Driving Growth Though Distribution Strategy and Sales Management

Driving Growth Though Distribution Strategy and Sales Management
Agenda
Distribution Channels
Examples Channel selection Channels management
Sales Management
Sales priorities Sales management model Building sales capabilities Sales productivity
Case Studies
Strategic Innovators
What do these firms have in common?
Strategic Innovators
It was not just what they sold but, how they sold it!
(reconfiguring the value chain to achieve lower costs and/or better service)
Distribution Channels - Examples

Field sales reps Corporate resellers Master or local distributors Integrators Value-added resellers Manufacturers agents Brokers Franchises Telemarketers Inbound telesales agents Internet sites Extranets e-Marketplaces Direct Mail OEMs Retail Kiosks Strategic alliances Agents (consultants, affiliates, etc.)
Channel Continuum (illustrative)

High High Touch Channels
VARs Field Sales
t irec D es Sal nnel Cha
Value Add Of Sale
Low Touch Channels

Telemarketing
Distributors Retail Stores

tC irec Ind ls nne ha
Low
Internet
ls nne ha tC ec Dir
Low
Cost per Transaction
High
Channel Selection
Channel strategy must start with the customer
Who are our target customers, what do they need and how do they want to do business with us ? What drives them to make a purchase? What kinds of experiences are they seeking from their vendors? What has real value to them in the sales process value their willing to pay for? What channels do they use today, and what channels are they planning to migrate to over the next year? What specific actions would cause them to increase significantly their volume with your firm?
Channel Selection
Channel strategy must be aligned with the maturity of the market
Do you need to develop a new market or fulfill needs within an established market? Are there dominate vendors or distribution channels already established? Are you targeting a narrow or broad market? Do you have the funds necessary to build all the required services (pre and post sales) to compete? Can you spread the costs over enough volume to be competitive? Do you have a narrow or broad product offering? Who are the key purchase influencers?
Channel Selection
How you sell has to fit with what you are selling
Are the channels selected the ones that customers actually use to buy the things that you are selling? Channels chosen must make economic sense, given what you are selling The channel selected must be well suited to the complexity of your offering You can not be everywhere at all times for every customer
There is a trade off between market coverage and control
Sales Control vs. Coverage

Control Coverage
Goal
We want to dominate and lead in our core customer base, to protect the brand, and control the relationship with the customer Field sales force High-end partners, thoroughly trained, with binding contracts covering all aspects of the sales process
We want to reach and serve new markets and customers, and to grow as fast as possible
Channel Approach
Retail, mass merchants Telesales Distributors Value-added resellers Internet Strategic alliances 3rd party service agreements Etc.
Source: Go to Market Strategy by Lawrence Friedman
Market Coverage Example 1

Large, enterprise customers Corporate Resellers Mid-sized accounts VARs, Solution Partners Direct, Field Sales Reps
Small office / home office
Mail order catalog
(unserved market)
Markets Products
Simple, off the rack products
Mass-customized products
Complex, unique solutions
Market Coverage Example 2

Large, enterprise customers Direct, Field Sales Reps
Mid-sized accounts
Small office / home office
Business partners + Telechannels + Web sites
Markets Products
Simple, off the rack products
Mass-customized products
Complex, unique solutions
Integrated Multi-Channel Model Single Channel

Sales Task Channel Direct Field Sales Business Partners Cost Telechannels Direct Mail Lead Generation Qualification Bid & Proposal Negotiation/ Close Sales Fulfillment Customer Support
Internet
Sales Cycle
Integrated Multi-Channel Model Reduce Cost & Increase Sales

Sales Task Channel Direct Field Sales Business Partners Cost Telechannels Direct Mail Lead Generation Qualification Bid & Proposal Negotiation/ Close Sales Fulfillment Customer Support
Internet
Sales Cycle
Integrated Multi-Channel Model Example 1

Sales Task Channel Direct Field Sales Business Partners Cost Telechannels Direct Mail
(Over $25,000)
Lead Generation
Qualification
Bid & Proposal
Negotiation/ Close Sales
Fulfillment
Customer Support
(Under $25,000)
Internet
Sales Cycle
Integrated Multi-Channel Model Example 2

Sales Task Channel Direct Field Sales Business Partners Cost Telechannels Direct Mail
Sales support for key accounts
Lead Generation
Qualification
Bid & Proposal
Negotiation/ Close Sales
Fulfillment
Customer Support
Internet
Sales Cycle
Partner Channel Development

1. 2. 3. 4. 5. 6. Define the scope of the channel Define partners role in the sales process Develop robust and attractive channel policies Build a strong base of partners Build a strong channel support infrastructure Measure and manage channel performance
Source: The Channel Advantage by Lawrence Friedman
Sales Management
What are you selling to whom?

