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Part1 of Business Development For Startups. This was run at the MassChallenge Accelerator in Boston.
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Stephen N. Davis
“Partnering With Clients to Drive
Sustainable Profitable Growth”
Choosing and Managing
Sales Channels For Your Startup
2000 - 2012 © CXO Advisory Group
9 Steps To Sales Success
2000 - 2012 © CXO Advisory Group
The 9 Steps
1. Get Into The Mind Of Your Buyer
2. Develop Your Buyers Profile
3. Be Where YOUR Prospects Are
4. Align Sales & Marketing
5. Develop Your Inbound Marketing Program
6. Automate And Track
7. Measure Marketing On Contribution to Revenue
8. Analyze Quality of Leads Generated And Tools
9. Improve Your Tools And Programs
2000 - 2012 © CXO Advisory Group
What We’ll be Covering
Developing your channel strategy
• How to choose the right channels
Types of sales channels
• Capabilities & limitations
What it takes to succeed
Managing channel relationships
We will not be talking
about online sales
2000 - 2012 © CXO Advisory Group
Business Development Workshops
Choosing the Right Sales Channel for Your Startup
Secrets to Maximizing Your Marketing ROI:
Aligning Sales & Marketing
• Thursday, July 19th
Networking Your Way to Business Success
• Tuesday, July 24th
Maximizing LinkedIn for Business Development
2000 - 2012 © CXO Advisory Group
Get Into The Mind Of Your Buyer
1
2000 - 2012 © CXO Advisory Group
Develop Your Buyers Profile
2
2000 - 2012 © CXO Advisory Group
Develop Your Buyers Profile
Who is your “ideal customer?”
Who is typically the “key decision maker?”
How do they make their decisions?
Where do they collect their information to make a
decision?
What are their critical business issues?
What is their buying process?
Where do they buy?
What is the Sales Cycle?
What are the “trigger events”
2000 - 2012 © CXO Advisory Group
Be Where YOUR Prospects Are.
3
2000 - 2012 © CXO Advisory Group
Sales Channels – The Reality
“A product with better distribution will
always win over a superior product with
poor distribution or customer access”
It’s not fair. It’s not right.
But, it’s reality.
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Not having an
adequate profile of
customers
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Confuse channel
partners with final
customers
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Channels are not in
sync with your
targeted buyers
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Thinking your
“value proposition”
is the same as theirs
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Failure to consider
licensing or joint-
venture agreement
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Insufficient channel
margins
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Insufficient
marketing budget
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Not aligning
marketing to the
sales channel
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Channel conflict
2000 - 2012 © CXO Advisory Group
Common Sales Strategy Mistakes
Going to the channel
before you’re READY
2000 - 2012 © CXO Advisory Group
Plan Your Entry into the Channel
“If you don’t know
where you’re going
you’ll probably
wind up
somewhere else”
2000 - 2012 © CXO Advisory Group
Types of Sales Channels
Direct 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.)
2000 - 2012 © CXO Advisory Group
Channel Benefits/Risks
Control
Higher gross margins
Direct customer relationship
Necessary for complex sale
Harder to scale
Higher fixed costs
Less flexible – seasonal sales
Can scale quickly
Use established customer relationships
Fill product gaps
Companion selling opportunities
Local support
Increased demand generation
Offload financing risk
Ongoing investment in recruitment & training
Big margin sacrifice
Up front MDF investment
Loss of customer relationship & feedback
Fighting for mindshare
Quality of channel partner
Benefits Risks
Direct
Indirect
2000 - 2012 © CXO Advisory Group
Channel Costs
Freemium
Co
st
Minimal Touch
Channel Sales
Inside Sales
Direct Sales Force
2000 - 2012 © CXO Advisory Group
Comparison of Major Channels
Retail Agent/Rep Distributor/VAR Acquisition Joint Venture Subsidiary
Time to Market Slow Slow Medium/Fast Medium Medium Slow
Management Control Low Medium Low High Medium High
Brand Control Low Low Low High Medium High
Cost of Sales Medium Low Low High Medium High
Development of In-House
Expertise Low Low Low Medium Low High
Access to New Partners Low Medium Low Medium Medium Low
Risk Medium Low Low/Medium High Low High
Hands-On Sales/Marketing
Support High Medium High Low Low Low
2000 - 2012 © CXO Advisory Group
Computer Distribution Channels
2000 - 2012 © CXO Advisory Group
What Do These Firms Have in Common?
