Aligning your channel tactics

Channel Tactics

In Memorial This presentation represents a condensed version of Managing Your Go-To-Market Strategy. The course,

and its predecessor versions, were offered by the University of Wisconsin for decades. As the Center shifted its mission to management and leadership

training, the marketing and sales courses were discontinued. Since channel strategy is no longer available as a public workshop, I am offering these

materials to you for your personal education. Enjoy!

Questions? Contact: Linda M. Gorchels Emerita Director, Executive Marketing Education UW-Madison School of Business Center for Professional & Executive Development lgorchels@bus.wisc.edu

What you can expect This channel management session will hone your ability to: • Assess channel fitness given

changing strategic and tactical conditions

• Structure ideal candidate profile templates

• Improve support programs • Reduce channel conflict

Why you should care

Working with dealers and distributors can feel like herding cats – unless you do it right!

What is channel management?

Stewardship Differentiation

Efficiency

What is channel management? • Stewardship of a go-to-market strategy

that provides value to end-users… • local selling • financing/credit terms • delivery/installation/customization • service support

• In a way that establishes differentiation • through seamless customer experience

• And increases effectiveness or efficiency • cost containment and channel segmentation

Range of channel issues

Is channel structure redesign required due to: • market dynamics? • shifts in strategy? • a new product launch?

How can you: • better manage your

relationship with the channel?

• motivate the channel to attain objectives?

• evaluate channel effectiveness and performance?

• improve support within the channel?

Strategic fit (requiring changes)

Management issues (on an ongoing basis)

Channel management process 1. Assess

performance of existing channel

structure 2. Refine

channel and coverage

requirements

3. Rethink channel design

4. Prepare ideal candidate

templates and assess fit

5. Review mutual

performance expectations

6. Support channel efforts

7. Monitor performance and adjust

1. Assess performance of existing channel

structure

Too many process potholes?

• What can you streamline?

• Automate? • Simplify? • Eliminate? • Combine?

Excessive channel conflict?

• Are your contracts, guidelines and policies working?

Picture from mediate.com

Lack of partner mindshare?

• Are your channel partners willing to push aggressively for your sales?

• Why or why not?

Picture from michaelmccurry.net

Lack of trust & acceptance?

• What do your partners say about you when you are not in the room?

Customers jumping to new channels?

• Do end-customers want new services or conveniences?

• Can they get what they want with your existing channels?

So …

• Are you accomplishing your objectives with your existing channel?

• Do you need minor tweaking?

• Or is more significant structural change necessary?

2. Refine channel and coverage

requirements

Requirements of customers

Requirements of your products

Your importance to the channel

Major vendor

Secondary vendor

Minor vendor

Importance to distributor’s business

moderate

Distributor willingness to adapt

moderate

Manufacturer’s marketing approach

push/pull

Required sales tasks

Pre-sale Transaction Post-sale

3. Rethink channel design

Consider your options

Distributor continuum

Generalist Specialist

•Product generalists

•Fast-moving inventory

•Reactive selling

•Heavy inventory resources

•Many customer orders

•Product specialists

•Full parts inventory

•Proactive selling

•Dedicated resources

•Fewer, larger customer orders

A common problem

Markets

Questions: How do you obtain coverage of Market #3?

Is Market #4 an opportunity or a hindrance?

Calculate effectiveness

• Product Fit: percent of total market your product or service “fits”

• Distribution availability: percent of opportunities where your product is present

• Win rate: how often you win the sale

effectiveness = product fit x distribution availability x win rate

14% = 60% x 80% x 30% © Linda Gorchels, BrainSnacksCafe.com

Leverage your sales force

Key accounts

General business

Small customers

Sales force primary focus

Other channels

(custom solutions)

4. Prepare ideal candidate templates

and assess fit

Ideal candidate template Description of “ideal” Candidate

evaluation Market served

Product line fit

Territorial coverage

Sales capabilities

Business & managerial stability

Marketing capabilities

Operational capabilities

Local service

Ease of doing business

Reputation

5. Review mutual performance expectations

Manage, motivate, evaluate

• Effectiveness usually increases when expectations are mutual – What was written into the contract? – What specific measures are addenda

that change annually? – Know what to expect and what NOT to

expect from your distributors or reps.

Price & performance expectations

• The target street price is the price you feel is attractive to the end user while providing acceptable compensation to the channel.

• Compensation may include discounts from the target price along with allowances, rebates and other programs

Classic Discount Structure

List Price Target Street Price

Dist Buy Price / Mfr Sell Price Distributor Rebate Program

Standard Cost

1.00 .90

33% Channel Margin

5% Rebate

47% Manufacturer

Margin

Multiplier

.40% 43%

Discount

Source: Sam Shapiro, Channel Pricing Associates

6. Support channel efforts

How strong is your support?

