Kamran Qamar » Feaured

Indirect (Partner) Sales Channels

Kamran — Sun, 08 Nov 2009 21:50:48 +0000

Once thought of as indirect sales channel killer, the Internet has proved to be the main enabler of a global network for indirect sales. Today, indirect sales account for almost half of all global business. Indirect channels including distributors, wholesalers, value-added resellers and retailers have seen their business grow by leaps and bounds because of technological advances. The reason? Indirect sales channels provide the necessary capital, logistics, access to markets, and customer service and support, bundled with the efficiency of the Internet. This combination is a very compelling value proposition.

An indirect sales channel could be a giant multinational company with thousands of sales reps on its payroll like Wal-Mart, or a housewife who’s signed up to sell beauty products to her friends, or a blogger who has decided to promote your products in exchange for some affiliate commission. It doesn’t matter what shape a partner channel takes, or how it is labeled—affiliate, associate, manufacturer's agent, broker, wholesaler, retailer, distributor, aggregator, reseller, value-added dealer, etc. They serve the same purpose: to help a business penetrate deep in dispersed markets and reach more customers, thereby growing its revenue and market share. Below are the three basic variations on selling products through indirect sales channels.

Sell To: The channel is the customer
In this situation, the whole value proposition is for the channel partner. An example would be Intel selling its chips to an original equipment manufacturer (OEM), or McDonalds selling its franchise to a franchisee.
Sell Thru: The channel is the salesperson
This is a typical intermediary selling model, where a manufacturer sells its products through distributors, wholesalers, brokers, agents, retailers, etc. For example, car manufacturers sell their cars through a network of dealers.
Sell With: The channel is the teammate
This is a strategic alliance model, where a manufacturer partners with independent vendors to solve customers’ complex problems using its product or services e.g., SAP or Microsoft selling their complex IT solutions using partners.

There could be many other permutations of using indirect channels, especially when they are employed for customer service and support i.e., authorized service centers, partners that sell and service, partners that only generate leads, etc. Since partners come in many flavors, there is a lot of complexity involved in building an effective indirect sales channel. This chapter takes the complexity out and presents a field-tested process for building and managing a high-performance indirect sales channel.

So, let's start with introducing the framework.

Defining Revenue Opportunities for a Channel

Kamran — Sun, 08 Nov 2009 18:57:25 +0000

The first step is to define the sales forecast, specifically in terms that can be used for evaluating and allocating channel investments. Such a forecast is different than the kind most companies are used to. Most companies forecast sales based on products, or vertical markets; such projections works particularly well for product development and marketing/messaging positioning. Unfortunately, these kinds of projections are of little use for channel planning. This is because channels cut across vertical markets and product lines, as you have seen in the last step while building the integrated multichannel market coverage maps. Therefore, a distribution-based revenue forecast, one that looks at revenue primarily in terms of how—through which channels—it will be captured, is needed to calculate the real economics of channels.

Such a revenue forecast could be calculated in two steps:

Re-categorize revenues into market segments that closely reflect channel usage
Overlay the market coverage map developed in the last step to calculate revenue by channels

Left grid in the figure shows revenue per product per vertical market for a sample company. In the figure you can see, $1 million worth of "simple" products are projected to be sold to high-tech companies. The question is whether this "simple" product is valid for all kinds of high-tech companies or if it is suitable for small businesses?

Right grid shows the same projections but re-categorized based on product-market fit as discussed in Channel Mix section. As it is shown, Simple product is targeted only to SOHO and mid-market. The first thing to note is that SOHO market cut across market verticals (Manf. High Tect etc.) and served by different channels.

After re-categorizing the revenue projection by product-market fit, all that is left is to overlap the market coverage map from the last step to develop a complete revenue forecast by channels. The figure below shows this process and the results.

As the figure shows, the field force is responsible for generating $21 million in revenue while selling mass customized products and complex solutions to Fortune 500 companies. Distributors will be responsible for penetrating the mid-market using all available products. Their goal is to generate $10 million in revenue. etc.

Let me point out that this is a simple example. In real life, there will most probably be more than one channel covering the product-market segment. That will require some creative thinking to distribute the revenue responsibilities.