2000 - 2012 © CXO Advisory Group
Do You OFFER a Whole Product?
The
Product
Pre-Sales Support
Post-Sales Support
2000 - 2012 © CXO Advisory Group
Choosing a Channel
Considerations
• Fill whole in product offering
• Link to end-user targets
• Fit with existing channels
• What role do they play in the sale?
• Influence
• Sales
• Support
• Technical
How do I measure them?
How do I generate business for them?
Can I support them?
Do the financial requirements make sense for our company?
Do I have enough profit margin for them?
2000 - 2012 © CXO Advisory Group
Do You Have Enough Profit Margin for the Channel?
Cost of Goods
Gross Profit
Suggested List Price (SRP) or Street Price
End User
S. G. & A.
62%
15%
23%
2000 - 2012 © CXO Advisory Group
Do You Have Enough Profit Margin for the Channel?
Cost of Goods
Suggested List Price (SRP)
Your Revenue
End User
Consumer Retailer
Street Price
S. G. & A.
Gross Profit
15%
50%
23%
12%
2000 - 2012 © CXO Advisory Group
Do You Have Enough Profit Margin for the Channel?
Cost of Goods
Profit + S.G. & A
Suggested List Price (SRP)
Your Revenue
End User
Consumer Retailer
Distributor
Street Price
15%
50%
23%
10%
2% Gross Profit Is
NOT ENOUGH
S. G. & A.
2000 - 2012 © CXO Advisory Group
The Channel Marketing Plan
Program
Coverage model
Value proposition
Business rules
Sales model
Pricing
Sales Support
model
Customer Support
Model
Budget
Strategy
Goals
Target
Market
Product
Competition
Channels
• Roles
• Alignment
Execution
Media Campaign
Communication
Incentives
Education
Outsourcing
2000 - 2012 © CXO Advisory Group
Creating 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
2000 - 2012 © CXO Advisory Group
Is Your Buyer Package up to Snuff?
Marketing materials
Price lists
Outline of your marketing campaign – Demand Creation
Product samples - Packaging
COOP/MDF funds and campaigns
In-store merchandising
Prospect & customer correspondence
Sales training for their personnel
Sales support
End user training
End user support
2000 - 2012 © CXO Advisory Group
Joint Venture/ OEM / Private Label
Quick penetration – less risk
Established market presence
Provides localization of product
Handles all marketing, sales, distribution &
support
Provides ongoing market analysis
Provides ongoing competitive analysis
Usually won't carry competing product
Tough sale – long sales cycle
2000 - 2012 © CXO Advisory Group
Approaching a Potential Joint Venture/ Private Label Partner
Be Ready to Explain Key Product Advantages
Do 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 products
How easy it will be to work with you
Support you will give them • Technical
• Training
2000 - 2012 © CXO Advisory Group
Key Issues Licensing Agreement
Specs & Deliverables
Acceptance
Grant of License
Terms
Payments
Bookkeeping Requirements
Ownership
Use of Trademarks
Training
Decision Making Authority
Marketing Obligations
List Price of Product
Performance Requirements
Warranties
Limitation of Liabilities
Development Support
Rights to Updates
Termination
Source Code Access
2000 - 2012 © CXO Advisory Group
Distributors/Wholesalers
2000 - 2012 © CXO Advisory Group
Distributors
Sells to other channel players within designated
area
Takes title to goods and is compensated by mark-up
upon sale
Sells suppliers goods to his own customers
No authority to act on your behalf
Maintains Inventory
Sells in original packaging
May or may not provide after sales services
Many products are taken on consignment basis
2000 - 2012 © CXO Advisory Group
What Distributors Look For
Products with proven demand
Product's packaging, ease of use & install
Marketing budget
Quality tech & Customer support
Ability to scale up to demand
Financial stability
Training
Distributor staff time required
Only 1% - 2% of products presented get chosen
2000 - 2012 © CXO Advisory Group
Manufacturers Agent/Commercial Agent
Alternative to own sales force
Both authorized to solicit orders in designated area
Receive salary or commission
Usually bear no credit risk
Maintains no inventory
Requires same support & training as internal salesforce
