–50%, 2-5% MDF2000 - 2011 © CXO Advisory Group
  39. 39. 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 aggressively  Deliver channel value with the web • Demand creation • Quality leads • Support • Information • Links • Feedback2000 - 2011 © CXO Advisory Group
  40. 40. 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.”2000 - 2011 © CXO Advisory Group
  41. 41. When Worlds Collide: Misalignment of Marketing & Sales  Company centric messaging doesn’t support sales effort  85% 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 collateral2000 - 2011 © CXO Advisory Group
  42. 42. 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 politics2000 - 2011 © CXO Advisory Group
  43. 43. How the Channel Views Vendor Internet Plans2000 - 2011 © CXO Advisory Group
  44. 44. 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 processes2000 - 2011 © CXO Advisory Group
  45. 45. 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 programs2000 - 2011 © CXO Advisory Group
  46. 46. Questions2000 - 2011 © CXO Advisory Group
  47. 47. Driving Profitable Growth2000 - 2011 © CXO Advisory Group
  48. 48. Driving Profitable Growth We help companies optimize business development and marketing; accelerate sales; and seize the most attractive growth opportunities.2000 - 2011 © CXO Advisory Group
  49. 49. 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 channels2000 - 2011 © CXO Advisory Group
  50. 50. 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 partnerships2000 - 2011 © CXO Advisory Group
  51. 51. 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 coaches2000 - 2011 © CXO Advisory Group
  52. 52. 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 companies2000 - 2011 © CXO Advisory Group
  53. 53. 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) 528-7571Email: sdavis@cxoadvisorygroup.comWebsite: www.cxoadvisorygroup.comLinkedin: www.linkedin.com/in/stephendavisTwitter: twitter.com/stephendaviscxo

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