Before I answer the question, let’s look at what functions each perform and then draw a conclusion.

Assuming your enterprise has a direct sales force, it performs many functions such as; relationships, promoting your company, finding customers, closing orders, etc. An additional function that is performed by sales people is creating a personalized awareness with their customers.  Two major issues a sales team cannot do effectively is create wide-spread awareness and be the most cost effective.

Advertising can be used for different objectives. The primary objectives of advertising are creating awareness, branding, and providing information about your company and /or products.  It has been proven that advertising increases sales efficiency by providing awareness or helping turn a cold call into a warm sales call.  On the other side of the equation, advertising is not a substitute for personal selling or creating product preference.  These require a sales person to be “real time” and demonstrate or explain the value propositions to a potential customer.

So which is best?  The answer is not which channel is the best but that advertising and personal selling support each other and thus, picking the correct mix and integrating from a marketing communication strategy is really the key.  Of course the mix will contain more than just personal selling and advertising but other marketing tools as well.  The real challenge is developing a complete marketing plan that maximizes the  communication tools, supports the overall goals and falls within the marketing budget.

So the keys are: 

-Develop an overall marketing strategy and implementation plan

-Structure the mix to include your sales team

-Make sure things like messaging and value propositions are in sync between advertising and the sales force.

-Establish the budget that supports the overall game plan

RHL 7/27/10

A guest post from Bob McKee.

Dick has posted about the Pros and Cons of Direct, Indirect, and On-line sales channels here, here and here.  Bob McKee talked to us about selling to the Government; asking why hadn’t that been included.  This is a good question and we asked Bob to share his thoughts and experiences.

Federal Government Sales – Right for Your Company?

Federal government agencies spend over $500 Billion through open contracts awarded by the General Services Administration.  About $200 billion of that total is earmarked for businesses with fewer than 500 employees.  GSA contracts cover almost every type of non-perishable product or service, but the contracts work better for some types of companies than others.

For example, contracts tend to be for finished products rather than for components.  They also work best for companies that have a sales force or a dealer network.  The contract is a license to hunt; it doesn’t put the deer in your pickup.  Sales people have to develop relationships, just like with regular customers.  Another issue is that price changes are usually limited, which may not be attractive to companies with volatile costs.

There are surprisingly few companies on contract in most product categories.  You can see which competitors have contracts by going to www.gsaelibrary.gsa.gov , finding your product and clicking on the Category Number.  This will link to a list of the companies that have contracts.  I selected “air compressors” at random and found that there are only 13 contractors, of which half are distributors.

The small number of companies is a good reason to get on contract.  So why haven’t more companies done it?  Naturally, there are some good reasons.

1.  Place of Manufacture.  All products must be made in countries with which the United States has trade agreements.             These include North America, and many European, Caribbean Basin, African and Asian nations.  But it leaves out                         some big Asian manufacturing countries, most notably China.

2.  AbilityOne, a government agency that assists participation of handicapped Americans in industry, lists several                      thousand products, mainly commodities.  If your product is essentially the same as something they offer, either become              associated with AbilityOne or forget Federal sales.

3.  Paperwork. Contracts are lengthy, difficult to follow, and full of requirements that are incorporated by hard-to-find               references.  A contract response package runs 200 – 300 pages with requirements that involve several agencies.                           Companies usually estimate that it took 9 – 12 months to put their packages together.

4. The Review Process. Although the GSA wants to attract more companies, their review is directed by bureaucratic             rules unlike anything in civilian business.  Everything in the contract response has to conform exactly with the                                 sometimes unclear requirements of the Solicitation or the entire proposal is disqualified.  The contracting officers will                   explain whathas to be changed, then the entire proposal has to be resubmitted.

On a recent proposal, a contracting officer emailed to ask why I listed some floor mats under a small business set aside, but not others.  He stressed that he was not challenging me, but as a new group member he wanted to understand the distinction.  I responded that it was based on the type of material and cited the contract reference.  The proposal was subsequently rejected for not including a list of the very products he had asked about. I resubmitted exactly the same files and the proposal sailed through.