Now that we have clarified what is expected from each channel, let’s look into how much resources these channels will need to meet their goals.

[This section need more examples and clarifications]

Reference:

The Channel Advantage

Your revenue forecast will impact the number of resources needed by various channels, as well as the overall allocation of resources across channels. People will need to be hired or fired or shifted between channels to support the revenue plan. Resource analysis involves figuring out where people need to be added, subtracted, or shifted to optimize their allocation in pursuit of a revenue target. Unless you determine how many people will be needed to achieve the channel’s revenue target, you can’t determine how much a channel will cost.

Luckily, there is a straightforward relationship between the channel’s revenue target and the resources it needs to reach that target. It is:

Number of resources required = channel revenue forecast/contribution per resource

Example:
The channel revenue forecast is $20 million, and each rep brings in $1 million on average. Thus, the number of resources required = 20

Although the calculation is simple, you have to find out the channel productivity. You can get this number from your history data. For example, if you have fifteen salespeople who brought in $15 million in sales last year, your field sales force channel’s productivity is $1 million per sales rep. Of course, not every sales rep in your sales force is superstar. Therefore, to calculate real productivity, you can apply Pareto’s rule i.e., calculate the productivity for the top 20 percent of your sales force. You can also get the industry benchmark information from leading industry journals. The problem with that is twofold. First, it is averaged. Second, it is a tactic suited for for organizations that already have well-established channels. If you are building it from scratch, you cannot assume the same level of productivity.

Channel Mix

Kamran — Sun, 08 Nov 2009 17:19:47 +0000

Channel mix is about the coverage of a company’s overall market with multiple channels. Channels in a mix coexist, each providing a different route to customers. The purpose of developing a channel mix is to intercept a broad range of purchasing transactions, and thus increase sales and your market share.

In order to create a market coverage model, you have to begin by dividing your overall market into discrete "product markets" such as "simple products sold to consumers" and "customized solutions for mid-sized accounts," etc. One such matrix is shown in the figure below:

The product-market grid allows to align company’s offers with the best selling opportunities. Once those channel opportunities are clear, channel strategy jumps to center stage. After all, channels are nothing but pipes connecting your products with customers.

There are three practical ways to fill this grid:

1. Selective market coverage—Assign one channel to serve one product market only.

The figure above shows a sample selective market coverage model. As is apparent, the simple-SOHO (Small Office / Home Office) market is served by the Internet, whereas complex solutions are sold to Fortune 500 companies using a field sales force. This chart illustrates the basic concept behind the selective coverage mode i.e., keep each channel in its silo, serving a discrete and unique group of customers on its own.

Advantages:

Minimal channel conflict – Since each channel is selling in its own silo, there is a very little chance of them bumping into each other.
Ease of channel performance management – It is easy to monitor the performance and sales activities of individual sales channels when each of them is assigned to a discrete market.

Disadvantages:

Practicality – It is difficult to execute this model in real life. For example, a reseller assigned to sell a product in a smaller market may covet larger opportunities and pursue customers that they are supposed to avoid, as they often do. Customers assigned to one channel such as a reseller may also decide to use other channels e.g., the Internet. This breeds resentment among channel partners who were promised a certain group of markets.
Customer dissatisfaction – Customers want choices—they don’t want to be told how to buy things. Attempts to force them into a particular channel fail. They either go to channels they prefer or they go to a competitor.

2. Intensive coverage – Use all available channels to sell all products to all customers.

The intensive market coverage model allows maximum flexibility so customers can do business where they want and how they want to do it.

Advantages:

Alignment with customers’ buying trends – It meets customers on their own terms, and lets them migrate to their preferred channels.
Deeper market penetration – An aggressive use of all possible channels allows you to capture maximum transactions.

Disadvantages:

Margin erosion – When channels compete for the same sales, channel conflicts arise, resulting in eroded margins and, in some cases, defection of the best partners.
High costs – Providing a large number of channel inventories to cover the same market segment is not cost-effective. These channels need to be built, maintained and managed, and that costs money.

