Today’s Topic:Today’s Topic: Sales & Sales ChannelsSales & Sales Channels

Designing and ManagingDesigning and Managingthe the

Selling, Implementation and Selling, Implementation and Customer Support ProcessCustomer Support Process

Course ScheduleCourse Schedule

The Marketing Function (Lenovo)The Marketing Function (Lenovo) Sales & Sales Channels (GolfLogix)Sales & Sales Channels (GolfLogix) Internet-based Marketing (HubSpot)Internet-based Marketing (HubSpot) R&D: Product Development (Guidant)R&D: Product Development (Guidant) Operations (Crocs)Operations (Crocs)

Product Launch (Invisalign)Product Launch (Invisalign) Final Exam on Product Launch (Emotiv)Final Exam on Product Launch (Emotiv)

Last week: Marketing LearningsLast week: Marketing Learnings

Elements of the Elements of the Marketing Mix (C+4P)Marketing Mix (C+4P) BasisBasis of mix decisions: market & financial of mix decisions: market & financial

objectives and competitive advantageobjectives and competitive advantage Importance of Importance of product positioningproduct positioning Positioning factors:Positioning factors:

- positioning - positioning withwith? (target customers)? (target customers)- positioning - positioning againstagainst? (relevant competitors)? (relevant competitors)- - desires & fearsdesires & fears of positioning target of positioning target- positioning - positioning contentcontent (differentiators,benefits) (differentiators,benefits)

Promotion (marcomm)Promotion (marcomm): choosing the vehicle(s)/ : choosing the vehicle(s)/ media that provides best and most cost-effective media that provides best and most cost-effective access to the targetaccess to the target

Today’s AgendaToday’s Agenda

The basic sales functionsThe basic sales functions

Types of sales channels Types of sales channels

Choosing sales channelsChoosing sales channels

GolfLogix--- sales channel selectionGolfLogix--- sales channel selection

Readings and assignment for next week Readings and assignment for next week (HubSpot)(HubSpot)

Sales & Sales ChannelsSales & Sales Channels

““Nothing (good) happens until Nothing (good) happens until somebody sells something”somebody sells something”

Sales Channels: LearningsSales Channels: Learnings

The basic sales functions: (promotion), The basic sales functions: (promotion), selling, selling, fulfillment, fulfillment, andand service service

Channel value-addedChannel value-added: Higher and lower value-: Higher and lower value-added channels; value-added functionsadded channels; value-added functions

Specific Specific channel optionschannel options: direct (multiple types), : direct (multiple types), OEM, integrator, VAR/VAD, distributor, OEM, integrator, VAR/VAD, distributor, dealer/retailer, etcdealer/retailer, etc

Channel decision criteriaChannel decision criteria: considerations in : considerations in matching products, customers, and channelsmatching products, customers, and channels

Channel economicsChannel economics: channel margin, profit: channel margin, profit Channel conflictChannel conflict: coordinating multiple channels: coordinating multiple channels

Channels are Critical: Channels are Critical: which channel(s) you use affects…which channel(s) you use affects…

The success you’ll have in selling The success you’ll have in selling ((revenuesrevenues))

WhatWhat you have to sell you have to sell WhoWho you are selling to you are selling to The The priceprice you get for your product you get for your product The The designdesign of the product of the product The The functionsfunctions you’ll have to perform (and you’ll have to perform (and

associated expenses) in marketing, sales, associated expenses) in marketing, sales, manufacturing, R&D, IT and finance manufacturing, R&D, IT and finance

---- almost everything!---- almost everything!

Three Basic Sales FunctionsThree Basic Sales Functions Promotion/marketing communications creates the Promotion/marketing communications creates the

environment for successful sales: making the customer environment for successful sales: making the customer aware and interestedaware and interested

SellingSelling: convincing the customer to buy: convincing the customer to buy (may sometimes be achieved by promotion alone)(may sometimes be achieved by promotion alone)

FulfillmentFulfillment: taking the order, delivering : taking the order, delivering the product, installing/configuring/testingthe product, installing/configuring/testing

ServiceService: delivering post-sale customer : delivering post-sale customer support support (repair, maintenance, training, (repair, maintenance, training, consultation/helpline, upgrades, returns, …)consultation/helpline, upgrades, returns, …)

Channel Functions:Channel Functions:One or more of………..One or more of………..