For all the reasons listed above, an industry has sprung up to help companies prepare their contract proposals.  For many companies the cost of these services is more than covered by their first sale.

Going back to the positives of government contracts:

1. This is a large market with limited competition.  Many companies increase their market potential by 10 -15%.
2. Once you are in the door, you can also sell products that are not on contract.  These are called open market sales.  For example, suppose a product is not on contract because of a conflict with AbilityOne offerings.  AbilityOne only guarantees 45 day delivery on most products.  If the contracting officer needs the product sooner, he is allowed to buy it on the open market.  That happens a lot.
3. The market is practically recession proof.  In fact, some sectors are awash in money right now.
4. There are no slow pays.  The government pays every invoice in 30 days or less.
5. Contracts run for 5 years, with 5 year extensions.  So the effort of getting on contract is rewarded by 10 to 20 years of opportunities.

Bob is a principal at Resolute Marketing, which helps companies submit contract proposals a fraction of the time normally required.  Contact him at resolutemarketing@verizon.net or (508) 361-5626.

© Robert L. McKee 2010

3/19/2010

 Five major direct marketing misconceptions:

 1-      Given today’s technologies, direct marketing is the only way to go and it is the least costly. Well, technology is changing the way we do things, but technology alone is not always the key driver for change. Remember that your potential customers are humans and thus they vary on how they “gather” information and interact with technology. Secondly, some products and services are not very well oriented towards today’s technology. As for cost,  the “web 2.0” process is far from free; take a complete look at the cost to do direct marketing. In some cases you may have to add resources to manage the multiple divergent activities.

 2-      Everyone has email, so I can send our emails and the orders will start coming in.  This plan of action may be in violation of the CANSPAM act, and may alienate potential customers.  Just like traditional telemarketing, one needs a compelling offer, an approved targeted list, a call to action, and supporting activities such as case studies, blogging for creditability, and must importantly a well thought out email program, because one mailing alone will not cause potential customers to react.

 3-      Social marketing has no proven results, so I do not need too use any of these new tools! Understand that the vendor to consumer model has changed. The consumer is in the driver seat and consumers can and are talking about enterprises and about enterprises’ products and services. So as a minimum, one should at a minimum, monitor what is being said so you can react. Secondly, many end users are using media tools like blogs, twitter postings and Facebook to become informed before they make a decision, so it stands to reason that if they don’t see anything about your services or products, you will not be considered.

 4-      Hard copy (print) mailings are no longer used because they are not effective. Again, it is not a question of what to use, but your mix.  Hard mailings are and can be very effective.  A good example is a mailing to “new” customers, those who may not know about you. Hard mailings add personalization and get around potential filtering by the corporate IT email structure.  Hard mailings can also precede or follow up as part of planned social media programs.

 5-      The web site is nice to have but once I get it launched I can focus on other marketing programs. As I noted in item number three, the consumer is in control. Their major source of information is the internet, starting with your web site. If your web site is not user friendly, up to-date, contains real information and provides “give a ways” such as papers, case studies, white papers; and then you have just lost another potential customer.

 In summary, as I have always stated, look at your strategy and goals and see how direct marketing as a sales channel will support them.  In reality, your sales model will probably be a mix.  So the real question is how much direct marketing and what percentages of its components will be used. Also like other marketing programs, know your audience and know what they are thinking and saying about you.

 Do you know how your web site compares to your competition?

 RHL 01/19/10

 Five major indirect channel misconceptions:

 1-      Partners, resellers, etc. are all alike. Nothing could be further from the truth! The major impression is that most indirect channels carry vendor’s products, do some form of telemarketing and just take orders. In reality resellers come in thousands of kinds and types.  From pure distributors, to value added resellers, to system integrators.  Many resellers not only know the products and/or services better then the vendor; they usually have very knowledgeable sales people with solid long-lasting relationships with their customers.

 2-      The indirect channel is only interested in pricing for products and /or services. While everyone is in business to make a profit; the indirect channel is equally interested in areas such as marketing programs, territory alignment, training, technical support and LEADS!  And like all good businessmen, they recognize the positive nature of continuing relationships with key customers.

