Stop channel surfing for sales and get a strategy

Like spring cleaning, it seems if corporate America changes their sales distribution methods on a regular basis. The latest trend seems to be oriented towards the indirect versus direct distribution. As best I can tell, projected or forecasted cost savings seems to be the main reason for this conversion.   My experiences and observations are that these cost savings are illusionary and I would suggest that before you make any change, you fully understand the issues for each type of channel and how it supports your go to market strategy.

 

But first, a definition for clarity reasons and some overall strategy considerations.

 

I define channel sales by meaning all forms of distribution (direct (your sales force), indirect (via distributor/resellers) or direct marketing (email campaign, promotional offers, etc.)) by an enterprise to promote and sell their product and or service into a market(s).

 

Regarding your strategy, there are many factors to be considered. The following are some of the major items that should be thought about in selecting your channel.

 

First, what type of product or service do you offer?  Is it a very straight forward and relative simplistic to explain or is it a very complex solution (complex solution are those that consists of multiple products, some applications and professional services). I would suggest that complex solutions are very difficult to sell via direct marketing let alone by a direct sales force. Related to the type of product or service, what is the cost structure?  Is there margin for “sharing” with other partners, or can related services help provide margins to maintain profitability.

 

Second, what type of accounts/customers is your primary target? If they are the Fortune 500, then it is highly unlikely that a direct marketing campaign will get you any kind of response from your customer.

 

Third, do you need a full scale service organization to support your products, both in the pre and post sales environment?  Here you might consider a distributor or reseller who is noted for their service value proposition.

 

Fourth, is your marketing organization structured to support different channels, do they have various programs (an example would be, if direct marketing is your approach; you will need expertise in email campaigns, telemarketing and web support) and personnel for each channel (example, competitive analysis experts versus email operations), incentives (commissions versus spiffs), promotional programs and channel oriented collateral for the various channels? Is there enough money (margin) to support these different activities?

 

Fifth, a very often overlooked consideration is your systems or infrastructure. Can they support various channels?  Simple things like product codes and tracking end users can be nightmares for all organizations internally if they are not structured appropriately.

 

Sixth, a very critical factor in deciding which channels to utilize is what values you bring to that channel.  If the selected channel does not see a benefit to them (financially, value proposition or a fit within their strategy) everything else will be a major waste of time and money let alone major missed opportunities.

 

Seventh, equally critical to channel utilization is the issue of channel “conflict”. If you have an existing sales force, how will they be goaled and commissioned versus the potential reseller/distributors? Who owns which accounts, who sell what to which accounts? What is the organizational structure and how are they motivated?

I can NOT over state that understanding and developing roles and responsibilities among these channels is very complex and potentially expensive.

 

Lastly, what is your overall strategy for sales at this phase of your company? Are you just getting established and thus awareness is the key, or is it penetrating new markets or is it taken share away from your competitors.  Whatever the case, you need to have an integrated plan that considers the above items.

 

So before your switch channels or if this is your first time at this; first have a strategy and see how you would answer the seven items above.  After that, look at the overall financials to support the targeted channels and look at the margin differences and the forecasted sales volumes, to see if the overall combined projections are profitable.

 

Next time, we will look at the direct model in more detail.

 

RHL 7/22/09

 

 

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