3. Hybrid market coverage – mix of selective and intensive market coverage model

In the hybrid market coverage model, a critical mass of buyers is supported by intensive channel coverage, whereas unique product-market segments such as premium customers are served by selective channels e.g., by a field sales force. The figure above shows a sample hybrid market coverage model.

Advantages:

Extensive market coverage – Just like the intensive market coverage model, the hybrid model offers deeper market reach, giving customers in those markets the flexibility that they need.
Premium service for premium customers

Disadvantages:

Channel conflicts – Conflicts over tasks and territories may develop in main markets served by multiple channels
Higher sales costs

Whichever market coverage models you choose depend upon your business objectives and conditions. However, the hybrid model offers the best of the both worlds. While designing a market coverage model, there are four basic principles to follow. They are:

Align intensively covered markets with the "critical buying mass," meaning the market segment with the best revenue growth opportunities should be thoroughly covered by multiple channels.
Manage the channel mix for profitability, not just sales. The goal of a business is to make money that you can keep. Only money you can keep is profits. Unless you have deep pockets, don’t risk the profitability of your business for a larger market share.
Save selective coverage for when it really counts, for example, reserve your field sales force for premium accounts or the Internet for simpler products; otherwise, just go for intensive coverage.
Beware of channel conflicts, particularly with indirect channels. As discussed before, there is no real way to solve channel conflicts, so play it by ear and strive for channel cooperation.

In the next section, "Channel Integration" we will see how to improve profitability for each sales channel by integrating them in one coherent system.

[This Section needs to be re-written]

Reference:

The Channel Advantage by Lawrence Friedman and Tim Furey

Example of Customer Experience Mapping

Kamran — Sat, 07 Nov 2009 19:49:48 +0000

Let’s look at the example of the movie rental business. Customers rent a movie for many reasons, e.g. for entertainment; to spend quality time with their families; to increase their knowledge of a certain topic; to explore new ideas; to kill time, etc. Figure 6.4 shows a typical customer journey in renting a movie as a sequence of eight steps i.e., learning about a subject or movie; planning to watch it on a weekend or weekday, in the theater or online or on video, alone or with family and friends; browsing available titles on the subject; choosing the right movie based on other viewers or friends or movie marketing material; receiving or renting the actual movie and paying for it; viewing it in the comfort of your home; returning the movie; and paying the late fee if they are late.

Figure 6.4: Customer Journey in Media Rental

So how are movie rental companies at providing the experience in this customer journey?

The chart below in Figure 6.5 intuitively illustrates how traditional media rental companies like Blockbuster, Hollywood and other small media rental companies rank on the customer experience scale. The chart—provided by Tim Olgive of Peer Insight, a management consulting company—divides the customer experience into two broad categories i.e., "customer responsibility" or below-the-surface experiences and "media rental company" or above-the-surface customer experiences. To rank a company, the chart uses a simple three-grade scale i.e., negative experience (the customer is not happy with what she got for the price she paid); neutral (the customer is getting what she expected); and positive (the customer values the experience more than the price she paid).

Figure 6.5: Traditional Media Rental Company’s Customer Experience

As is apparent from the figure, traditional media rental companies believe that the most important draw for customers is the location of their retail rental stores. These companies assume that when a customer walks into their store, she already knows what movie she wants; therefore, in their world, customer awareness, planning, and choosing a movie is the customer’s responsibility. They don’t influence these steps. Overall, major traditional media rental companies provide a reasonably good customer experience at all the touch points that they have created. This particularly applies to browsing and renting touch points, where customers get the instant gratification of holding the movie in their hand, renting, and watching it right away. They provide a negative customer experience, however, when they punish their customers for not returning the movie on time. It is like telling them, "You are a bad person. You did wrong and you deserve to be punished."

Blockbuster and Hollywood were doing a great job. However, they were not properly aligned with their customers’ changing buying behaviors, so the customer experience became more bleak with every passing moment. This is where Netflix spotted an opening and created a business that threw Hollywood out of business and significantly affected Blockbuster’s market. The chart in Figure 6.6 shows the touch points that Netflix created, and how the company aligned itself with the customer journey.