 3-      Your channel programs can be applied to all resellers/partners equally.  If you believe this then you are in for some very rough times with your resellers. Again resellers come in different forms. Some are product oriented, others specialize in services, while others focus on certain type of industry applications.  Therefore one needs to tune each program   for each different type of partner (reseller, distributor, etc.).

 4-      Indirect channel partners only know how to sell. Just like myth number 2, channel partners can and do have many capabilities. Again usually each has one or two major strength capabilities, so make sure you know what they are when selecting a indirect channel partner such that their strengths matches with your distribution strategy.

 5-      Indirect channels do not need much care and feeding after the initial start up. This is like the myth of the direct sales force that “loves them and then leaves them” but coming from the other direction.  Probably the worst thing you can do is to ignore your indirect channel. Take this approach and see how long your partners last with you. Make sure you have sales people who know how to manage and support your indirect channel.  The most successful companies have channel partners who have been with them for years.

 In summary, noting that the indirect channels are actually more complicated then the direct channel, one should make absolutely certain that the partners/resellers you select match your strategy. Next, depending on why you selected the appropriate partner, make sure that your partner programs meet your and your partner’s needs. Lastly make it a partnership relationship not just a business relationship!

  Have you thanked your channel partners today?

RHL 01/12/10

Five major direct sales force misconceptions:

1-      That the sales force is only “coin operated”, meaning they are motivated by money, money and more money.   Granted direct sales people are compensated by a combination of a salary and commission, which is usually organized around an increasing sales volume, incenting them to sell more. However, other equally or more important drivers are that most sales people are driven by being singled out at the annual sales meeting as the top performing person in his/her region, or the overall top performer, or being selected to go that exclusive “retreat” for outstanding individuals within the corporation. Another major driver is what I called the thrill of the “kill”; i.e. getting that big order! In other words, competition and recognition are just as important as is the compensation.

2-      That sales people are just “gun slingers”; they see a potential opportunity and drop what they are doing and go after this potential record breaking situation. The true top performing person spends hours in understanding potential customers needs, who is who, generating a strategy, knowing the competition’s strengths and weaknesses and providing the best solution that meets the customer’s real needs.

3-      That sales people only know how to sell.  Again your top sales people not only know how to sell, but often they know the products and/or services usually better than some of the product managers! Sales people also know technology, and more importantly they know the appropriate situations for specific technologies. Probably the best attribute is they know how to propose the best solution for the customer’s problem.

4-      That sales people “loves them (the customer) and then leaves them”.  Good sales people not only get the initial order, but stay with the customer and work to understand other related needs or other emerging needs within the corporation. This accomplishes two major tactics, one, getting embedded with the customer for future business and two keeping the competition out.

5-      That anyone can sell so if I lose a good sales person, so what!  People who say this probably have never sold, just like people say anyone can do marketing. It take a unique combination of drive, motivation, knowing people, understanding needs and fulfilling those needs, negotiating, knowing how to close, and in many cases taking rejection, in order to be a good salesperson.

In summary, while the direct model requires many factors for success, the most important component is the sales force itself. You can create great programs, products/services but if you have mediocre sales people you will not last long. On the other hand you can have mediocre products and programs, and top performing sales people can make up the difference. So do your due diligence on selecting sales people just like you would do on selecting a strategy.

Have you thanked your sales force today?

RHL 01/05/10

On the second day of sales, marketing gave to me two value propositions and an outstanding brand!

On the third day of sales, marketing gave to me, three new market segments, two value propositions and an outstanding brand!

On the fourth day of sales, marketing gave to me, four campaigns for the year, three new market segments, two value propositions and an outstanding brand!

On the fifth day of sales, marketing gave to me, five new social networking medias, four campaigns for the year, three new market segments, two value propositions and an outstanding brand!

On the sixth day of sales, marketing gave to me, six product introductions, five new social networking medias,…

On the seventh day of sales, marketing gave to me, seven testimonials, six product introductions, five new …… 

On the eighth day of sales, marketing gave to me, eight email campaigns, seven testimonials, …….

On the ninth day of sales, marketing gave to me, nine blogs per week, eight emails campaigns,….

On the tenth day of sales, marketing gave to me, ten case studies, nine blogs,…..

