Driving Growth Though Distribution Strategy and Sales Management

Agenda
Distribution Channels
Examples Channel selection Channels management

Sales Management
Sales priorities Sales management model Building sales capabilities Sales productivity

Case Studies

Strategic Innovators
What do these firms have in common?

Strategic Innovators
It was not just what they sold but, how they sold it!
(reconfiguring the value chain to achieve lower costs and/or better service)

Distribution Channels - Examples

Field sales reps Corporate resellers Master or local distributors Integrators Value-added resellers Manufacturers agents Brokers Franchises Telemarketers Inbound telesales agents Internet sites Extranets e-Marketplaces Direct Mail OEMs Retail Kiosks Strategic alliances Agents (consultants, affiliates, etc.)

Channel Continuum (illustrative)

High High Touch Channels
VARs Field Sales
t irec D es Sal nnel Cha

Value Add Of Sale

Low Touch Channels

Telemarketing

Distributors Retail Stores

tC irec Ind ls nne ha

Low

Internet

ls nne ha tC ec Dir

Low

Cost per Transaction

High

Channel Selection
Channel strategy must start with the customer
Who are our target customers, what do they need and how do they want to do business with us ? What drives them to make a purchase? What kinds of experiences are they seeking from their vendors? What has real value to them in the sales process value their willing to pay for? What channels do they use today, and what channels are they planning to migrate to over the next year? What specific actions would cause them to increase significantly their volume with your firm?

Channel Selection
Channel strategy must be aligned with the maturity of the market
Do you need to develop a new market or fulfill needs within an established market? Are there dominate vendors or distribution channels already established? Are you targeting a narrow or broad market? Do you have the funds necessary to build all the required services (pre and post sales) to compete? Can you spread the costs over enough volume to be competitive? Do you have a narrow or broad product offering? Who are the key purchase influencers?

Channel Selection
How you sell has to fit with what you are selling
Are the channels selected the ones that customers actually use to buy the things that you are selling? Channels chosen must make economic sense, given what you are selling The channel selected must be well suited to the complexity of your offering You can not be everywhere at all times for every customer

There is a trade off between market coverage and control

Sales Control vs. Coverage

Control Coverage

Goal

We want to dominate and lead in our core customer base, to protect the brand, and control the relationship with the customer Field sales force High-end partners, thoroughly trained, with binding contracts covering all aspects of the sales process

We want to reach and serve new markets and customers, and to grow as fast as possible

Channel Approach

Retail, mass merchants Telesales Distributors Value-added resellers Internet Strategic alliances 3rd party service agreements Etc.

Source: Go to Market Strategy by Lawrence Friedman

Market Coverage Example 1

Large, enterprise customers Corporate Resellers Mid-sized accounts VARs, Solution Partners Direct, Field Sales Reps

Small office / home office

Mail order catalog

(unserved market)

Markets Products

Simple, off the rack products

Mass-customized products

Complex, unique solutions

Source: Go to Market Strategy by Lawrence Friedman

Market Coverage Example 2

Large, enterprise customers Direct, Field Sales Reps

Mid-sized accounts

Small office / home office

Business partners + Telechannels + Web sites

Markets Products

Simple, off the rack products

Mass-customized products

Complex, unique solutions

Source: Go to Market Strategy by Lawrence Friedman

Integrated Multi-Channel Model Single Channel

Sales Task Channel Direct Field Sales Business Partners Cost Telechannels Direct Mail Lead Generation Qualification Bid & Proposal Negotiation/ Close Sales Fulfillment Customer Support

Internet

Source: Go to Market Strategy by Lawrence Friedman

Sales Cycle

Integrated Multi-Channel Model Reduce Cost & Increase Sales

Sales Task Channel Direct Field Sales Business Partners Cost Telechannels Direct Mail Lead Generation Qualification Bid & Proposal Negotiation/ Close Sales Fulfillment Customer Support

Internet

Source: Go to Market Strategy by Lawrence Friedman

Sales Cycle

Integrated Multi-Channel Model Example 1

Sales Task Channel Direct Field Sales Business Partners Cost Telechannels Direct Mail
(Over $25,000)