Figure 6.6: Netflix’s Customer Experience

While traditional media rental companies were viewing learning and planning stages as the customer's responsibility and were relying on customers to do it themselves, customers were demanding easier ways to choose movies. By spotting this need, Netflix changed the equation of the media rental business by creating special touch points in the shape of online search and recommendation engines. This helped them engage customers from the start, which reduced their sales cycle time and improved customer retention and satisfaction, resulting in increased repeat business.

Netflix also noticed customers' frustration at the final stage of their journey i.e., late fees, and completely eliminated it. Netflix inspired customers to try its service with a simple message: “No late fee ever.” Instead of punishing customers with a late fee, their negative experience is this: If a customer is late, they don't get another movie to watch! This is somewhat like saying, "You cut it in half and I will pick the half."

How did this customer alignment work for Netflix? In 2008, Netflix posted a 45 percent increase in its profits. Its customer acquisition cost decreased to $26.67 per customer from $34.58 a year earlier, while they added almost 2 million new subscribers. This brought Netflix's total circulation to 9.39 million subscribers, up 26 percent from the 7.48 million customers it had at the end of 2007. Churn, or the rate of subscriber cancellations, was 4.2 percent in the fourth quarter, compared with 4.1 percent a year earlier.

So let's see how you can map experiences of your customers to grow your business.

Reference

Tim Ogilive – Peer Insight Consulting

Finding Treasures

Kamran — Sat, 07 Nov 2009 05:47:07 +0000

The combination of the outside-in view i.e., net promoter score (NPS) with the inside-out view i.e., customer profitability (CP) provides a potent tool for uncovering the jewels in your customer base. Start by ranking your customers based on these two criteria, then categorize them in nine groups as shown in Figure 5.4. The 3 x 3 grid is the magical grid that provides a very unique customer profiling mechanism. Here, the net promoter score is plotted on the x-axis, whereas customer profitability is on the y-axis. The figure also shows some general strategies that you can apply to the customers in each grid. Let’s discuss them in detail:

Figure 5.3: Existing customers’ grouping based on customer profitability and net promoter score

Detractor—Unprofitable
Guaranteed, the customer experience is the key to success in today’s connected world. There are customers, however, that will never be happy. These customers take a lot of your attention, money, and resources. They will cost you money and still give you a bad review. The customers in block 1 are those difficult customers. Instead of spending too many resources on these customers in an effort to win them over, it is wise to politely turn their business down.
Detractor—Breakeven
These customers are not happy with your offerings, but you haven’t lost any money on them either. These customers are the source of a gold mine of information that is critical for improving your offerings, hence growing your business. Spend time on understanding their concerns, objections, and suggestions.
Detractor—Profitable
This block represent unhappy customers from whom you have made ton of money. If you have customers in this block, it is a bad omen for your business. They stick around because they feel trapped but they won't suffer for long. Your competitors have a good chance of snatching their business from you, so these customers should be number-one on your priority list. Wow them, charm them, and make them feel special. The goal should be to move them to either block 6 i.e., the Passive—Profitable category or block 9 i.e., the Promoter—Profitable category. You don’t want to move down but across i.e., in an effort to woo them, you don’t want to lose money on them. Keep a close eye on all the initiatives that you run to please these customers.
Passive—Unprofitable
In an effort to please customers, businesses offer many freebies to customers that may lower their profitability level. A large number of customers in this block mean many of your incentive programs are not effective. You may have been able to deter customers from spreading bad messages about your company but the tactic that you are using is costing you money. Look into adjusting your campaigns and processes.

In this category, you may also find customers who buy only when you run a promotion or sale.
Passive – Breakeven
Passive Profitable
The majority of your customers should be in blocks 5 and 6. These customers do not have any major complaint. They like your offerings and you have made decent money while serving them. These are your ideal clients. Your general business goal should be to have most of your customers in these blocks, so that you are profitable and can encourage these customers to become evangelic promoters by offering targeted loyalty programs such as rewards points.
Promoter – Unprofitable
If your evangelic customers are costing you money, don’t write them off as a marketing expense. Rather, think of creative ways to make them profitable e.g., look at Google, which found a way to monetize its offerings by displaying advertisement on their search results, which eventually become their business model.
Promoter – Breakeven
This is the group of customers that need new tools to spread the word. Think about empowering them with something special e.g., building a social networking community or engaging them in a conversation where they can invite their friends. Or offer them selective new products.
Promoter – Profitable
These are the champions of your cause. Respect them, make them part of the insider group, and seek advice from them on new products, offerings, and changes in strategy. They have better know-how about your target markets than any research studies. Make them the part of your family.

