choosing the right sales strategy
DESCRIPTION
This is a presentation that I gave on developing sales channels to a group of entrepreneurs at the Technology Capital Network in July 2007 in the Boston areaTRANSCRIPT
CXOCXOAdvisory Group
Stephen N. Davis “Partnering With Clients to Drive Sustainable Profitable Growth”
July 2007
Choosing the RightSales Channel
2000 - 2009 © CXO Advisory Group
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What WeWhat We’’ll be Coveringll be Covering
Developing your channel strategy • How to choose the right channel(s)
Types of sales channels• Capabilities & limitations
What it takes to succeedManaging channel relationshipsKey points to remember
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Sales Channels Sales Channels –– The RealityThe Reality
“A product with better distribution will always win over a product with poor
distribution or customer access”
It’s not fair. It’s not right.But, it’s reality.
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Common Sales Strategy MistakesCommon Sales Strategy Mistakes
Confuse channel partners with final customersChannels are not in sync with end-user targetsChannels do not fill company weaknessesNo targeted value proposition to the channel Failure to treat sales channels on an equal basisFailure to consider licensing or joint-venture agreementLack of sell cycle sales toolsInsufficient start up costsInsufficient channel marginsChannel conflictTreating the US as one homogenous market
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Plan Your Entry into the ChannelPlan Your Entry into the Channel
“If you don’t know where you’re going you’ll probably wind up somewhere else”
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Critical Questions You Must AnswerCritical Questions You Must Answer
What is the customer profile? Do I offer a whole product solution?What is my average deal size?How complex is my solution?How long is my sales cycle?What are my company’s Strengths and Weaknesses?How much money is available for Marketing/Sales?How and where do my competitors sell effectively?What complimentary product sales opportunities exist?
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You Need a Whole Product OfferingYou Need a Whole Product Offering
Hardware
ConsultingSoftware
Integration
Services
TheProduct
Pre-Sales Support
Post-Sales Support
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The Channel Marketing PlanThe Channel Marketing Plan
ProgramCoverage modelValue propositionBusiness rulesSales modelPricingSales Support modelCustomer Support ModelBudget
StrategyGoalsTarget MarketProductCompetitionChannels
• Roles• Alignment
ExecutionMedia CampaignCommunicationIncentivesEducation Outsourcing
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Have a Written Plan with Measurable Have a Written Plan with Measurable ObjectivesObjectives
Build a customer profile?What channel partners should I have?
• Build a channel partner profile• Link to end-user targets• Fit with existing channels• What role do they play?
• Influence• Sales• Support• Technical
How do I choose them?How do I measure them?How do I generate business for them?Do the financial requirements make sense for our company?
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Creating Effective BudgetsCreating Effective Budgets
A program without a budget is a wish• Cancelled at any point• Not credible to reseller• Cannot be strategic or justified to management• Costs cannot be measured or controlled
Must estimate costs of program design, implementation and management
• Coverage, sales model, support model, value proposition• Calculate as both cost of sales and return on investment
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Types of Sales ChannelsTypes of Sales Channels
Direct field sales repsCorporate resellersMaster or local distributorsIntegratorsValue-added resellersManufacturer’s agentsBrokersFranchisesTelemarketersInbound telesales agents
Internet sitesExtranetse-MarketplacesDirect MailOEM’sRetailKiosk’s Strategic alliancesAgents (consultants, affiliates, etc.)
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Channel Benefits/RisksChannel Benefits/Risks
Ongoing investment in recruitment & trainingBig margin sacrificeUp front MDF investmentLoss of customer relationship & feedbackFighting for mindshareQuality of channel partner
Can scale quicklyUse established customer relationshipsFill product gapsCompanion selling opportunitiesLocal supportIncreased demand generationOffload financing risk
Harder to scaleHigher fixed costsLess flexible – seasonal sales
ControlHigher gross marginsDirect customer relationshipNecessary for complex sale
Benefits Risks
Direct
Indirect
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Computer Distribution ChannelsComputer Distribution Channels
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What Do These Firms Have in What Do These Firms Have in Common?Common?
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Is Your Buyer Package up to Snuff?Is Your Buyer Package up to Snuff?
