Like most manufactures or service providers, you have an abundance of options to sell and deliver your products and services to your end-customers – this is your Sales Channel. It goes without saying that developing a dynamic and robust sales channel strategy is required to, once again, out-maneuver your competition.
However, if you haven’t spent much time working on your channel strategy recently, you may discover a messy chart with lots of arrows, and looking something like the following illustration…
Obviously, it is incredibly expensive to manage a sales channel structure like this, and worse, you may not actually be focused on the preferred channel choice for your real end-customers.
In this article, I want to explore a few key factors needed to develop an appropriate sales channel strategy, and ultimately discuss how your end-customers help determine it. Naturally, it begins by asking your team “who are your end-customers?” When I ask this question, I’ll sometimes hear answers like “ABC Retailer,” or “XYZ Distributor.” Other times, I’ll get answers like “18-80 year olds,” and “the SMB and Large Enterprise Market.”
The first two are not end-customers, but channel partners, and need to be considered differently from your true end-customers. The other answers represent an overly broad mix of end-users and markets. Neither of these provide you with enough information to fully understand the unique characteristics of your end-customers, and, more specifically, why they shop and buy where they do.
When you treat your channel partners as though they are your end-customers – and many companies do – you lose touch with your real end-customers, and may completely miss the mark at producing and delivering product and service solutions that truly satisfy their needs – including their preferred sales channel.
An important distinction to agree on first is that your end-customers are the ones who “write the last check” for the product or service. Everyone else in between you and your end-customer should be considered a channel partner. This is not to say, that your channel partners aren’t important, or that you shouldn’t treat them properly, but we’ll talk about this at a another time.
Secondly, having a deep and refined knowledge of who your end-customers are, and an understanding of where and why your end-customers shop where they do tells you a lot about the sales channel features your end-customers value most – features such as convenience, assortment choice, pre-sales services received, follow-up support, pricing and finance options, etc. Knowing this will make it much easier to develop your sales channel strategies, and more importantly how to identify the appropriate channel partners that can deliver these features best.
A simple rule of thumb is to use the sales channel that delivers the appropriate level of customer service features to your end-customers for the least amount of cost, as long as, this is also the preferred channel for your end-customers.
Once you know who your end-customers really are, learning how their buying requirements change over the life cycle of your products or services becomes important. For example, your end-customers may have become smarter about using and deploying your technology. Moreover, if you are following the practices we’ve discussed in other posts you’ll find here [e.g. Balanced Product Portfolio, Commodity Corner, Solutions, etc.], you are also improving the performance and ease-of-use of your product or service, making the need for more sophisticated channels less important for THESE products and services. Thus, the way of transacting business with your end-customers differs in each life cycle stage, and is why your sales channel strategy – and partners – need to adapt as well.
A third consideration impacting your channel strategy and creating significant market disruptions is that market and product life cycles are hyper-compressed versus what they were when the device was single purpose, the application software was tightly coupled with the device, and access networks were hard-wired and proprietary. A few years ago, the telephone just made phone calls, it took quite a long time to develop the next new version, you could only buy one from the phone company, and you had to wait for weeks for the phone company guy to show up and mysteriously string the multi-colored wires into your home to make it work – and that was considered state-of-art.
Today, three major technology enablers are driving market life cycles:
- Devices have become universal in their functionality and usability, as platforms have standardized on more affordable, powerful, smarter, smaller microprocessors, memory, and mobility technologies.
- The ability of these devices to satisfy needs (solve problems / enrich lives) is almost fully realized by robust software applications continuously modified and improved 7x24x365, and …
- The availability of super fast, virtually ubiquitous cellular and WiFi networks provides mobile anywhere, anytime access for you and your devices.
Now you can purchase a cell phone at a convenience store on your way to work, and start making phone calls and texting your friends, in a matter of minutes.
More to the point, these hyper-compressed life-cycles created by shifts in product platform, applications-driven functionality, and ubiquitous network access have put tremendous pressures onto traditional distribution and sales channel models that supported the previous ways of working.
These enablers have created a paradigm shift in how and where we communicate with each other, not to mention how we read books, trade stocks, watch movies, listen to music, purchase an airline ticket, pay for a cup of coffee, get breaking news, take and share photographs, review our medical records, find driving directions, and make restaurant reservations. Soon enough, “product printers” will change how we manufacture and distribute physical goods and online services.
Remarkably, consumers made these changes in buying behavior practically overnight, becoming quite comfortable with – if not demanding – the new ways of discovering and purchasing products and services.
However, I continue to discover that many of you are still using the same channel strategies you put in place when you first opened your doors. Be honest, is your industry next to experience business-shattering innovative disruption, and is your sales channel strategy flexible enough to support this new way of delivering your products and services?
Regardless of how and where you produce your product or service, you still need a dynamic sales channel strategy, one that is continuously adapting to this always changing, always available, networked world where we now find ourselves. By the way, if you find yourself concerned for your long-time / reliable / capable channel partners, despair not. The sea changes I’m describing also represent a perfect opportunity for your partners to re-invent themselves – delivering value to your end-customers (and you) in very new and innovative ways.
Reach out to us today and see how we can help you and your channel partners work together to bring greater value to your end-customers.