Those who sell for you require lots of support …

– Training (product and sales) – Ordering/sales management systems – Marketing “air cover” – Advertising support (“co-op”) – Selling support – Promotional programs – Logistics (delivery/expediting, parts, returns,…)

Channel receptivity to change

• Self-growing • Growable • Not growable

– Sustainable – Not sustainable

(Source: Frank Lynn & Associates, Inc.)

Rep Business Life Cycle

Struggle

Rapid growth

Maturity

Decline

“Death”

The comfortable lifestyle driven rep

The growth driven rep

Longevity Source: Harry Novick, Selling through Independent Reps

Planning a dealer/rep meeting

• One way to learn about how your reps and distributors evaluate you is through advisory councils – Survey past attendees – Be sure senior managers attend – Obtain feedback on company effectiveness. – Follow up on meeting ideas

Source: Joseph Conlin, “The Art of the Dealer Meeting,” Sales & Marketing Management

Ensure organizational support • Quick response to

questions and RFQs • Follow through on

promises • Technical support • Accurate and prompt

payment (for reps) • Plant visits (as

appropriate)

What incentives might we use?

• Discounts • volume • contractual • functional

Picture from ecigarettedirect.co.uk

What incentives might we use? • Discounts • Sales promotion

– Contests – Spiffs

• Promotional funds

Picture from thebusinessboosters.blogspot.com

What incentives might we use?

• Discounts • Sales promotion • Promotional funds

– MDF (market development funds) – Coop advertising

Managing promotional programs

• Provide pass-through materials • templates, ad slicks, catalogs, videos, bulletins,

CDs, DVDs, downloads

• Design direct response campaigns • Email newsletters, social media support

• Increase home office promotions • website, press releases, national advertising / PR

• Support distributor promotions • coop/MDF, yellow pages, customer seminars,

trade shows, open houses, website hosting

Managing promotional programs

• Think in terms of a CAMPAIGN rather than piecemeal efforts!

Keep it simple.

Coordinate with manufacturer efforts.

Compare with competitive programs

Management & contracts

• Distributors – contractual agreements, mutual business

planning & support • Reps

– commission packages & support • Direct

Build sales support • Lead generation & qualification • Provide sales tools

– “Elevator pitch” – Killer demo

• Conduct joint sales calls • Provide training • Coach performance

• cross selling • suggestive selling

7. Monitor performance and

adjust plans

7. Monitoring & adjusting

• How will plans be adjusted to accommodate performance and conflict issues?

• Develop a “report card”

Evaluate channel performance

• Define metrics appropriate to your sales cycle – Sales revenue, units – Demos, proposals, etc. for

longer cycles • Ability to meet plan objectives • Functions performed

– Showroom, counter displays, events, etc.

Manage conflict between …

Manufacturer and channel Clarify national account strategies

Players in the same channel Define APR and related performance measures

Different channels “Build fences” through defined-customer strategies, brand or product differences, etc.

Key points • Stay on top of the dynamics that may suggest a need

for channel re-evaluation, and follow the steps in redesign:

1. Assess structure 4. Assess and/or select partners 2. Refine requirements 5. Review expectations 3. Rethink channel design 6. Support channel efforts 7. Monitor & adjust

• Manage channels on an ongoing basis 1. Maintain good two-way dialog 2. Use incentives that motivate the right behaviors 3. Measure and monitor effectiveness 4. Coordinate and improve marketing, sales and operations

Based on sections of The Manager’s Guide to Distribution Channels

Authors: Linda Gorchels

Ed Marien Chuck West

There are several people who taught in and/or contributed to this course over the years. I would like to thank the main contributors as listed below.

Jon P. Christiansen Susan Heintz Jack Nevin

Harry Novick Bob Segal

Chuck West

Just as we routinely upgrade computer systems, we must upgrade our own knowledge systems. Linda has helped over 10,000 people over a 25+ year period with these educational upgrades, merging anecdotal client experience with researched “best practices,” and sharing the resulting insights with managers and executives. After working in the office products, publishing and insurance industries, she joined UW-Madison’s Center for Professional and Executive Development, both as a corporate trainer and program director. Now, as a director emerita, she provides workshops for select clients. An award-winning author of The Product Manager’s Handbook, she has also written The Product Manager’s Field Guide, The Manager’s Guide to Distribution Channels, Business Model Renewal, and Aptitudes of an Energized Product Manager. Linda is now a blogger, mystery author and Creativity Curator for her own company, Tomorrow’s Mysteries, LLC.

Linda M. Gorchels

For more information, refer to the following books on Amazon, follow my blogs, and download several

free articles from my website, BrainSnacksCafe.com.

Aligning your channel tactics

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