optimizing channel compensation...sales force size & structure sales force productivity (support...
TRANSCRIPT
Optimizing Channel CompensationManaging the Channel for Collaborative Advantage
Dr. F. Barry LawrenceProgram Coordinator, Industrial Distribution Program
Director, Thomas and Joan Read Center for Distribution Research EducationTexas A&M University
Collaboration and Compensation
• E-Commerce at near B2C level• Developing an E-Commerce Enhanced Sales
Process• New Service Models• Supplier Partnerships
GENERATING GROWTH - BEST PRACTICESHow do we generate growth opportunities?
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
www.naw.org/crdbp http://supplychain.tamu.eduwww.nawpubs.org
MetricsGrowth Strategy Best Practices
LEVERAGEAccount Penetration - Existing customers
GrowthMechanism
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
PENETRATEMarket penetration - New Customers
BROADENNew Products and Services
ADDSales & Marketing Channels
REACH OUTGeography
EXPANDMarket Segments
BUILDNew Platform (multiple drivers)
INNOVATEValue Proposition Innovation
DIVERSIFYLine of Trade & Value Chain Function
GROWTHDRIVERS
IndustryDynamics
CustomerRelationships
SupplierRelationships
Sales &MarketingStrategy
Sales ForceEffectiveness
Account gap analysisCustomer stratificationSales force effectivenessRetention strategyValue proposition update
Market gap analysisSupplier collaborationCompetitive value propositionSales force performance managementSelling process
Growth mapping core customer andstrategic supplierIndustry trends analysisCompetitive analysis
Customer feedbackPain point analysisGrowth mapping core customer and strategic supplierProduct & service portfolio management
Market mappingTechnology developmentsCustomer need/convenience
Market mappingIndustry trends analysisCompetitive analysis
Growth mapping core customer andstrategic supplierMapping key competitorsSupply chain network optimization
Market segmentationSupplier growth inputsCompetitive analysisIndustry trends analysis
Customer feedbackSupplier inputsValue chain analysisCross-industry best practices
Core customer retention rateCore customer conversion rateShare of walletBalance revenue reliance (risk)
New customer acquisition rateRevenue from new (core) customersNew customer retention rate
Growth pipeline run rateGrowth from new platformsChange in competitive advantage
Growth from new products and services Value proposition leverageBalance over-dependency
Growth from new channelsChange in competitive advantage
Change in competitive advantageRisk managementGrowth from diversification
Growth from new territories Value proposition leverage(national accounts)
Growth from new market segmentsDegree of variety in end markets(risk factors)
Number of innovative effortsGrowth from innovate opportunitiesChange in competitive advantage
OrganicDevelopment
Acquisition
Merger
Strategic Alliance
Growth Drivers
© 2011 Global Supply Chain Laboratory
MANAGING GROWTH - BEST PRACTICESHow do we manage profitability while growing?
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
www.naw.org/crdbp http://supplychain.tamu.edu
© 2011 Global Supply Chain Laboratory
www.nawpubs.org
Profitability Drivers ProcessGroups Growth ForcesGrowth Challenges Best Practices
Supplier proliferationProduct mix Supplier's channel strategyChannel power balanceChannel visibility
Competency GapTalent attractivenessTechnology and applications infrastructureLeadership gapLack of coordination, control & synergiesOrganizational mobility
Margin pressure from growing customersLack of pricing strategy (value proposition)Competency gapLack of support toolsSub-optimal market mix
SKU proliferationProduct portfolio / mixCost Vs service trade-offFill rate challengesSupplier performance
Sales force capacity vs customer coverageLack of sales-support productivity toolsMisaligned sales force incentives
Warehouse capacityOperating cost challengesCustomer service (accuracy & efficiency)
Ownership typeAccess to growth fundingInvestor attractiveness
Transportation capacityTransportation cost (routing & cubing / loading)Customer service (on-time delivery)
Credit requests from growing customers“New Normal” challenges
Credit, return and rebate policies forproduct expansion growth strategies
Supplier stratification & relationship strategyOptimizing channel compensationChannel growth strategy alignmentLeverage supplier performance
Customer stratificationPricing optimizationIn-built mechanism for early warningsActive adaptation of value propositionMarket segmentation
Inventory stratificationFocused forecastingDynamic replenishmentInventory network optimizationCompetency development
Sales force size & structureSales force productivity (support tools)Sales force compensationAligning customer, company and sales force
Operations (inbound & outbound) productivity - LeanEconomy of scaleBest practices sharingInternal benchmarking
