choosing the right sales strategy

CXOCXOAdvisory Group

Stephen N. Davis “Partnering With Clients to Drive Sustainable Profitable Growth”

July 2007

Choosing the RightSales Channel

2000 - 2009 © CXO Advisory Group


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



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.



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



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”



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?



You Need a Whole Product OfferingYou Need a Whole Product Offering

Hardware

ConsultingSoftware

Integration

Services

TheProduct

Pre-Sales Support

Post-Sales Support



The Channel Marketing PlanThe Channel Marketing Plan

ProgramCoverage modelValue propositionBusiness rulesSales modelPricingSales Support modelCustomer Support ModelBudget

StrategyGoalsTarget MarketProductCompetitionChannels

• Roles• Alignment

ExecutionMedia CampaignCommunicationIncentivesEducation Outsourcing



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?



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



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.)



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



Computer Distribution ChannelsComputer Distribution Channels



What Do These Firms Have in What Do These Firms Have in Common?Common?



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



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



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



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



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



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



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



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



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



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



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.



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



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.”



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



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



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



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



QuestionsQuestions


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”



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



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




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




Venture Advisory Services• Fine tune operations, business strategy and market entry• Assist with due diligence• Strategic business assessment of portfolio companies


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