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Students to Start-Ups Entrepreneurial Skills Workshop Series Presents: 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 Manufacturer’s agents Brokers Franchises Telemarketers Inbound telesales agents • • • Internet sites Extranets e-Marketplaces Direct Mail OEM’s Retail Kiosk’s Strategic alliances Agents (consultants, affiliates, etc. )
Channel Continuum (illustrative) High “High Touch Channels” Field Sales VAR’s Value Add Of Sale Distributors “Low Touch Channels” Telemarketing Low Retail Stores ls Internet ec Dir Low t c dire n s nel an Ch t irec D es Sal nnel a Ch I e ann h t. C 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 Goal “We want to dominate and lead in our core customer base, to protect the brand, and control the relationship with the customer” Channel Approach • Field sales force • High-end partners, thoroughly trained, with binding contracts covering all aspects of the sales process Source: “Go to Market Strategy” by Lawrence Friedman Coverage “We want to reach and serve new markets and customers, and to grow as fast as possible” • Retail, mass merchants • Telesales • Distributors • Value-added resellers • Internet • Strategic alliances • 3 rd party service agreements • Etc.
Market Coverage Example 1 Large, enterprise customers Direct, Field Sales Reps Corporate Resellers Mid-sized accounts VAR’s, Solution Partners Small office / home office Markets Products Mail order catalog Simple, “off the rack products Source: “Go to Market Strategy” by Lawrence Friedman Mass-customized products (unserved market) Complex, unique solutions
Market Coverage Example 2 Large, enterprise customers Direct, Field Sales Reps Business partners + Telechannels + Web sites Mid-sized accounts Small office / home office Markets Products Simple, “off the rack products Source: “Go to Market Strategy” by Lawrence Friedman Mass-customized products Complex, unique solutions
Integrated Multi-Channel Model Single Channel Sales Task Channel Lead Generation Qualification Bid & Proposal Negotiation/ Close Sales Direct Field Sales Cost Business Partners Telechannels Direct Mail Internet Source: “Go to Market Strategy” by Lawrence Friedman Sales Cycle Fulfillment Customer Support
Integrated Multi-Channel Model Reduce Cost & Increase Sales Task Channel Lead Generation Qualification Bid & Proposal Negotiation/ Close Sales Direct Field Sales Cost Business Partners Telechannels Direct Mail Internet Source: “Go to Market Strategy” by Lawrence Friedman Sales Cycle Fulfillment Customer Support
Integrated Multi-Channel Model – Example 1 Sales Task Channel Lead Generation Qualification Bid & Proposal Negotiation/ Close Sales Direct Field Sales Business Partners (Over $25, 000) Cost (Under $25, 000) Telechannels Direct Mail Internet Source: “Go to Market Strategy” by Lawrence Friedman Sales Cycle Fulfillment Customer Support
Integrated Multi-Channel Model – Example 2 Sales Task Channel Lead Generation Qualification Bid & Proposal Negotiation/ Close Sales Direct Field Sales Cost Business Partners Telechannels Sales support for key accounts Direct Mail Internet Source: “Go to Market Strategy” by Lawrence Friedman Sales Cycle Fulfillment Customer Support
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
What are you selling… to whom? High Call Efficiency Dominates Customer Fragmentation Call Effectiveness Dominates Low High Value Proposition Complexity
Sales efficiency & effectiveness… Sales Efficiency Sales Effectiveness Definition How to get in front of the right customers, for the right amount of time, at a minimum cost Once there, how to maximize sales potential Typical Performance Levers • Territory design / coverage • Activity reporting systems • Compensation systems • Sales support • Selling skills • Account strategy • Application knowledge • Effectiveness models • Systems • Structures • Recruiting • Training • Coaching • Coverage • Call rates • Cost per call • Sustainable margins • Repeat business Driving Mechanisms Sample Measures Source: Huthwaite, Inc. 1988
Setting objectives / priorities… Current Business New Customers What kind of customer? - Size - Type of business - Attitude / usage Where? What geography? What products / services? 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 More From Current Customers “Farmers” New Customers “Hunters”
Sales management model What is the value proposition and the role of the sales force in its delivery? Efficiency Is the sales force (and channels) organized for optimal coverage of selected markets? Does the sales force have adequate coaching & supervision? Sales Strategy/ Mission Sales Individual Force Selling Deploy- Sales Skills ment Support Coaching & Super- Recruiting vision & Training Does the recruiting and training match selling skill requirements? Effectiveness Infor. Motivation mation & Compen. Resources sation Capability Building What critical selling skills are required for the sales role in the value proposition? Is support adequate to maximize the selling effort? Does the incentive compensation plan meet management’s objectives and pay the sales force fairly? Are information systems being fully utilized to support the selling effort?
Building your sales capabilities… Develop sound selling strategy Organize for efficient coverage Develop skills for effective selling Clear segmentation Right structure Define necessary skills Explicit objectives, goals and priorities Right size Develop training, recruiting and coaching programs for: Territory / account Winning selling proposition Realistic time frame/expectations Assignments for adequate coverage • Product knowledge • Buying process • Sales methodology • Planning & execution Motivate & support sales force 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 • Compensation plans • Sales tools • Value proposition Selling Rate Revenue = $1000 hr. actual selling time • Skills assessment • Territory / opportunity planning • Partnerships Direct Selling Cost $500 / day per rep Sales Force Utilization Hrs actual selling time = 5 per day per rep • Reduced overhead costs • Centralized sales admin • Sales force automation
Case study #1 (The early years)
Case study #2 (The early years)
Case study #3 5 Year Old S. CA Professional Services Firm
Additional Resources Ü Books The Channel Advantage, Lawrence G. Freedman, Timothy R. Furey Go To Market Strategy, Lawrence G. Freedman Ü People UCI Center for Entrepreneurship and Innovation [email protected] uci. edu SCORE Orange County www. score 114. org
Students to Start-Ups Entrepreneurial Skills Workshop Series UPCOMING WORKSHOPS April 4 th Nuts & Bolts of Business Structure and Licensing April 18 th Refine Your Unique Value Proposition RSVP [email protected] UCI. EDU
Questions Mike Mata Michael. [email protected] 114. org