Treasure hunting is not so difficult, is it? The magical 3 x 3 grid is a powerful tool to find treasure in your backyard. Apply it to your existing customer base and you will find gems. To unearth this treasure, however, you have to invest resources, money and people. The question is how much and where? This is where customer lifetime value comes into picture.

Net Promoter Score (NPS)

Kamran — Sat, 07 Nov 2009 05:13:13 +0000

The concept of the net promoter score (NPS) is quite simple. It starts with the customer experience. Positive customer experiences lead a customer to become loyal. Customer loyalty can manifest itself in multiple ways, for example as increased customer lifetime value—how much a customer spends with the company over a given period of time—or in the shape of a referral—new business gained because of the positive message that an individual customer shares via word of mouth. Conversely, when the customer experience is poor, loyalty will be low, which in turn results in low purchasing value, as well as a potential loss of business due to bad word-of-mouth messages. The net promoter score (NPS) provides a framework to quantify this customer behavior. The higher the number, the greater its impact on the bottom line of a business. Figure 5.1 shows the effect of NPS on income growth in the airline industry.

Figure 5.1: Net Promoter vs. 5-year Revenue Growth Rate for US Airline Companies
Source: SATMETRIX

As the figure shows, in last five years, companies that maintained higher net promoter scores also grew faster than companies whose net promoter scores were low. For example, Southwest Airlines, with a net promoter score of 60, grew at a rate of 15 percent in comparison with American Airlines, which has a net promoter score of only 17.

Statistics aside, the net promoter score (NPS) makes sense on an intuitive level. When customers are truly loyal to a company, their relationship changes from a simple exchange of product for money to a long-term commitment, despite price increases and/or occasional errors. A truly loyal customer also recruits new customers through positive word-of-mouth recommendations, which results in income growth for a company.

So, once you have customers, the goal is to increase the ~~Net Promoter Score~~ promoters!

Calculating the Net Promoter Score

The net promoter score (NPS) first gained momentum when Fred Reichheld’s breakthrough paper titled “The One Number You Need to Grow” appeared in the Harvard Business Review in 2003. In just a few years, the NPS has been widely adopted by Fortune 500 companies like Apple (NPS = 79), Adobe (NPS = 46), Google (NPS = 73), DirecTV (NPS = 20), Verizon (NPS = 10), and American Express (NPS = 47). There have been some controversies regarding the way it is calculated. Everyone, however, agrees on the utility and simplicity of the net promoter score concept, so I say don't let the perfect be the enemy of the good. If you don't like the NPS question or the scoring system as suggested by Reichheld, feel free to use your own. Any reasonably neutral approach will give you valuable data. Using the standard approach, however, will provide you with an opportunity to benchmark your efforts against the industry and/or world-class companies.

Calculating the NPS is quite simple. It is a three-step process, defined below:

Step 1: Ask the NPS question

Design a survey to ask all your existing customers the "Ultimate Question" i.e., How likely are you to recommend us to your friends and colleagues? The answer should be collected on a scale of zero to ten, where zero means least likely and ten means most likely.

While designing this survey, the most challenging part is to resist the temptation to collect a lot of information. I suggest that if you really have to elaborate, add just one more open-ended question: "What’s the one thing that we could do to improve the score you gave us." Or ask, "Why do you feel this way?"

Step 2: Invite people to take the survey

Depending upon the business you are in, devise a consistent formula to invite people to take this survey. For example, if you are selling to consumers you can use a lottery mechanism to ask this question to X number of randomly selected customers in a day and then ask the same question after a quarter. Similarly, if you are selling to businesses you may ask this question as a part of your invoicing, fulfillment, or servicing routine and then reach them once every six months.