On the eleventh day of sales, marketing gave to me, eleven new pieces of collateral, ten case studies,…..

On the twelfth day of sales, marketing gave to me one hundred and twenty thousands leads, eleven new pieces of collateral, ten case studies,……….

What are you giving to sales this season??

RHL 12/22/09

When the best doesn’t come, everyone wonders why goals are not being met, why the sales force is confused and why the partners are underperforming?

I call this approach the “ready, fire, aim” method. The answer to the confusion above is that there is no well thought out, formal partner reseller program.

The following are the major activities that best-in-class partner programs have in common:

1-Strategy- If you have read any of my other blogs regarding sales or sales channels, you know the first consideration already. Any good program must have a strategy. What is the company’s strategy and how will the partners contribute to the strategy? Some of the questions you must answer are: are you developing a partner program to get new customers, new territories, or to augment your direct sales force? Whatever the reason, the program must support these strategies, if not the path will be filled with potholes!

2-A Partner Program: This may seem obvious, but you would be amazed how many companies see an opportunity, but do not plan a program and thus cause a false start and, in some cases, bad will in the reseller community.

Fundamentally a program outlines the why, the who’s and how’s of doing partner business. A partner program is like a business case, it contains items such as goals, objectives, forecasts, roles and responsibilities, partner programs, partner manuals, partner collateral, leads program, training, promotional activities, support guidelines, benefits, procedures/processes, measurements/metrics, engagement procedures, customer service an escalation policy, and much more.

3- What type of partners will you be recruiting? Will they augment your sales force, or a technology, or a skill set, or a region, or help you expand into a new market(s)? Will there be synergy with your sales force or will there be a huge overlap (and potential conflict)? Note that this decision ties back to your strategy.

4- Partner selection: Your program must have documented information on the selection criteria for partners. The criteria should cover among other things: business requirements, certification, capabilities, partner’s responsibilities, partner’s benefits from the program, and sales coverage requirements.

5-Financials: How will the partners be compensated, is there a special discount rate for the selected partners? Will the partners be measured on volume, revenues, or just new business?

6-Targeted Markets- Assuming you have targeted markets for your direct sales force, what will be the targeted market(s) for the reseller(s)? Will they be the same as for the direct sales but with different products, or different markets with the same products or different products and pricing?

7-Measurements- How will you measure success of the partnerships? This will depend on the “stage” that your company is in and the overall goals of the company. As an example if you are in a start-up mode, the measurement for the reseller might just be new business (profitability is secondary), but if you are seeking product revenue expansion, the measurement might be net new revenues.

Well these are some of the major activities that one must consider is developing partnerships. Again, like my blogs that discuss channel selection, things are never black and white and unfortunately they tend to be very gray and complex. Don’t let this scare you away; start with a very well thought out and tested strategy. If you do this step well and involve potential partners, you will be amazed how the well the other activities move ahead.

Till then happy partnering!

RHL 11/23/09

Last time we discussed the scenario of a direct sales channel and switching or adding an indirect channel. The key issues were: a complete strategy, reseller selection and a reseller program(s). This posting is about adding a Direct Marketing function. Again, like the last discussion, make sure you have a sales strategy or that your sales strategy is updated. We will also assume the strategy is valid.

Here are five key considerations for a direct sales channel planning on switching to or adding a direct marketing channel.

1-Product selection for direct marketing

Do the products within your portfolio meet the following criteria?
- Are the products straight forward and well understood by the market place?
- Are the products fairly standalone (no real services required)
- Do you have a timely distribution system (infrastructure) in place (turn around will be critical)?
- Does your infrastructure support multiple SKDs, as well as tracking and ordering online?

If your answers are yes to at least 2 or 3 of the four then continue. If you answer NO to most of the above, going direct marketing is not out of the question but you need to address the action items below.

Action items
-You will need to augment the product with very compelling features and benefits.
-Create or partner for a rapid/ quick turn around product distribution system.
-Develop your web site so that it handles the complete cycle for transaction activities.
-Begins staffing for customer calls, for those who don’t want to order over the web, those that have difficulty and those who have product problems upon receipt or under warranty.

