Others think of Channel Management solely as a partnership with a 3rd party to enter a complex market—like selling your new software program in Baltic countries. While the latter can be an example of Channel Management, it is a small portion of overall channel strategy for most firms.
The biggest conversations in Sales today are directly related to channel management. Thinking of reallocating resources from your expensive Field Sales group to a less expensive Inside Sales group? Channel Management. Outsourcing (or insourcing) your Customer Service line? Channel Management. New website with order taking capability? You guessed it.
When deciding on which channels you want to enter, here are three questions that must be addressed:
Will customers use this channel?
Notice the distinction between the above phrase and the present tense “Do customers use this channel?” Michael Dell realized that he could sell personal computers at a cheaper price by avoiding excessive costs associated with paying distributors. Prior to 1996, this involved using a Tele-Sales team as the primary method of order taking. However, in late 1996 he decided on launching a website for direct orders. The result: Dell experienced amazing growth, had better tracking to customer trends, and could execute orders faster than competitors. Dell believed that consumers would use his channel if given an opportunity, and it paid off. Ask your customers the same thing, you may be surprised.
Is it a good fit with the product?
Just because a product is able to be delivered faster and cheaper does not necessarily make it a great avenue for your product. Consider banking: If your bank today told you they were closing down all branch locations and that all communication would be directed to a website or hotline, you would understandably be upset. Most consumers need the comfort of a tangible location and expect face to face service when give up control of their hard-earned dollars. Although responsiveness and costs would increase, the consumer’s sense of security would be compromised. Far from solely moving to a virtual world, some banks are increasing the number of branches to capture additional customers.
Does it make economic sense?
This is a question that should be asked every year, not solely when entering a new sales channel. Consider the case of Encyclopedia Britannica—a company well known for a mature door-to-door sales force. After getting squeezed by the Internet (Encarta and later Wikipedia), Britannica sales had plummeted so precipitously that a sales force no longer made economic sense. In 1996, all direct sales positions were eliminated. Although it marked an end to an era, dwindling sales could no longer justify the expense of maintaining this channel. As products mature and turn less complex, cheaper sales channels can often be utilized.
Before channel expansion or contraction, go through a worksheet showing the answers to each of these three Channel Management questions — if you don’t get a “Yes” on all three, don’t utilize that channel. Also important, make sure each of these channels has all it resources it needs to be successful. Are you leaving money on the table in 2012 by not servicing your customers? Come to our seminar on January 12th for a better understanding of how to effectively staff your salesforce for 2012.