InformationInformation Local advertisingLocal advertising Product/brand Product/brand

choiceschoices SellingSelling AvailabilityAvailability PackagingPackaging LogisticsLogistics Installation/ Installation/

ConfigurationConfiguration

IntegrationIntegration CustomizationCustomization TrainingTraining MaintenanceMaintenance Advice/helplineAdvice/helpline Warranty/returnsWarranty/returns UpgradesUpgrades RepairsRepairs TestingTesting

TechsonicTechsonicWhich channel(s) for 901?Which channel(s) for 901?Which channels for GPS?Which channels for GPS?

Marine dealersMarine dealers Mass merchantsMass merchants Direct: Techsonic catalogDirect: Techsonic catalog (Direct: internet)(Direct: internet)

Required for sales success…?Required for sales success…?

promotionpromotion

sellingselling

fulfillmentfulfillment

serviceservice

Channel CapabilitiesChannel Capabilities

functionfunction Mass Mass

merchantsmerchants MarineMarine

dealersdealers

promotionpromotion (marcomm)(marcomm)

lowlow mediummedium

sellingselling very lowvery low highhigh

fulfillmentfulfillment highhigh very highvery high

serviceservice low/mediumlow/medium medium/highmedium/high

higher value-add channel

““High(er) Value-added” Channels High(er) Value-added” Channels are used for products that are:are used for products that are:– Technically complex, and/or… Technically complex, and/or… – Higher priced, higher margin (%)Higher priced, higher margin (%)– Hard-to-sell/explain (incl. first-of-type); Hard-to-sell/explain (incl. first-of-type);

require sales efforts in addition to require sales efforts in addition to manufacturer-initiated promotionmanufacturer-initiated promotion

– Application-specific Application-specific – Require significant support services (install, Require significant support services (install,

configure, maintain, customize, help/advice)configure, maintain, customize, help/advice)

…………..and conversely for ..and conversely for

“ “low(er) value-added” channelslow(er) value-added” channels

Two Additional ConsiderationsTwo Additional Considerations

Your channel partner(s) is selling Your channel partner(s) is selling (many) other products, not just yours(many) other products, not just yours

Channels can (sometimes) accept Channels can (sometimes) accept lower gross margins on products, lower gross margins on products,

if they can make money on service, if they can make money on service, support and add-on sales support and add-on sales

High-Tech ChannelHigh-Tech Channel OptionsOptions

Direct Direct (own salesforce, agents, telemarketing, (own salesforce, agents, telemarketing, direct mail, catalog, internet)direct mail, catalog, internet)

Original Equipment Manufacturer (OEM)Original Equipment Manufacturer (OEM) Distributors Distributors (“warehouses”)(“warehouses”) Dealers/Resellers/RetailersDealers/Resellers/Retailers VARs/VADsVARs/VADs Systems integratorsSystems integrators (sell or refer)(sell or refer) ConsultantsConsultants (refer)(refer) FranchisesFranchises (uncommon for tech products)(uncommon for tech products)

Channel AlternativesChannel Alternatives-- 5 most common in color ---- 5 most common in color --

End-customers“You”

OEM

Distrib

VAR

SystsIntegr

Dealer

Manufacturer-Channel Manufacturer-Channel Relationship ElementsRelationship Elements

Price, and volume discountsPrice, and volume discounts Contract timeframeContract timeframe Degree of exclusivityDegree of exclusivity Sales area Sales area (region or customer type)(region or customer type) Product supportProduct support Selling supportSelling support Marketing supportMarketing support Delivery commitments Delivery commitments (logistical (logistical

support)support) ……

Deciding on Channels - 1Deciding on Channels - 1

Ability to satisfy customers’ needsAbility to satisfy customers’ needs Customer decision processesCustomer decision processes Customer preferences/expectationsCustomer preferences/expectations Market coverageMarket coverage Product characteristics Product characteristics (e.g., complexity)(e.g., complexity)

