The last step in creating a clear business case for an integrated multichannel go-to-market strategy is to calculate how much money needs to be invested in each channel to achieve overall revenue targets. The output of the last step— resource planning by channel—is a good starting point, because resources often account for fifty percent or more of a channel’s cost structure. There are other costs associated with a channel e.g., indirect field expenses for the field sales force, distribution margins for partners, telephone bills for call center, or website development and maintenance costs for the Internet, etc. In this step, I will show you a generic cost model that you can customize for your use.
The table below provides an overview of various types of expenses that different channels can incur. Of course, you won't be building every channel, but it provides a good starting point and lays out the standard framework for expense calculation.
Build the Go-to-Market Cost Model
This table is pretty much self-explanatory. It defines the major expenses per channel. For example, major expenses for the business partner channel include: margins, channel program training, rebates for promotions and management expenses. Table also spell out general expenses and allocates them equally to each channel. This provides a mechanism to calculate and compare the productivity and efficiencies of different channels.
Channel E/R or Channel Expense to Revenue ratio is one of the standard ways to calculate the efficiency of a channel and compare it with other channels. It shows how much investment is needed to generate the target revenue. As the table shows, different channels will have different E/R values; these values can be used to decide which channel to use. You can either go with the lowest-cost channel or take a balanced approach. Keep in mind that that channel profitability ultimately reflects the level of service being provided to customers. Lowest-cost channels generally cost less because they provide fewer services in the sales process. In some circumstances—for example, when high service levels are the key differentiator for a business—it may make sense to select a channel that can deliver an acceptable level of profitability rather than the highest possible level.
In Conclusion
You have settled on your market, come to understand your customers, decided on the best mix of channels to cover your markets and are armed with your financial business case. Now, all that is left is to present it to the management team and get its buy-in, after which you should start to put your plans in action. In the next section, I will discuss the steps that you must take to build the organizational capabilities so you can successfully implement this plan.
Related:
- Table of Content
- Red Queen Effect – An Introduction
- The Billionaire Code
- Cracking the Code
- Implementation Plan
- Renovation or Innovation?
- Implementation Process
- Baseline Current Go-To-Market Activities
- Protect & Renew
- Plan for New Sales
- Targeting the Right Market
- Market Segmentation
- Prioritizing Target Markets
- Align with Your Customers
- Example of Customer Experience Mapping
- Mapping Customer Experience
- Drawing Customer Persona
- Customer's Moments of Truth
- Identifying Appropriate Levers to WOW Customers
- Establish Channels to Deliver the WOW Experience
- Market Coverage Maps
- Economic / Revenue Modeling
- Targeting the Right Market
- Renovation or Innovation?