Channels 3

7/29/2019 Channels 3

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Business PlanEntrepreneurship 4543

Module leader: Dr Shehryar ShahidOffice: 418-C

Email: [email protected]
mailto:[email protected]:[email protected]


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2

Channels

How does each customer segment

want to be reached?

Through which interaction points?


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3

Test Hypotheses: Channel

3


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4

Two Critical Questions about Channels

First one is obvious: How do you wantto sell your product?1

Second one is subtle, but more

important than the first: How does yourcustomer want to buy your product?

2


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5

How Do You Want to Sell Your Product?

Yourself

Through someone else

Retail

Wholesale

Bundled with other goods orservices


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How Does Your Customer Want to BuyYour Product?

Same day

Delivered and installed

Downloaded

Bundled with other products

As a service


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The Sales Channel

Web

System Integrators

Direct Sales Force

Value-Added Resellers (VARs)

Dealers

Distributors

Retail/Mass Merchants

Your

Company

Your

Customers


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Types of Channels

OEM

VAR

Reseller

Distributor

Direct Indirect

Web

Own stores

Sales force


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How Are Channels Compensated?

Commission

Percentage of sales price Discounted pre-purchase


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How Are Channels Motivated or Incented?

Money! what makes them the most?

Training Marketing to the channel

SPIF (Product Incentive Fund)


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Economics of Channels

11


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Channel Economics: Direct Sales

Cost of Goods

(Supply Chain)Profit + SG&A + R&D

EndC

onsumer

EU

Dis

counts

Revenue

List

Price

Source: Mark Leslie, Stanford GSB


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Channel Economics: Resellers

Cost of Goods


EndC

onsumer

EU

Dis

counts

Reseller

Revenue

List

Price



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Cost of Goods


Channel Economics: Distributors/Resellers

EndC

onsumer

EU

Dis

counts

Reseller

Dis

tributor

Revenue

List

Price



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Channel Economics: OEM or IP Licensing

Your Product Becomes

Your Customers COGs


EndC

onsumer

ResellerProfit + SG&A + R&D

Cost of Goods

(Supply

Chain)

EU

Dis

counts

Reseller

Dis

tributor

M

aster

Dis

tributor

Profit + SG&A + R&DCost of Goods

(Supply Chain)

Revenue

List

Price


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Example: Book Publishing

Publisher NationalDistributor

Printer Wholesaler Retailer Customer


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Book Publishing

Percent of

Retail

For their efforts, distributors take an

additional10% of retail. That means

you get 35% of retail, the distributor

gets 10%, the wholesaler gets 15% andthe retailer gets 40% less any discount

they offer the end customer

Publisher

National

Wholesaler Distributor Retailer Customer

35% 15% 10% 40%

$7.00 $3.00 $2.00 $8.00 $20.00


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Book Publishing Economics

Publisher

National

Distributor Wholesaler Retailer Customer

Wholesale costs

Markup

Allowances

Payment

guarantees

Payments

Bills

Creditguarantees

Paymentguarantees

Return rights

Credits


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Book Publishing Delivery

Publisher

National

Distributor Printer Wholesaler Retailer

Merchandisetitles

Sellmagazines

Acknowledgereturns

Determineallocations

Dispose ofreturns

Prepare film(content)

Establishidentity

Createdemand

Preparegalleys

Receive Schedules Print orders Bundle

counts Film

Print and shipmagazines

Deliver orders


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So how do you decide what is the

best channel for your business?

It depends!

It depends on the nature of product/service youare selling?

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The Channel as a Customer

Some products are embedded in others (OEM)

Some products are resold by others (VARs) Some products are distributed by others

Whos the customer?


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Distribution Complexity

Evangelists

Service

Technicians

Direct Sales

VARs

Retail

Web, Telesales

Systems Integrators

Mainframes

Minis

LANs

PC Servers

Desktop PCs

PrintersKeyboards

Toner

WANs

Global Systems

Solution Complexity

M

arketingCom

plexity


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Bits vs. Atoms

Bits

Physical

Product

Web Physical

Channel


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Product and Channel Are Bits

Bits

Physical

Product

Web Physical

Channel

Rapid Agile andCustomerdevelopment

Fastest to acquire earlycustomers and scale


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Web 2.0 Product and Channel Are Bits

Bits

Physical

Product

Web Physical

Channel

Google

Twitter

Facebook

Zynga Cloud Services


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Product Is Bits, but Channel Is People

Bits

Physical

Product

Web Physical

Channel




Traditional saleschannel

May require installation


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Traditional Enterprise Software

Bits

Physical

Product

Web Physical

Channel

Google

Twitter

Facebook


Microsoft

SAP

Oracle


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Physical Products Sold Over the Web

Bits

Physical

Product

Web Physical

Channel

Rapid Customer

development Logistics, shipping and

manufacturing critical

Customer service







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Killing Traditional Storefronts

Bits

Physical

Product

Web Physical

Channel

Zappos

Amazon Cafepress

Netflix

Consumer electronics

Google

Twitter

Facebook


Microsoft

SAP

Oracle


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The Factories May Be in China

Bits

Physical

Product

Web Physical

Channel

Rapid Customer

development Logistics, shipping and

manufacturing critical

Customer service



Longer customer

feedback cycle May require large

capital requirements forscale





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We Still Make Things that Need Salespeople

Bits

Physical

Product

Web Physical

Channel

Zappos

Amazon Cafepress

Netflix


Google

Twitter

Facebook


Cars

Solar panels

Wind turbines

Bookstores


Microsoft

SAP

Oracle


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In Class Exercise

32

Channels 3

Documents