Marketing materialsPrice listsOutline of your marketing campaign – Demand CreationProduct samples - PackagingCOOP/MDF funds and campaignsIn-store merchandisingProspect & customer correspondenceSales training for their personnelSales supportEnd user trainingEnd user support
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Joint Venture/ OEM / Private LabelJoint Venture/ OEM / Private Label
Quick penetration – less riskEstablished market presenceProvides localization of productHandles all marketing, sales, distribution & supportProvides ongoing market analysisProvides ongoing competitive analysisUsually won't carry competing productTough sale – long sales cycle
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Approaching a Potential Approaching a Potential Joint Venture/ Private Label PartnerJoint Venture/ Private Label Partner
Be Ready to Explain Key Product AdvantagesDo Your Homework
• Why should they be interested?• Fills competitive hole• Enhances existing product line• Prevents having to compete against you• You could develop market in your home country for their
productsHow easy it will be to work with youSupport you will give them
• Technical• Training
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Key Issues Licensing AgreementKey Issues Licensing Agreement
Specs & DeliverablesAcceptanceGrant of LicenseTermsPaymentsBookkeeping RequirementsOwnershipUse of TrademarksTrainingDecision Making Authority
Marketing ObligationsList Price of ProductPerformance RequirementsWarrantiesLimitation of LiabilitiesDevelopment SupportRights to UpdatesTerminationSource Code Access
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DistributorsDistributors
Sells to other channel players within designated areaTakes title to goods and is compensated by mark-up upon saleSells suppliers goods to his own customersNo authority to act on your behalfMaintains InventorySells in original packagingMay or may not provide after sales servicesMany products are taken on consignment basis
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What Distributors Look ForWhat Distributors Look For
Products with proven demandProduct's packaging, ease of use & installMarketing budgetQuality tech & Customer supportAbility to scale up to demandFinancial stabilityTrainingDistributor staff time required
Only 1% - 2% of products presented get chosen
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Manufacturers Agent/Commercial Manufacturers Agent/Commercial AgentAgent
Alternative to own sales forceBoth authorized to solicit orders in designated areaReceive salary or commissionUsually bear no credit riskMaintains no inventoryRequires same support & training as internal salesforceCarries several linesReferences, References, References
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What does a good Reseller look forWhat does a good Reseller look for
Product for their marketWays to increase revenue via
• Consulting• Support• Reduced cost of sale
Investment and commitmentGood business propositionTraining & technical supportSale & marketing supportTerritorial exclusivityPrice stability
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VARs Choose Product OnVARs Choose Product On
Product Quality 87% Order Fulfillment 55% Profit Margins 45% Price/Performance 45% Commitment 43% Technical Support 41% Business Documentation 29% Terms & Conditions 25% Channel Conflict 21% Sales Rep Assistance 17& Sales Leads 17% Co-op Advertising 6%
% VARs Considering Factor Extremely Important
Source: VARBusiness
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Manage Your Reseller RelationshipManage Your Reseller Relationship
Be selective – resellers won’tReduce potential territorial conflictsDistributors will not maintain your reseller relationship
• You have to do it directlySegment your resellers
• That work on large accounts with your direct sales force• Markets that resellers will be your salesforce• Specialized vertical markets
Resources should be based on this segmentationSet realistic sales targets and ramp upProvide sales cycle specific marketing toolsCommunicate regularlyTrain, Train, Train
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Cost of Market Entry OptionsCost of Market Entry Options
Margin, 20-40%, 5-10% MDFValue Added Reseller (VAR)
Mark-up, 50% - 200%+5-10% MDF, Slotting Fees
Retailer
Margin, 10%–50%, 2-5% MDFDistributor (stocks product)
Commission, 5%–30%Agent/ Rep.
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Key to Efficient Channel ManagementKey to Efficient Channel ManagementStrengthen ability of channel partners to deliver solutions Train channel partners well & often - for freeEnhance communicationsTreat them like they’re your own salesforceEnable partners to sell complementary services agressivelyDeliver channel value with the web
• Demand creation• Quality leads• Support• Information• Links• Feedback
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When Worlds Collide: When Worlds Collide: Misalignment of Marketing & SalesMisalignment of Marketing & Sales
Marketing sales:“We spend millions generating qualified
prospects and they fall into a black hole!”