Human capital developmentInformation capital readinessStrategic awareness and alignmentCustomer-centricGrowth mindset Creative leadershipStrategy & structure match
Financial fitness through free cash flow andoperating productivityInvestor confidence
Routing and loading optimizationEconomy of scaleSupply chain network optimization (Transportation vs Inventory)
Customers Human andIT Capital
Suppliers Shareholders
GROWTHFORCES
Customized terms based on customer stratificationIn-built mechanism for early warningsActive adaptation of value proposition
Optimizing channel compensation throughstrategic supplier relationshipLeverage supplier performance
GM%
CTS
DSO
DOI
DPO
OPPORTUNITY
CAPABILITY
> HUMAN CAPITAL> INFORMATION CAPITAL> ORGANIZATION CAPITAL
> FINANCIAL CAPITAL
OPERATINGMARGIN
CASHCONVERSION
CYCLE
SUPPORTSERVICES
STORE
SELL
SELL
SOURCE
STOCK
SUPPLYCHAIN
PLANNING
SOURCE
SHIP
BUSINESSMODEL
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
ECONOMICDRIVERS
RESOURCEDRIVERS
>> Shareholders>> Leadership
>> Human Capital>> Information Capital>> Organization Capital
>> Supplier>> Purchasing Workforce
>> Supplier>> Customer>> Cross-functional Workforce
>> Supplier>> Sourcing Workforce
>> Customer>> Sales Force
>> Customer>> Operations Workforce
>> Customer>> Sales Force
Sales ProcessLead
Generation
Potential Data Sources
Phone & Internet
Business Development Analyst
Lead Generation Tool
# Qualified leads
Prospecting
Customer contact – understand pain
points
Face-to-face
Sales force
Sales pipeline tool (~CRM)
Success Rate
Estimate potential
Face-to-face
Sales force
Sales pipeline tool (~CRM)
Success Rate
Selling
Design solution
Face-to-face
Sales force & Specialist
Value Proposition Builder
Conversion Rate
Present/Demo to customer
Face-to-face
Sales force & Specialist
Value Proposition Documentation
Success Rate
Negotiate & Close the sale
Face-to-face
Sales force
Sales management support tools
Success Rate
Post-sales
Order Management
Phone & Internet
CSR
Order Management System (~ERP)
Success Rate
Sustain relationship &
Retain
Face-to-face, Phone & Internet
Sales force, Business Development & CSR
Opportunity Management
Analytics Tool
Retention Rate
Sales Process
Activity
Channel
Role
Tools
Metrics
Drivers
$hareholder Value & Customer Service
Sales Force Stratification Framework
• High Profitability• Effective Relationships• Resists New Business• Developed Skill Set
Farmers
• High Profitability• Effective Relationships• Business Development• Developed Skill Set
Entrepreneurs
• Low Profitability• Weak Relationships• Resists New Business• Undeveloped Skills
Defenders
• Low Profitability• Weak Relationships• Busness Development• Innate Skills
Hunters
Productivity
Effic
ienc
y
Opportunity
Skill
Dev
elop
men
t
Inside Sales
• Combining business analytics with traditional sales work.– Relationships will be leveraged.– Advancing value added services to strengthen relationships.– Monetizing e-commerce and value add.– Collecting information (data) from multiple sources (including
the customer) and enhancing/validating with our system.– Using tools like customer stratification to direct the outside
sales force.
Customer Stratification Model
§ High Profitability§ No Relationship§ Low Cost to Serve§ Low Volume
Opportunistic Customers
§ High Profitability§ Sustained Relationship§ Low Cost to Serve§ High Volume
Core Customers
§ Low Profitability§ No Relationship§ High Cost to Serve§ Low Volume
Marginal Customers
§ Low Profitability§ Sustained Relationship§ High Cost to Serve§ High Volume
Service Drain Customers
Customer Life (Loyalty)
Gro
ss M
argi
n
Sales Volume
Cost To Serve (C
TS)
Outside Sales
• Driven by analytics to optimize relationship building.• Developing and managing value added services.• Adding to organization’s intelligence.
Challenges
• ERP is not fully operational.• CRM is in nascent stage.• E-Commerce is dependent on both.• Analytics is dependent on all three.• Most firms don’t have the resources to fix the problems.
Solutions
• Technology is advancing so fast the processes are commoditized fast(affordable and easier to implement). IT monopolies are breakingdown.
• Understanding of the problems and how to solve them is also movingfast.
• Value added services are better understood, managed, andimplemented.
• Firms can be selective on the combination of ways they go to market.• Decisions can be based on financial, capability, and market
constraints/opportunities.
Resources
Available from NAW - National Association of Wholesaler-Distributorswww.naw.org
http://id.tamu.edu/professional-development/thomas-joan-read-center/programs-calendar/
Discount Code for AHTD Members
‘COMP20’
For Registration Questions:
Ms. PeggyJo [email protected]
979-845-3148
Questions? Comments….
Thank you!!
http://id.tamu.edu/professional-development/thomas-joan-read-center/programs-calendar/
Discount Code for AHTD Members
‘COMP20’
For Registration Questions:
Ms. PeggyJo [email protected]
979-845-3148