Step 3: Calculate the NPS

Categorize customer responses in three buckets:

Promoter – Customers who give a score of 9 or 10. These customers are loyal enthusiasts who will keep buying and refer others, hence fueling your growth.
Passive – Customers who give you a score of 7 or 8 are satisfied but unenthusiastic. They are vulnerable to competitive offerings.
Detractors – Customers who give you a score between 0 and 6 are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

To calculate the net promoter score of your company, simply take the percentage of customers who are promoters and subtract the percentage of detractors. Figure 5.2 shows this calculation visually.

Figure 5.2: Calculating Net Promoter Score (NPS)

Knowing the NPS of your business is a wonderful first step, however, its real value is that it provides actionable information on which you can create targeted initiatives to grow your business. For example, for promoters you can devise new tools to help them promote your offerings such as social networking and community tools, or you can offer special reward programs so they can buy more. You can create creative programs for passive customers to make them promoters e.g., a campaign like "buy one and your friend will get one for free" will encourage passive customers to buy and promote your product. Or you can invest your energies in understanding the concerns of your detractors, uncovering the problems that are stopping them from loving your offerings. Fixing those problems will boost your business.

Doing all of this requires that you look at businesses from the inside out.

Reference Material:

The Ultimate Question by Fred Reichheld

Renovation or Innovation?

Kamran — Fri, 06 Nov 2009 07:31:42 +0000

The first thing to recognize is that a business can perform—or reach ripe fruit—only within the context of capabilities and opportunities that it has assembled. With time and competitor inroads, however, these opportunities and capabilities wear away. The only way to remain competitive is to continuously renew existing capabilities and to find and add new and distinct ones.

There are two ways to do this: 1) Protect and renew existing markets by continuously improving the way your business approaches, services, and engages customers. For example, train salespeople to close more deals, implement customer relationship management (CRM), etc. This is what I call renovation. 2) Innovation, on the other hand, is about entering markets, old or new, with entirely new competencies. It is not about how distant a business is in terms of its market space, it is about how devastating the idea is to competition. For example, in 1996 when Amazon.com started there was nothing unique in its business model as far as product goes. It was selling the same books that were available at any other bookstore. The innovation that devastated competitors was, however, how Amazon.com sold them over the Internet. Similarly, when Dell started, computers were sold by salespeople in fixed configuration in traditional face-to-face sales. Dell changed the game by offering build-to-specification computers sold over low-cost, wide-reach sales channels like direct mail, telephone, and later the Internet.

Both of these are the examples of innovations in business processes—in the sales process to be specific. The question is how should you go about instilling innovation in your business? Should you protect and extend your core, or should you completely change the way you sell? The slow economy is forcing all executives to rethink this question.

Experience shows that as long as a business is not radically changing the market, the ideal approach is to make evolutionary moves inside the business that have a revolutionary impacts o the market i.e., combine both approaches in a single explosive and coherent strategy for maximum benefits. Figure 3.1 shows this approach:

Figure 3.1: Strategy for Profitable Growth

The first step in this strategy is to protect and renew your existing customer base. This is because competitors always catch on to whatever competitive advantage you have. For example, once Amazon.com was successful, everyone started selling books online. Seeing this, Amazon.com protected its core business by engaging customers in the delightful customer experiences of "Online Review," "Look Inside," and customer loyalty programs. Amazon.com was also the first to implement and execute a lead referral program in the shape of Amazon Associates that created the needed boundaries for competitors.

The second step was to penetrate adjacent markets by leveraging existing competencies. Amazon.com, which had a strong foothold with the right customers who were willing to buy online, and which had built a strong IT infrastructure, decided to leverage these assets by first renting them to other bookstores to sell their books. Next, Amazon enhanced its IT infrastructure to sell any product online, hence becoming the marketplace of choice.

The third step is to build new competencies that will be the source of a new competitive advantage. Keeping Amazon.com as an example, we can see its next move was to build a strong Amazon.com web service model—based on the existing IT infrastructure—that revolutionized the IT storage space field. Now, instead of buying hard drives, a business can simply rent disk space from Amazon and pay only for the usage. Amazon also ventured into search engine technology.

