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 • Internet sites
• Corporate resellers • Extranets
• Master or local distributors • e-Marketplaces
• Integrators • Direct Mail
• Value-added resellers • OEM’s
• Manufacturer’s agents • Retail
• Brokers • Kiosk’s
• Franchises • Strategic alliances
• Telemarketers • Agents (consultants,
• Inbound telesales agents affiliates, etc.)
 Channel Continuum (illustrative)

High
“High Touch
Channels” Field
Sales

VAR’s
Value i rect
Dis- D
Add “Low Touch es
tributors Sal nnel
Of Sale Channels” Cha
Retail
nn els
Stores ha
Tele- ire ct C
marketing Ind
Internet el s
Low nn
ct Cha
Dire
Low High
Cost per Transaction
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 “We want to reach and serve new
our core customer base, to markets and customers, and to
protect the brand, and control the grow as fast as possible”
relationship with the customer”

Channel • Field sales force • Retail, mass merchants

Approach • Telesales
• High-end partners, thoroughly • Distributors
trained, with binding contracts • Value-added resellers
covering all aspects of the sales • Internet
process • Strategic alliances
• 3rd party service agreements
• Etc.

Source: “Go to Market Strategy” by Lawrence Friedman

 Market Coverage Example 1

Large, enterprise
Direct, Field Sales Reps
customers
Corporate
Resellers
Mid-sized
VAR’s, Solution Partners
accounts

Small office /
Mail order catalog (unserved market)
home office

Markets Simple, “off the Mass-customized Complex, unique

rack products products solutions
Products

Source: “Go to Market Strategy” by Lawrence Friedman

 Market Coverage Example 2

Large, enterprise Direct, Field Sales Reps

customers

Mid-sized Business partners

accounts +
Telechannels
+
Web sites
Small office /
home office

Markets Simple, “off the Mass-customized Complex, unique

rack products products solutions
Products

Source: “Go to Market Strategy” by Lawrence Friedman

 Integrated Multi-Channel Model -
Single Channel
Sales
Task Lead Qualification Bid & Negotiation/ Fulfillment Customer
Generation Proposal Close Sales Support
Channel

Direct
Field Sales

Business
Partners
Cost

Tele-
channels

Direct
Mail

Internet

Source: “Go to Market Strategy” by Lawrence Friedman Sales Cycle

 Integrated Multi-Channel Model -
Reduce Cost & Increase Sales
Sales
Task Lead Qualification Bid & Negotiation/ Fulfillment Customer
Generation Proposal Close Sales Support
Channel

Direct
Field Sales

Business
Partners
Cost

Tele-
channels

Direct
Mail

Internet

Source: “Go to Market Strategy” by Lawrence Friedman Sales Cycle

 Integrated Multi-Channel Model –
Example 1
Sales
Task Lead Qualification Bid & Negotiation/ Fulfillment Customer
Generation Proposal Close Sales Support
Channel

Direct
Field Sales

(Over $25,000)
Business
Partners
(Under $25,000)
Cost

Tele-
channels

Direct
Mail

Internet

Source: “Go to Market Strategy” by Lawrence Friedman Sales Cycle

 Integrated Multi-Channel Model –
Example 2
Sales
Task Lead Qualification Bid & Negotiation/ Fulfillment Customer
Generation Proposal Close Sales Support
Channel

Direct
Field Sales

Business
Partners
Cost

Tele- Sales support for

channels key accounts

Direct
Mail

Internet

Source: “Go to Market Strategy” by Lawrence Friedman Sales Cycle

 Partner Channel Development…

1. Define the scope of the channel

2. Define partners’ role in the sales process
3. Develop robust and attractive channel policies
4. Build a strong base of partners
5. Build a strong channel support infrastructure
6. 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 Sales Effectiveness

How to get in front of the right Once there, how to maximize
Definition customers, for the right amount of sales potential
time, at a minimum cost

• Territory design / coverage • Selling skills

Typical
• Activity reporting systems • Account strategy
Performance • Compensation systems • Application knowledge
Levers • Sales support • Effectiveness models
• Systems • Recruiting
Driving • Structures • Training
Mechanisms • Coaching

• Coverage • Sustainable margins

Sample • Call rates • Repeat business
Measures • Cost per call

Source: Huthwaite, Inc. 1988

Setting objectives / priorities…

What kind of customer?

- Size
Current New - Type of business
Business Customers - 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 New “Hunters”

Business Customers

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
What critical selling
Strategy/
skills are required for
Mission the sales role in the
value proposition?

Sales
Efficiency Effectiveness
Force Individual
Is the sales force (and
Deploy- Sales Selling
channels) organized for optimal Is support adequate to
coverage of selected markets? ment Support Skills maximize the selling effort?

Does the incentive

Does the sales force have
Coaching Infor- Motivation compensation plan meet
adequate coaching & & Super- Recruiting mation & Compen- management’s
supervision? vision & Training Resources sation objectives and pay the
sales force fairly?

Does the recruiting and Are information systems

training match selling skill Capability Building being fully utilized to support
requirements? the selling effort?
 Building your sales capabilities…

Develop sound Organize for efficient Develop skills for effective Motivate & support
selling strategy coverage selling sales force

Clear segmentation Right structure Define necessary skills Align measurement

and reward systems:
Explicit objectives, Right size Develop training,
goals and priorities recruiting and • Compensation
Territory / account coaching programs for: • Recognition
Winning selling
proposition Assignments for • Product knowledge Provide necessary
adequate coverage • Buying process organization support
Realistic time • Sales methodology (systems, etc.)
frame/expectations • Planning & execution
Example sales productivity model…
Sales Force Productivity
Profit contribution = $4
per $ direct selling cost

●
—
Effectiveness ● Efficiency
Profit contribution = $400 Direct selling cost = $100
hr. actual selling time Hr. actual selling time

●
X —
●
Selling Margin Selling Rate Direct Selling Cost Sales Force Utilization
40% profit contribution Revenue = $1000 $500 / day per rep Hrs actual selling time = 5
margin hr. actual selling time per day per rep

• Compensation plans • Skills assessment • Reduced overhead costs • Centralized sales admin
• Sales tools • Territory / opportunity • Sales force automation
• Value proposition planning
• Partnerships
Case study #1

(The early years)

Case study #2

(The early years)

Case study #3

55 Year
Year Old
Old S.
S. CA
CA Professional
Professional Services
Services Firm
Firm
Additional Resources
 Books
The Channel Advantage, Lawrence G. Freedman, Timothy R. Furey
Go To Market Strategy, Lawrence G. Freedman
 People
UCI Center for Entrepreneurship and Innovation CEI@Merage.uci.edu
SCORE Orange County www.score114.org
Students to Start-Ups
Entrepreneurial Skills Workshop Series

UPCOMING WORKSHOPS

April 4th
Nuts & Bolts of Business Structure and Licensing

April 18th
Refine Your Unique Value Proposition

RSVP
CEI@MERAGE.UCI.EDU
Questions

Mike Mata
Michael.Mata@SCORE114.org
Thank You!