The solution is right before our eyes: Manage our selling costs.
Now, I am not suggesting that you cut your channels or fire people irrationally. I am suggesting that you do what the world-class companies are doing:
Integrate multiple channels into one relationship cycle.
There are two things to notice. First, instead of taking a limited view of marketing through the sales cycle perspective, take a broader view of the whole customer journey and manage both marketing and sales costs together. Second, recognize that each channel has its own associated costs. For example, the cost for your sales force could include salary, commission, traveling, and entertainment expenses. Partner channel-related costs may include discounts, management expenses, sales and marketing promotion allowances, etc. The Internet channel may include website building and maintenance, product discounts, promotional expenses, etc.
Figure 2.2: Transaction costs per sales channel
Figure 2.2 compares the fully loaded per-transaction cost that a manufacturer of a typical $5,000 – $7,000 industrial product incurs while selling through different channels. In the next chapter you will find a detailed model to calculate channel costs for your business.
As the chart shows, for the same deal, sales force costs equal $1,000 or almost 20 percent of the deal, value-added partners cost $500 – $600 or 10 percent of the deal, and volume distributors cost 8 percent. Meanwhile, direct channels like telesales cost only 3 percent, whereas the Internet costs less than 1 percent. It makes sense on the high level to employ low-cost channels—and that’s what most of us did.
Figure 2.3: Strengths of Sales & Marketing Channels
However, as Figure 2.3 shows, not every channel is suitable for providing the best customer experience at every level to make a sale and retain the customer. For example, salespeople are very good at relationship-building and consultative selling, but they despise generating new leads. Depending upon the complexity of your product, a telesales channel may be very good at providing customer service and generating new leads, but may be unable to close sales and may not be the best way to increase customer loyalty. The Internet may be an excellent source for generating leads or providing self-help customer service but prove to be a difficult channel when it comes to quoting a custom price. Therefore, expecting that a channel should complete sales and deliver the cost savings promised above is an unrealistic expectation that has been hurting many businesses for a long time.
So now that we understand that:
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Per-transaction costs for each channel vary.
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Not every channel is good for providing the best experience at each touch point in the customer journey.
How about using multiple channels working together so that only the most suitable and most cost-effective channel is used at a touch point, in a way that can provide the desired customer experience? That way, your business will enjoy the savings generated by low-cost channels, and customers will be served by the channel that they desire most and that has the strength to fulfill the function. This is called an integrated multichannel selling model (IMSM), which gives a powerful, winning, total customer experience that will:
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Attract, win, and retain the most desirable customers
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While driving high sales and market share growth
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At the lowest possible cost.
This is the open secret of the world-class companies. Instead of using a single channel such as sales reps at all touch points, they assign appropriate channels to each specific touch point. For example, instead of asking sales reps to generate their sales leads, they are using the Internet to generate leads, telesales channels to qualify them and sales reps to close them.
There are two other key pieces to this puzzle. First, an integrated multichannel selling model targets a specific market. For example, Google sells its online application suites to individuals and businesses through its website, but uses the web only to generate leads for schools, ISPs and large business markets. Those leads are followed up on by account reps, who gather detailed information to suggest and sell a fully customized solution to the customer. Second, information technology is the underlying enabler of the integrated multichannel selling model. Since models use different channels to perform different selling tasks, there is always the potential for chaos and poor coordination at the interfaces between channels, such as lost or mishandled sales leads, conflicts between channels and problems with customer service. IT systems prevent these kinds of problems and make possible a seamless, channel-transparent customer experience.
The four basic characteristics of an integrated multichannel selling model are:
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Multiple channels work together to make a sale.
Multiple channels such as field reps, partners, call centers, and the web work together to generate leads, close deals, and serve customers. -
Multiple channels take on specific roles within a single relationship cycle.
Each channel takes on one or more specialized roles, such as lead generation, negotiation, or post-sales support. In other words, not every channel performs every selling task; rather, individual channels are assigned to specific tasks for which they are most suitable. -
Multiple channels serve a specific target market or group of markets
Different markets usually require different channel mixes. Therefore, any company that sells into a variety of markets will require different multichannel selling models to serve those markets. -
Multiple channel integration is achieved through information systems.
Coordination and collaboration are the key success factors for integrated multichannel selling models. IT systems help achieve seamless interactions among channels and customers.
Next chapter discusses benefits of the Integrated Multichannel Selling.