Hence, in three simple steps, you can completely transform your business as Amazon.com did. It started as an online book retailer, morphed into a marketplace, and then completely changed into an IT storage service provider. The process doesn’t stop here; you can repeat the cycle. Jeff Bozz, CEO of Amazon.com, is doing it again. In the second cycle, Amazon.com started again with its core business, i.e. book sales. This time its strategy to protect and renew the core business was an e-book reader, Kindle, which created a strong barrier for other top book retailers. Their second move to leverage Kindle’s assets is to engage authors and publishers to write books for the new platform, augmented with on-demand publishing services.

So what do you think? If Amazon.com can completely change its business in three simple steps, can you do the same for your business? The answer is yes. The five-step implementation process below explains how.

Rapid revenue growth

Kamran — Fri, 06 Nov 2009 06:44:17 +0000

The Net Model

The best—though perhaps not the most profitable—approach for companies that are primarily concerned with quickly finding and penetrating new markets and driving top-line sales results is to use a lot of different sales channels to attract, reach, and penetrate a broad base of customers. One example of this approach is illustrated below. It is called the net.

Figure 2.8: The Net Model

Figure 2.8 shows the usage of a wide assortment of channels, aimed at capturing the maximum possible number of sales transactions taking place in the market. In some cases channels may work together, and at other times they may work independently.

These channels are cast in search of leads like a fishing net: They capture everything in a given area, somewhat indiscriminately but effectively nonetheless. Needless to say, this is a very aggressive channel approach, aimed not at simplicity or the lowest possible selling costs, but at the highest possible top-line results. This approach will undoubtedly capture the maximum number of sales transactions and revenue. The complexity associated with this approach will open the possibility of channel conflicts and reduce margins. Finally, this approach requires great effort and costs lots of money to build all those channels and keep them working together effectively.

It may be worth the effort and cost if maximum growth is the most important go-to-market goal.

Reduced selling costs

Kamran — Fri, 06 Nov 2009 06:34:03 +0000

The Wing Model

Many businesses use the traditional direct sales model, where every task in a relationship lifecycle, from the generation of sales leads all the way through to customer support and care, is performed by a single channel, i.e. sales reps.

Figure 2.4 illustrates this using a simple matrix where the y-axis represents the costs of sales for a few common channels—the field sales force, value-added distributors, volume distributors, call center, direct mail, catalog and the Internet—arranged based on their relative cost-of-sales. The x-axis represents typical stages in a customer relationship lifecycle. The canvas shows the pathway that channels use to move a prospect from one task to another.

Figure 2.4: Single Channel selling model

The pathway in this matrix shows that, in a typical direct sale, all sales tasks are performed by the sales force, which results in high selling costs. A migration of any selling tasks to lower-cost channels will provide margin improvements, as well as the means to reach more customers, in more markets, more efficiently.

Salespeople usually spend anywhere from 20 to 30 percent of their time in prospecting i.e., finding and qualifying new leads by cold calling, networking, trade shows, etc. This is an enormously expensive and wasteful way to generate leads. Just about any other channel can generate more qualified leads at a lower cost than field sales reps.

Figure 2.5: A Wing Model

Thus, if the responsibility of generating leads is taken mostly or entirely out of the hands of expensive high-touch channels such as field sales reps, and transferred to low-cost, high-reach channels like the call center or the Internet as shown in the "wing model" in Figure 2.5, a business will:

Increase its field sales reps' selling time by at least 20 – 25 percent (Imagine the top-line impact of a 20 percent increase in selling time. Like an eagle who has spotted its prey, a salesperson will be able to nab the best pre-generated leads with very little wasted movement i.e., close more deals!)
Decrease the cost of sales by at least 10 – 15 percent, causing its profit margins to soar
See the total volume of sales leads take flight
Ultimately increase the volume of profitable sales, allowing everyone to feather their nests with a new-found profitability

This is the simplest form of an integrated multichannel selling model, and it requires relatively little effort. If you are not using this approach, do it! Implementation of this model could be as simple as hiring a few telemarketers or, even better, outsourcing the effort to a telemarketing firm and/or building a new website. For this low investment, you will get an increase in sales as well as significant improvements in selling margins due to a reduced cost of lead acquisitions.