Deciding on Channels -2Deciding on Channels -2

Competitive strategy/situation Competitive strategy/situation (advantage, shelf space, mind share, (advantage, shelf space, mind share, preemption, response)preemption, response)

Availability of partnersAvailability of partners Competencies of potential partnersCompetencies of potential partners Channel management Channel management (conflict, cost)(conflict, cost) Financials Financials (revenue/margin and (revenue/margin and

expense; start-up and ongoing)expense; start-up and ongoing)!!!!

higher value-added channels have higher expenses, and need higher gross margins to make a profit

Channel Economics --- exampleChannel Economics --- example

Manufacturer

COGS = 35

expenses = 20

ChannelPartner

COGS = 65

expenses = 20

channel price 65

end user price 90

List price = $100

gross margin % = 30/65 = 46%

OI % = 10/65 = 15%

gross margin % = 25/90 = 28%

OI % = 5/90 = 6%

Those who sell for you Those who sell for you require require lotslots of support…… of support……

Training (product Training (product andand sales) sales) Ongoing technical supportOngoing technical support Selling supportSelling support Marketing “air cover”Marketing “air cover” Advertising support (“co-op”)Advertising support (“co-op”) Promotional programs (incl. pricing)Promotional programs (incl. pricing) Ordering/sales management systemsOrdering/sales management systems Logistics (delivery/expediting, parts, Logistics (delivery/expediting, parts,

returns,…)returns,…)

Sales Readings Sales Readings for 11/2 Classfor 11/2 Class

Going to MarketGoing to Market - read to understand - read to understand typestypes of sales channels, and the reasons of sales channels, and the reasons for choosing themfor choosing them

GolfLogix: Measuring the Game GolfLogix: Measuring the Game of Golf of Golf (case)(case)

GolfLogix Case SummaryGolfLogix Case Summary

A start-up company in 2002A start-up company in 2002 Uses GPS technology to aid golfersUses GPS technology to aid golfers Two product versions: “distance Two product versions: “distance

only” and “complete system”only” and “complete system” Currently selling to/through golf Currently selling to/through golf

coursescourses Considering also using retail Considering also using retail

channels (would require a channels (would require a modification to their product)modification to their product)

Sales questions for 11/2 classSales questions for 11/2 class What are the most significant end-customer and sales What are the most significant end-customer and sales

channel benefits of the each of the GolfLogix channel benefits of the each of the GolfLogix products?products?

What is the market potential (number sold and What is the market potential (number sold and GolfLogix revenues) of each of the GolfLogix products?GolfLogix revenues) of each of the GolfLogix products?

Who are the appropriate target customers for the Who are the appropriate target customers for the Distance Only product? For the Complete System?Distance Only product? For the Complete System?

What are the positives-and-negatives of selling What are the positives-and-negatives of selling through golf courses? Through retail channels?through golf courses? Through retail channels?

If only one of the channels can be chosen, which one If only one of the channels can be chosen, which one should GolfLogix use? Given the option of selling should GolfLogix use? Given the option of selling through both channels, should GolfLogix do that?through both channels, should GolfLogix do that?

Sales Channels: LearningsSales Channels: Learnings

The basic sales functions: (promotion), The basic sales functions: (promotion), selling, selling, fulfillment, fulfillment, andand service service

Channel value-addedChannel value-added: Higher and lower value-: Higher and lower value-added channels; value-added functionsadded channels; value-added functions

Specific Specific channel optionschannel options: direct (multiple types), : direct (multiple types), OEM, integrator, VAR/VAD, distributor, OEM, integrator, VAR/VAD, distributor, dealer/retailer, etcdealer/retailer, etc

Channel decision criteriaChannel decision criteria: considerations in : considerations in matching products, customers, and channelsmatching products, customers, and channels

Channel economicsChannel economics: channel margin, profit: channel margin, profit Channel conflictChannel conflict: coordinating multiple channels: coordinating multiple channels

Reading for Next Week:Reading for Next Week: Internet Marketing Internet Marketing

HubSpot: HubSpot:

Inbound Marketing and Web 2.0Inbound Marketing and Web 2.0(a case that focuses on(a case that focuses on

““new” methods of promotionnew” methods of promotion

using the internet)using the internet)