Sales says:“The collateral material is crap. It doesn’t help me in the sales cycle and the so-called leads
they send us are a waste of my time.”
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When Worlds Collide: When Worlds Collide: Misalignment of Marketing & SalesMisalignment of Marketing & Sales
Company centric messaging doesn’t support sales effort50% to 90% of marketing messages, collateral and sales tools go unusedSales people spend 40-60 hours each month creating their own materials, responses, presentationsOnly 10% of sales people present the “best answer”to a customer solution
Solution: Produce sales-cycle relevant tools and collateralSource: AMA
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Manage Channel ConflictManage Channel ConflictAreas of channel conflict
• Multiple channels calling on same account• Specify territories or vertical markets -
segmentation• Company selling directly to reseller accounts
• Specify company owned accounts -reserved
• Specify reseller owned accounts - reserved• Compensate direct sales force on sales
through resellers• Have them work on accounts with key
resellers• Pricing not consistent across channels
• Get your pricing structures in lineConflict can not be eliminatedChanging business objectivesCompany politics
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Key Points That Can Make a DifferenceKey Points That Can Make a Difference
Have realistic expectationsTop management commitmentFocus, Focus, FocusLong Term ViewClear understanding of end-user targets and their alignment with channel partnersReduce channel conflict by clearly defining roles and responsibilities for each channelDevelop comprehensive business rules for managing program processes
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Key Points That Can Make a DifferenceKey Points That Can Make a Difference
Take inventory of your partners• Does the 80/20 rule apply?• Build profiles based on successful partners• Align internal resources based on contribution
Invest in your partners• Marketing• Training• Support• Web
Use the Internet to enhance partner salesReview your channel strategy yearly
• Identifies potential destructive channel conflict• Tune channel support programs
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QuestionsQuestions
CXOCXOAdvisory Group
Stephen DavisStephen Davis
Phone: (508) 528-7571Email: [email protected]: www.cxoadvisorygroup.comLinkedin: www.linkedin.com/in/stephendavisTwitter: twitter.com/stephendaviscxo
Interim COO/VP Sales & Marketing | Business Consultant | Sales Channel and Business Development Expert | Author & Speaker
Contact Information:
“Partnering With Clients to Drive Sustainable Profitable Growth”
2000 - 2009 © CXO Advisory Group
CXOCXOAdvisory Group
The CXO Advisory GroupThe CXO Advisory Group
CXO Advisory Group is a strategic operations advisory and management firm comprised of proven C-level executives with both breadth and depth of experience.
CXO Advisory Group Team members have achieved success in positions ranging from: President/CEO to COO, and VPs of Sales, Marketing, Corporate Development and Human Resources.
Has proven success in business development and in building US sales and distribution channels
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How Can CXO Help You?How Can CXO Help You?
Business Strategy Services• Audit business practices and organization• Evaluate product and pricing strategies• Evaluate effectiveness of sales channel• Assess effectiveness of existing sales and marketing
programsMarket Entry Program
• Analyze competitive landscape• Market launch strategy and plan• Channel strategy and programs• Establish sales channels• Generate sales and manage relationships• Identify and develop strategic partnerships
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How Can CXO Help You?How Can CXO Help You?
Sales Channel Management• Review and revise sales channel strategies• Channel partner identification, prospecting and recruitment• Eliminate channel conflict• Channel contract development and negotiation
Interim Management Resources• Interim CEO, COO, CMO, CSO• Interim VP of Sales and Marketing• Consultant on staff• Launch team coaches
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How Can CXO Help You?How Can CXO Help You?
Venture Advisory Services• Fine tune operations, business strategy and market entry• Assist with due diligence• Strategic business assessment of portfolio companies
CXOCXOAdvisory Group
Stephen DavisStephen DavisInterim COO/VP Sales & Marketing | Business Consultant | Sales Channel and Business Development Expert | Author & Speaker
Contact Information:
“Partnering With Clients to Drive Sustainable Profitable Growth”
Phone: (508) 528-7571Email: [email protected]: www.cxoadvisorygroup.comLinkedin: www.linkedin.com/in/stephendavisTwitter: twitter.com/stephendaviscxo