2- Marketing methods and tool selection

Perform an analysis on which media you will use and what mix:
-Analyze how integrated and automated your marketing programs are, procedures and rules are (considering cycle times to be competitive, automation and responsiveness is critical)
-Telemarketing methods need multiple scripts and an installed follow-up system.
-Investigate what tracking tools you will use.
-Do you have compelling value propositions that will catch your potential customer’s attention?
-What is the best mix of traditional marketing (ads, telemarketing, etc.) versus email, blogging, face book, and twittering is appropriate for your targeted audience?
-Is your data base set up for all of the selected activities?
-Is your web site geared for transactions, and interactions?

Action Items
-Start monitoring what is being said about your company and your products.
-Do an ROI on the media mix and potential revenue per media.
-Do you have the budget and appropriate resources for social media methods (blogging, twitter, tracking, etc?) and skill sets?
-Develop or modify your customer database so it is integrated, complete, and flexible so that you have a closed loop marketing (customer- sales- marketing- back to customers) capability.
-Develop a metric/measurement system for the direct marketing (example, all programs must have an ROI target).

3- Marketing programs

You should have a series of marketing campaign well thought out ahead of time (multiple touches and offers will be required in order to develop a reasonable funnel).
-What will be the offers?
-How will the campaigns be linked (themes, or offers or audiences as examples)
-Do you have marketing “packages” oriented for each targeted audience or and campaigns?
-
Action Items
-Perform market testing for the campaigns and packages
-Develop some give-away within your web site such as white papers, free ipod, webinars, etc.
-Financials- prepare a complete forecast analysis to understand realistic revenue targets, realistic costs and thus true margins and ROI per campaigns.

4- Financials

Direct marketing will have a startup operating costs just like a product introduction, but the difference will be in the media methods, tools and the skills required in performing this closed loop marketing. So, just like the indirect model case build a complete business model with attention on the following areas:
-Data base organization and analysis
-CRM/SAP type applications
-Web information analytics
-Creative offers
-Web 2.0 type dynamics
-Skills sets required

Action Items
-Related to action item in 3- develop a complete business case.
-Have measurements and timelines with key milestones to determine progress.

5- Cultural Environment

Since direct marketing is under going some dynamic changes, new functions/ procedures need to be introduced into your enterprise. Management also needs to understand that some of these tools/methods are new and thus more of an art than pure science, so be flexible, and prepare for changes along the way. What will be your policy regarding twitting and face book both internally and externally (see our blogs regarding social networking (www.firealarmmarketing.com/blog/))? You also need to consider the value of marketing of brands versus your own internal content marketing.

Action Items

-Educate management and key people involved on the nuances of direct marketing.
-Develop policies and procedures for the various tools and methods of direct marketing

Well, as you can see, Direct Marketing, like other forms of distribution must have a strategy, but differ in that you will probably need new tools and skills to be successful. Overall, you probably will end up with a mix of media marketing with the biggest issue what percentage of each will result in the best return on your investment.

We have looked at different channels of distribution, some guidelines for switching or adding other channels. The keys overall are having a strategy, knowing what the selected channel can actually do for you and having the appropriate programs and tools to be successful.

So, what are you waiting for, get busy and start that channel(s) and start selling!!!!

RHL 10/20/09

This is the seventh in a series regarding Sales Channels

One reader, who felt that the scorecard was a good guideline in defining the appropriate channels for many enterprises, wanted some insight on what should be considered in changing/ adding another channel, as her current channel is underperforming.  Well when the reader asks, we deliver, so let’s start with the following scenario of a company having direct sales only and wanting to add an indirect channel.

Again, make sure you have a sales strategy or that your sales strategy is updated.  Many times enterprises are locked into a strategy and don’t realize they have changed, the environment has changed or both have changed and thus the strategy is no longer valid.  But let’s assume your sales strategy is still valid;  here are five key considerations for switching or adding an indirect channel of distribution.

1-Product selection for the potential resellers

Do the products within your portfolio meet the following criteria?

            - Have margin-sharing room?

- Not complex, lending themselves to easy (low cost) training?

- Fit within distributors/resellers portfolios?

