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]
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?
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.