Who Does Sales Channels Well and Who Doesn’t


A number of you have asked, “Who does sales channels well?” after reading my series about different sales distribution models.  (www.firealarmmarketing.com/blog).


The Direct Model:


            Some of the major insurance companies demonstrate outstanding customer segmentation by their marketing campaigns.  They are focused, know their key messages and develop “packages” that address customer attributes along with time sensitive pricing.  The sales team is given very specific directions regarding the characterization of the customers they are to pursue.  The best parts of their marketing and sales program are the easy to remember, catchy messages. 


            On the flip side, there is a manufacturer of communication products and services north of me who should be written up as a business case for graduate schools.  They did most things wrong.  First and foremost, they really didn’t have a strategy.  Not only did they seem to change their strategy, but they also changed their targeted customers and what solutions that they were selling to them.  These actions (actually lack of actions) resulted in many issues.  Some of the major impacts were loss of sales force support and moral, customers losing confidence in them as a trusted vendor, fewer purchases and confusion on what the vendor actually offered.


The Indirect Model:


            A dominant vendor in the telecommunication industry is writing the book on how to work with distributors and reseller.  While they have some direct sales, they predominantly depend on resellers.  Their great relationship is created on a few good practices; first, the vendor is doing a wonderful job in the selection of the resellers, second there is a very clear distinction on who sells what, who is paid for what and what territories each one should cover.  Another unique feature is that the resellers are measured on customer satisfaction!


            A vendor, who is struggling with indirect model, is an East Coast manufacturer.  They started with the direct model but not only did they change which products to sell, they also changed their compensation plan, all of which demotivated the sales force.  Believing that the indirect model would be less costly, they changed to an indirect model, signing up hundreds of resellers.  There was one problem they had no strategy, which resulted in confusion among the direct sales force and the resellers.  We all know the expression; burn me once, burn me twice, well the resellers got burned a number of times, thus resulting in lost of creditability with the vendor and vendor sales.  Their next misstep was to develop a strategy (you are saying that is what you are supposed to do first).  Multiple strategies for the resellers were developed, not one general one.  These multiple strategies also resulted in confusion everywhere and thus continued lost of credibility and sales.


The Direct Marketing model:


            A major PC vendor probably wrote the book on best practices for the direct marketing model.  Their key strategy is reducing costs on the supply side and the end user side.  The other key element is their direct marketing functions.  They know, to the greatest detail, their customer’s attributes and segmentation.  The vendor also has a well-defined customer satisfaction program, which keeps them in touch to their customers and thus the ability to look forward and meet user’s future needs.


            If one looks at the dot com era, then we can see many examples of poorly handled direct marketing.  There are two common mistakes among the failed dot coms.  First is their business plan/strategy; they were not real at all (forecast were ridiculous).  Second, they really did not know their potential customers.  An example of this is the pricing of their products.  Vendors were totally mismatched with what they thought they could charge and what the price consumers were willing to pay.



If we learn anything from both the good examples and not-so-good enterprises examples, strategy was the key for both directions these companies undertook.  With no strategy, everything else is time wasted!


Is your distribution strategy clear and well understood by all?


RHL 9/17/09



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