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Engineering 245 The Lean Launch Pad. Session 5: Channels Professors Steve Blank, Ann Miura-Ko, Jon Feiber http://e245.stanford.edu. Channels. How does each customer segment want to be reached? Through which interaction points?. Test Hypotheses: Channel. - PowerPoint PPT Presentation
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Engineering 245The Lean Launch Pad
Session 5: ChannelsProfessors Steve Blank, Ann Miura-Ko, Jon Feiber
http://e245.stanford.edu
Channels
How does each customer segment want to be reached?
Through which interaction points?2
Test Hypotheses: Channel
3
Two Critical Questions about Channels
First one is obvious: How do you want to sell your product?
4
1
Second one is subtle, but more important than the first: How does your customer want to buy your product?
2
How Do You Want to Sell Your Product?
Yourself
Through someone else
Retail
Wholesale
Bundled with other goods or services
5
üüüüü
How Does Your Customer Want to Buy Your Product?
Same day
Delivered and installed
Downloaded
Bundled with other products
As a service
…
6
üüüüüü
Nature of Product Impacts Channel: Atoms or Bits?
Access to customers changes dramatically Logistics related to product complexity People as products
7
The Sales “Channel”
8
Web
System Integrators
Direct Sales Force
Value-Added Resellers (VARs)
Dealers
Distributors
Retail/Mass Merchants
Your Company
Your Customers
Types of Channels
OEM VAR Reseller Distributor
9
Direct Indirect Licensing
The Channel as a Customer
Some products are embedded in others (OEM) Some products are resold by others (VARs) Some products are distributed by others Who’s the customer?
10
Distribution Complexity
11
Evangelists
ServiceTechnicians
Higher Value Added
Higher Volume Direct Sales
VARs
Retail
Web, Telesales
Systems Integrators
Mainframes
MinisLANs
PC ServersDesktop PCs
PrintersKeyboards
Toner
WANs
Global Systems
Solution Complexity
Mar
ketin
g C
ompl
exity
How Are Channels Compensated?
Commission Percentage of sales price Discounted pre-purchase
12
How Are Channels Motivated or Incented?
Money! – what makes them the most? Training Marketing to the channel SPIF
13
Channel Economics: “Direct” Sales
14
Cost of Goods(Supply Chain) Profit + SG&A + R&D
End
Con
sum
er
EU
Dis
coun
ts
RevenueList
Price
Source: Mark Leslie, Stanford GSB
Channel Economics: Resellers
15
Cost of Goods(Supply Chain) Profit + SG&A + R&D
End
Con
sum
er
EU
Dis
coun
ts
Reseller
RevenueList
Price
Source: Mark Leslie, Stanford GSB
Cost of Goods(Supply Chain) Profit + SG&A + R&D
Channel Economics: Distributors/Resellers
16
End
Con
sum
er
EU
Dis
coun
ts
Reseller
Dis
trib
utor
RevenueList
Price
Source: Mark Leslie, Stanford GSB
Channel Economics: OEM or IP Licensing
Your Product Becomes Your Customer’s COGs
17
Source: Mark Leslie, Stanford GSB
End
Con
sum
er
ResellerProfit + SG&A + R&D
Cost of Goods(Supply Chain)
EU
Dis
coun
ts
Reseller
Dis
trib
utor
Mas
ter
Dis
trib
utor
Profit + SG&A + R&DCost of Goods(Supply Chain)
RevenueList
Price
Example: Book Publishing
18
Publisher National Distributor Printer Wholesaler Retailer Customer
Book Publishing
Percent of Retail
19
For their efforts, distributors take an additional 10% of retail. That means you get 35% of retail, the distributor gets 10%, the wholesaler gets 15% and the retailer gets 40% less any
discount they offer the end customer
Publisher National Wholesaler Distributor Retailer Customer
35% 15% 10% 40%
$7.00 $3.00 $2.00 $8.00 $20.00
Book Publishing Economics
20
Publisher National Distributor Wholesaler Retailer Customer
Wholesale costs
Markup
Allowances
Payment guarantees
Payments
Bills
Credit guarantees
Payment guarantees
Return rights
Credits
Book Publishing Delivery
21
Publisher National Distributor Printer Wholesaler Retailer
Merchandise titles
Sell magazines
Acknowledge returns
Determine allocations
Dispose of returns
Prepare film (content)
Establish identity
Create demand
Prepare galleys
Receive Schedules Print
orders Bundle
counts Film
Print and ship
magazines
Deliver orders
Bits vs. Atoms
22
Bits
Physical
Product
Web Physical
Channel
Product and Channel Are Bits
23
Bits
Physical
Product
Web Physical
Channel
Rapid Agile and Customer development
Fastest to acquire early customers and scale
Web 2.0 – Product and Channel Are Bits
24
Bits
Physical
Product
Web Physical
Channel
Google Twitter Facebook Zynga Cloud Services
Product Is Bits, but Channel Is People
25
Bits
Physical
Product
Web Physical
Channel
Rapid Agile and Customer development
Fastest to acquire early customers and scale
Rapid Agile and Customer development
Traditional sales channel
May require installation
Traditional Enterprise Software
26
Bits
Physical
Product
Web Physical
Channel
Google Twitter Facebook Zynga Cloud Services
Microsoft SAP Oracle
Physical Products Sold Over the Web
27
Bits
Physical
Product
Web Physical
Channel
Rapid Customer development
Logistics, shipping and manufacturing critical
Customer service
Rapid Agile and Customer development
Fastest to acquire early customers and scale
Rapid Agile and Customer development
Traditional sales channel
May require installation
Killing Traditional Storefronts
28
Bits
Physical
Product
Web Physical
Channel
Zappos Amazon Cafepress Netflix Consumer electronics
Google Twitter Facebook Zynga Cloud Services
Microsoft SAP Oracle
The Factories May Be in China
29
Bits
Physical
Product
Web Physical
Channel
Rapid Customer development
Logistics, shipping and manufacturing critical
Customer service
Rapid Agile and Customer development
Fastest to acquire early customers and scale
Longer customer feedback cycle
May require large capital requirements for scale
Rapid Agile and Customer development
Traditional sales channel
May require installation
We Still Make Things that Need Salespeople
30
Bits
Physical
Product
Web Physical
Channel
Zappos Amazon Cafepress Netflix Consumer electronics
Google Twitter Facebook Zynga Cloud Services
Cars Solar panels Wind turbines Bookstores Consumer electronics
Microsoft SAP Oracle
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