High Call Efficiency Dominates
Customer Fragmentation
Call Effectiveness Dominates Low Low High
Value Proposition Complexity
Sales efficiency & effectiveness

Sales Efficiency Definition Typical Performance Levers Driving Mechanisms Sample Measures
How to get in front of the right customers, for the right amount of time, at a minimum cost Territory design / coverage Activity reporting systems Compensation systems Sales support Systems Structures Coverage Call rates Cost per call
Sales Effectiveness
Once there, how to maximize sales potential Selling skills Account strategy Application knowledge Effectiveness models Recruiting Training Coaching Sustainable margins Repeat business
Source: Huthwaite, Inc. 1988
Setting objectives / priorities

What kind of customer? - Size - Type of business - Attitude / usage Where? What geography? What products / services?
Current Business
New Customers
More From Current Customers
More of current product use? Cross sell other products? Higher prices / better product mix? Eliminate unprofitable accounts?
Requires different sales skills
Current Business
New Customers
Hunters
More From Current Customers
Farmers
Sales management model

What is the value proposition and the role of the sales force in its delivery?
Sales Strategy Strategy/ Mission
What critical selling skills are required for the sales role in the value proposition?
Efficiency
Is the sales force (and channels) organized for optimal coverage of selected markets?
Sales Force Individual Deploy- Sales Selling Support Skills ment
Effectiveness
Is support adequate to maximize the selling effort? Does the incentive compensation plan meet managements objectives and pay the sales force fairly?
Does the sales force have adequate coaching & supervision?
Coaching & Super- Recruiting vision & Training
InforMotivation mation & CompenResources sation
Does the recruiting and training match selling skill requirements?
Capability Building
Are information systems being fully utilized to support the selling effort?
Building your sales capabilities
Develop sound selling strategy
Organize for efficient Develop skills for effective coverage selling
Motivate & support sales force
Clear segmentation Explicit objectives, goals and priorities Winning selling proposition Realistic time frame/expectations
Right structure Right size Territory / account Assignments for adequate coverage
Define necessary skills Develop training, recruiting and coaching programs for: Product knowledge Buying process Sales methodology Planning & execution
Align measurement and reward systems: Compensation Recognition Provide necessary organization support (systems, etc.)
Example sales productivity model

Sales Force Productivity
Profit contribution = $4 per $ direct selling cost
Effectiveness
Profit contribution = $400 hr. actual selling time
Efficiency
Direct selling cost = $100 Hr. actual selling time
X Selling Margin
40% profit contribution margin
Selling Rate
Revenue = $1000 hr. actual selling time
Direct Selling Cost

$500 / day per rep
Sales Force Utilization

Hrs actual selling time = 5 per day per rep
Compensation plans Sales tools Value proposition
Skills assessment Territory / opportunity planning Partnerships
Reduced overhead costs Centralized sales admin Sales force automation
Additional Resources
Books
The Channel Advantage, Lawrence G. Freedman, Timothy R. Furey Go To Market Strategy, Lawrence G. Freedman
Web sites
Various web sites
Questions
Prof. B. Manchanda

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Driving Growth Though Distribution Strategy and Sales Management

Distribution Channels - Examples

Channel Continuum (illustrative)

Value Add Of Sale

Low Touch Channels

Distributors Retail Stores

Cost per Transaction

There is a trade off between market coverage and control

Sales Control vs. Coverage

Source: Go to Market Strategy by Lawrence Friedman

Market Coverage Example 1

Small office / home office

Mail order catalog

Simple, off the rack products

Complex, unique solutions

Source: Go to Market Strategy by Lawrence Friedman

Market Coverage Example 2

Small office / home office

Business partners + Telechannels + Web sites

Simple, off the rack products

Complex, unique solutions

Source: Go to Market Strategy by Lawrence Friedman

Integrated Multi-Channel Model Single Channel

Source: Go to Market Strategy by Lawrence Friedman

Integrated Multi-Channel Model Reduce Cost & Increase Sales

Source: Go to Market Strategy by Lawrence Friedman

Integrated Multi-Channel Model Example 1

Bid & Proposal

Negotiation/ Close Sales

Source: Go to Market Strategy by Lawrence Friedman

Integrated Multi-Channel Model Example 2

Bid & Proposal

Negotiation/ Close Sales

Source: Go to Market Strategy by Lawrence Friedman

Partner Channel Development

Source: The Channel Advantage by Lawrence Friedman

What are you selling to whom?

Value Proposition Complexity

Sales efficiency & effectiveness

Source: Huthwaite, Inc. 1988

Setting objectives / priorities

More From Current Customers

Requires different sales skills

More From Current Customers

Sales management model

Sales Strategy Strategy/ Mission

Sales Force Individual Deploy- Sales Selling Support Skills ment

Does the sales force have adequate coaching & supervision?

Coaching & Super- Recruiting vision & Training

InforMotivation mation & CompenResources sation

Does the recruiting and training match selling skill requirements?

Building your sales capabilities

Develop sound selling strategy

Organize for efficient Develop skills for effective coverage selling

Motivate & support sales force

Example sales productivity model

Direct Selling Cost

Sales Force Utilization

Compensation plans Sales tools Value proposition