HubSpot Case SummaryHubSpot Case Summary Timeframe is 2009Timeframe is 2009 HubSpot was founded in 2006; currently has HubSpot was founded in 2006; currently has

~1000 customers~1000 customers Sells “inbound marketing” software that Sells “inbound marketing” software that

businesses use in their marketing/promotion businesses use in their marketing/promotion effortsefforts

HubSpot has built its business by (exclusively) HubSpot has built its business by (exclusively) using inbound marketing techniques and its own using inbound marketing techniques and its own products/toolsproducts/tools

To grow it’s business further, it faces questions To grow it’s business further, it faces questions about which customer segment to target, how to about which customer segment to target, how to generate customer interest/contact, and which of generate customer interest/contact, and which of the “interested” customers to pursue…the “interested” customers to pursue…

……and whether to engage in outbound marketingand whether to engage in outbound marketing

Mix elements: Mix elements: PromotionPromotion

Branding Branding (creating a company or product (creating a company or product “image”)“image”)

Advertising Advertising (multiple media; paid and free)(multiple media; paid and free) Direct marketing Direct marketing (mail, catalog, telemarketing, (mail, catalog, telemarketing,

internet)internet) ““Reference” customers Reference” customers (testimonials)(testimonials) Public relations Public relations Industry relations Industry relations (trade orgs, industry (trade orgs, industry

analysts,…)analysts,…) Trade shows and eventsTrade shows and events Price promotionsPrice promotions ……

Inbound vs. Outbound MarketingInbound vs. Outbound Marketing

Outbound (traditional) marketing “pushes” Outbound (traditional) marketing “pushes” information about the company and its products information about the company and its products out to customersout to customers

- mass and targeted advertising- mass and targeted advertising

- trade shows and events- trade shows and events

- direct mail, etc- direct mail, etc

Inbound marketing “pulls” customers and tries to Inbound marketing “pulls” customers and tries to get them interested enough to contact the get them interested enough to contact the company on their own initiativecompany on their own initiative

-search engines-search engines

- blogs- blogs

- social media, etc- social media, etc

Assignment QuestionsAssignment Questions Which Which customerscustomers should HubSpot target: Owner Ollies or should HubSpot target: Owner Ollies or

Marketer Marys? Why?Marketer Marys? Why? (see next chart for things to consider in making a decision)(see next chart for things to consider in making a decision)

Does HubSpot have the right set of Does HubSpot have the right set of productsproducts for your for your chosen target customers? If not, what changes should chosen target customers? If not, what changes should they make? they make?

What are the positives-and-negatives of HubSpot’s What are the positives-and-negatives of HubSpot’s software-as-a-service software-as-a-service pricingpricing strategy? strategy?

What benefits would undertaking some What benefits would undertaking some outbound outbound marketingmarketing have for HubSpot? What outcomes, if any, have for HubSpot? What outcomes, if any, could outbound marketing deliver better than inbound could outbound marketing deliver better than inbound marketing?marketing?

(see second following chart, AIDA, for some hints)(see second following chart, AIDA, for some hints)

Selecting Target Customers: Selecting Target Customers: some considerationssome considerations

Segment size and revenue opportunitySegment size and revenue opportunity Customer benefitsCustomer benefits Customer interest (incl. current relationships)Customer interest (incl. current relationships) Customer ability-to-pay and leverageCustomer ability-to-pay and leverage Competition/market coverageCompetition/market coverage Sales issues: sale time/complexity, cost, Sales issues: sale time/complexity, cost,

channel and associated profit marginchannel and associated profit margin Cost to serve/supportCost to serve/support Customer loyalty/lock-inCustomer loyalty/lock-in Customer lifetime valueCustomer lifetime value Strategic value Strategic value

AIDA Marketing ModelAIDA Marketing Model

AAttentionttention capture customer’s attention; create awarenesscapture customer’s attention; create awareness

of the company and/or productof the company and/or product

IInterestnterest create interest in the product’s features, create interest in the product’s features,

benefits or valuebenefits or value

DDesireesire customers want it and/or feel that they need itcustomers want it and/or feel that they need it

AActionction customer takes action; buys the productcustomer takes action; buys the product