Lead Generation

Qualification

Bid & Proposal

Negotiation/ Close Sales

Fulfillment

Customer Support

(Under $25,000)

Internet

Source: Go to Market Strategy by Lawrence Friedman

Sales Cycle

Integrated Multi-Channel Model Example 2

Sales Task Channel Direct Field Sales Business Partners Cost Telechannels Direct Mail
Sales support for key accounts

Lead Generation

Qualification

Bid & Proposal

Negotiation/ Close Sales

Fulfillment

Customer Support

Internet

Source: Go to Market Strategy by Lawrence Friedman

Sales Cycle

Partner Channel Development

1. 2. 3. 4. 5. 6. Define the scope of the channel Define partners role in the sales process Develop robust and attractive channel policies Build a strong base of partners Build a strong channel support infrastructure Measure and manage channel performance

Source: The Channel Advantage by Lawrence Friedman

Sales Management

What are you selling to whom?

High Call Efficiency Dominates

Customer Fragmentation
Call Effectiveness Dominates Low Low High

Value Proposition Complexity

Sales efficiency & effectiveness

Sales Efficiency Definition Typical Performance Levers Driving Mechanisms Sample Measures
How to get in front of the right customers, for the right amount of time, at a minimum cost Territory design / coverage Activity reporting systems Compensation systems Sales support Systems Structures Coverage Call rates Cost per call

Sales Effectiveness
Once there, how to maximize sales potential Selling skills Account strategy Application knowledge Effectiveness models Recruiting Training Coaching Sustainable margins Repeat business

Source: Huthwaite, Inc. 1988

Setting objectives / priorities

What kind of customer? - Size - Type of business - Attitude / usage Where? What geography? What products / services?

Current Business

New Customers

More From Current Customers

More of current product use? Cross sell other products? Higher prices / better product mix? Eliminate unprofitable accounts?

Requires different sales skills

Current Business

New Customers

Hunters

More From Current Customers

Farmers

Sales management model

What is the value proposition and the role of the sales force in its delivery?

Sales Strategy Strategy/ Mission

What critical selling skills are required for the sales role in the value proposition?

Efficiency
Is the sales force (and channels) organized for optimal coverage of selected markets?

Sales Force Individual Deploy- Sales Selling Support Skills ment

Effectiveness
Is support adequate to maximize the selling effort? Does the incentive compensation plan meet managements objectives and pay the sales force fairly?

Does the sales force have adequate coaching & supervision?

Coaching & Super- Recruiting vision & Training

InforMotivation mation & CompenResources sation

Does the recruiting and training match selling skill requirements?

Capability Building

Are information systems being fully utilized to support the selling effort?

Building your sales capabilities

Develop sound selling strategy

Organize for efficient Develop skills for effective coverage selling

Motivate & support sales force

Clear segmentation Explicit objectives, goals and priorities Winning selling proposition Realistic time frame/expectations

Right structure Right size Territory / account Assignments for adequate coverage

Define necessary skills Develop training, recruiting and coaching programs for: Product knowledge Buying process Sales methodology Planning & execution

Align measurement and reward systems: Compensation Recognition Provide necessary organization support (systems, etc.)

Example sales productivity model

Sales Force Productivity
Profit contribution = $4 per $ direct selling cost

Effectiveness
Profit contribution = $400 hr. actual selling time

Efficiency
Direct selling cost = $100 Hr. actual selling time

X Selling Margin
40% profit contribution margin

Selling Rate
Revenue = $1000 hr. actual selling time

Direct Selling Cost

$500 / day per rep

Sales Force Utilization

Hrs actual selling time = 5 per day per rep

Compensation plans Sales tools Value proposition

Skills assessment Territory / opportunity planning Partnerships

Reduced overhead costs Centralized sales admin Sales force automation

Additional Resources
Books
The Channel Advantage, Lawrence G. Freedman, Timothy R. Furey Go To Market Strategy, Lawrence G. Freedman

Web sites
Various web sites

Questions

Prof. B. Manchanda