Carries several lines
References, References, References
2000 - 2012 © CXO Advisory Group
Typical Rep Territories - USA
2000 - 2012 © CXO Advisory Group
Typical Rep Territories - Canada
2000 - 2012 © CXO Advisory Group
Source to Identify GOOD Reps
Customers and potential customers
Known GOOD Reps
Companies with complimentary products to yours
MANA (Manufacturers Agents National Association)
• Manaonline.org
ERA (Electronic Representatives Association)
• Era.org
AIM/R (Association of Independent
Manufacturers'/Representatives)
• aimr.net
2000 - 2012 © CXO Advisory Group
Rep Agreement Caveats
Most rep agreements have commissions due on order
• Commissions should be paid ONLY AFTER YOU COLLECT
Commissions should be on NET Sales
• Sales MINUS returns and any upfront market development
funds paid to the retailer
Splitting commissions
• Between rep territories
Territory definition
National (House) accounts
Termination issues
Automatic renewal
2000 - 2012 © CXO Advisory Group
Retail
2000 - 2012 © CXO Advisory Group
Retail
2000 - 2012 © CXO Advisory Group
Retail
2000 - 2012 © CXO Advisory Group
Retail Packaging that Sells
2000 - 2012 © CXO Advisory Group
Slotting Fees
2000 - 2012 © CXO Advisory Group
You Need to Satisfy All FOUR Customers to Gain Retail Distribution
Corporate
Store
Salespeople
Customer – End User
2000 - 2012 © CXO Advisory Group
Cost of Market Entry Options
Retailer Mark-up, 50% - 200%+
5-10% MDF, Slotting Fees,
Beware Consignment sales
Agent/ Rep. Commission, 5%–30%, Wants
to be paid on order
Value Added Reseller
(VAR)
Margin, 20-40%, 5-10% MDF
Distributor (stocks product) Margin, 10%–50%, 2-5% MDF
2000 - 2012 © CXO Advisory Group
Key to Efficient Channel Management
Strengthen ability of channel partners to deliver solutions
Train channel partners well & often - for free
Enhance communications
Treat them like they’re your own salesforce
Enable partners to sell complementary services aggressively
Deliver channel value with the web • Demand creation
• Quality leads
• Support
• Information
• Links
• Feedback
2000 - 2012 © CXO Advisory Group
Manage Channel Conflict
Areas 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 line
Conflict can not be eliminated
Changing business objectives
Company politics
2000 - 2012 © CXO Advisory Group
How the Channel Views Vendor Internet Plans
2000 - 2012 © CXO Advisory Group
Key Points That Can Make a Difference
Have realistic expectations
Top management commitment
Focus, Focus, Focus
Long Term View
Clear understanding of end-user targets and their
alignment with channel partners
Reduce channel conflict by clearly defining roles
and responsibilities for each channel
Develop comprehensive business rules for
managing program processes
2000 - 2012 © CXO Advisory Group
Key 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 sales
Review your channel strategy yearly
• Identifies potential destructive channel conflict
• Tune channel support programs
2000 - 2012 © CXO Advisory Group
Questions
2000 - 2012 © CXO Advisory Group
Driving Profitable Growth
2000 - 2012 © CXO Advisory Group
Driving Profitable Growth
We help companies optimize business development and marketing; accelerate sales; and seize the most attractive growth opportunities.
2000 - 2012 © CXO Advisory Group
The 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
2000 - 2012 © CXO Advisory Group
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
programs
Market 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
2000 - 2012 © CXO Advisory Group
How Can CXO Help You?
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
2000 - 2012 © CXO Advisory Group
How Can CXO Help You?
Venture Advisory Services
• Fine tune operations, business strategy and market entry
• Assist with due diligence
• Strategic business assessment of portfolio companies
Stephen Davis 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”
Phone: (508) 528-7571 Email: [email protected] Website: www.cxoadvisorygroup.com Linkedin: www.linkedin.com/in/stephendavis Twitter: twitter.com/stephendaviscxo