- Minimal conflict with the products the direct sales team carries?

- Does your infrastructure support SKDs, tracking and ordering for the resellers?

If your answers are yes to at least 3 or 4 of the five then continue.  If you answer NO to most of the above, going indirect is not out of the question but more difficult.  You will need to implement the following actions items:

Action items

-You will need to compensate for the product issues by excelling on other reseller program components

-Consider repackaging some of the products or adding services to the products that are oriented just to the resellers.

-Consider resellers who could use your products to complete their portfolio and thus will be less demanding on issue such as discounts.

2- Reseller segmentation

Perform an analysis on potential resellers and see who meets these criteria:

-Are they capable of selling the selected products ?

                -Do they have the necessary infrastructure to support these products?

-Can you segment resellers to minimize conflict with other resellers and your direct sales force?  Segments can be by geography, customers or products as

 examples.

-Do the selected resellers have compelling value propositions that support your selected products?

-Do you have compelling value propositions that will motivate the reseller to sell your products?

If you cannot segment the reseller so that there is minimum conflict, then I would say this is a major issue and indirect channel will be a struggle.

Action Items

            -Segment so that there is no or minimum overlap with your direct sales force

            -Develop specific value propositions for the resellers and for their end users

3- Reseller program

Again, assuming your strategy is still sound, then it is mandatory to have a well thought- out reseller program.  As a minimum you must have the following:

-Some type of “classification” of reseller types. i.e. sliver, gold, which outlines their objectives, revenues targets, products they will handle, etc.

-For selected products, what type of support you will provide

-Discount or points off the structured program (note: if you have low margins or your discounts would cause negative margins, then like the product packaging, look at bundling with the resellers products or bundling other product or services to improve the margins and value propositions.)

-A mutually agreed upon measurement system that covers items like sales, customer satisfaction, training and leads

-Certification programs (can be optional)

-Reseller agreements

-What joint marketing will be available to the resellers

-Well defined rules of engagement for the resellers and your direct sales force.

-Financials- prepare a complete forecast analysis to understand realistic revenue targets, realistic costs and thus true margins.

If you have not developed these elements or can not have a “best-in-class” reseller program (especially the financials, classification and measurements), then I would highly caution that going into indirect distribution, as this will not be a successful venture.

Action Items

            -Develop an indirect program and test/review it with potential resellers

            -Build a complete business case that supports resellers AND your sales force

            -Educate ahead of time the sales force about the pending channel change

4- Financials

Going indirect will have a startup costs just like a product introduction, but what differs is that there are specific activities in dealing with resellers and that most people underestimate these startup costs.  So, build a complete business case just like one would do for any product introduction; but pay special attention to the following areas.

-         Joint marketing cost with the reseller(s) ( events, travel, promotions, incentives, sales support, etc)

-         You will need a portion of your current sales force or new hires to focus on the resellers

-         The revenue sharing plan must consider the direct sales force and the reseller needs

-         Support to the resellers ( training, collateral, demos, programs, technical backup, returns, trouble shooting, customer engagements, etc)

-          

Action Items

            -Related to action item in 3- develop a complete business case.

            -Have measurements and timeline with key milestones to determine progress.

5- Cultural Environment

Here is one area that is either overlooked or becomes a stumbling block in many companies.  What I am talking about is the overall attitude about resellers, starting with the company’s management and moving on through the organization.  The old adage, action speaks louder than words, is applicable here, and both have a major impact to the success of the new relationship(s).  If people within your organization say and do things differently internally  than they do externally regarding resellers, the word gets out quickly and before you know it your resellers are abandoning ship or worse, not letting you know how they actually feel.

            -

Action Items

-Educate management and key people involved in this transition on the reseller world and what the relationships are, what should be expected and why we are doing this in the first place.

-Develop roles and responsibilities for key executives regarding reseller’s involvement and support.

In conclusion, one can see that adding or converting to another channel is not just looking at which products to distribute, but require execution of what I call the “surround components” which are the real keys for entering into the indirect channel world.

Next time we will discuss direct sales and converting or adding direct marketing.  Till then, happy selling

RHL 9/24/09