Customer Relationship Lifecycle

Kamran — Fri, 06 Nov 2009 05:51:58 +0000

A customer relationship lifecycle is made up of all the touch points between you and your customers. In most companies, a customer relationship lifecycle consists of four to nine stages, starting with awareness building and lead generation and ending with support, long-term care and advocacy. Every company’s customer relationship lifecycle is different, so to keep our discussion focused on the solution at hand, Figure 2.3 provides a pretty typical customer relationship lifecycle, consisting of eight stages. The white titles in the figures show the customer’s intent at every stage and the black titles are the business’s intent at the same stage of the customer relationship lifecycle. Let see each stage in detail:

Figure 2.3: A typical Customer Relationship Cycle

Awareness – Branding
The customer relationship lifecycle starts when a prospect realizes that she needs or wants a service. Companies that are able to communicate the ability to potentially address this need create awareness for the prospect. A company usually achieves this through brand-building activities like PR, advertisements, etc.
Investigation – Lead Generation and Qualification
After realizing her needs and becoming aware of a company, a prospect seeks more information about the company, its products and services. Prospects may also look for alternative solutions or the best solution. A company can provide passive information e.g., website, marketing collateral, videos and publications or it can provide active information that may help prospects make up their minds to consider the company’s offerings, hence generating leads.
Consideration – Bidding and Proposal
As the prospect weighs the available knowledge of various solutions against her criteria and hierarchy of needs, she develops a concept of the ideal solution for her needs. In consultative selling, the goal of the salesperson is to either understand the prospect’s concept of the ideal solution, or help the prospect create one and match the business’s offerings with that concept.
Purchase – Negotiation and Close
A prospect makes the final selection based on how well an organization’s offerings meet the hierarchy of her needs and align with her concept of the ideal solution. The organization, on the other hand, customizes its solution and negotiates the price and other components with the prospect to close the deal.
Use – Fulfillment
At this stage the prospect becomes a customer. In sales of simple commodity products, fulfillment may merely consist of shipment and delivery of the product to the customer. However, in more complex sales, fulfillment could be a major component including customization, configuration, and installation, etc.
Satisfaction – Customer Service
The customer goes through the learning curve of using the product and sees firsthand what the brand is about. If the solution meets or exceeds expectations, she becomes a satisfied customer. This satisfaction could be the combined result of excellent products and equally exceptional support, training, and customer care.
Loyalty – Retention and Up- and Cross-Sales
A highly satisfied customer shows her loyalty to the brand by buying the same, similar, or additional offerings from the same brand. A business offers special loyalty programs to increase customer satisfaction levels. Using customer satisfaction as the driver, a business maintains the relationship with existing clients and fulfills their unmet needs through additional offerings.
Advocacy – Word of Mouth and Referral
Not many customers reach this stage. However, those who do become completely vested in a brand, paying premium prices and recommending it to friends and foes alike. Hence, they contribute significantly towards a business’s growth.

We understand that a customer relationship lifecycle is composed of multiple stages and that each stage can have multiple touch points. Now, let’s see how multiple channels can be integrated to provide the best customer experience at each stage, hence achieving business objectives.

Kamran Qamar » Feaured

Indirect (Partner) Sales Channels

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Defining Revenue Opportunities for a Channel

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Channel Mix

1. Selective market coverage—Assign one channel to serve one product market only.

2. Intensive coverage – Use all available channels to sell all products to all customers.

3. Hybrid market coverage – mix of selective and intensive market coverage model

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Example of Customer Experience Mapping

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Finding Treasures

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Net Promoter Score (NPS)

Calculating the Net Promoter Score

Step 1: Ask the NPS question

Step 2: Invite people to take the survey

Step 3: Calculate the NPS

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Renovation or Innovation?

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Rapid revenue growth

The Net Model

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Reduced selling costs

The Wing Model

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Customer Relationship Lifecycle

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