Today’s Topic:
Sales & Sales Channels
Designing and Managing
the
Selling, Implementation and
Customer Support Process
Course Schedule
 The
Marketing Function (Lenovo)
 Sales & Sales Channels (GolfLogix)
 Internet-based Marketing (HubSpot)
 R&D: Product Development (Guidant)
 Operations (Crocs)
 Product
Launch (Invisalign)
 Final Exam on Product Launch (Emotiv)
Last week: Marketing Learnings
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Elements of the Marketing Mix (C+4P)
Basis of mix decisions: market & financial
objectives and competitive advantage
Importance of product positioning
Positioning factors:
- positioning with? (target customers)
- positioning against? (relevant competitors)
- desires & fears of positioning target
- positioning content (differentiators,benefits)
Promotion (marcomm): choosing the vehicle(s)/
media that provides best and most cost-effective
access to the target
Today’s Agenda
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The basic sales functions
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Types of sales channels
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Choosing sales channels
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GolfLogix--- sales channel selection
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Readings and assignment for next week
(HubSpot)
Sales & Sales Channels
“Nothing (good) happens until
somebody sells something”
Sales Channels: Learnings
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The basic sales functions: (promotion), selling,
fulfillment, and service
Channel value-added: Higher and lower valueadded channels; value-added functions
Specific channel options: direct (multiple types),
OEM, integrator, VAR/VAD, distributor,
dealer/retailer, etc
Channel decision criteria: considerations in
matching products, customers, and channels
Channel economics: channel margin, profit
Channel conflict: coordinating multiple channels
Channels are Critical:
which channel(s) you use affects…
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The success you’ll have in selling
(revenues)
What you have to sell
Who you are selling to
The price you get for your product
The design of the product
The functions you’ll have to perform (and
associated expenses) in marketing, sales,
manufacturing, R&D, IT and finance
---- almost everything!
Three Basic Sales Functions
Promotion/marketing communications creates the
environment for successful sales: making the customer
aware and interested
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Selling: convincing the customer to buy
(may sometimes be achieved by promotion alone)
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Fulfillment: taking the order, delivering
the product, installing/configuring/testing
Service: delivering post-sale customer
support (repair, maintenance, training,
consultation/helpline, upgrades, returns, …)
Channel Functions:
One or more of………..
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Information
Local advertising
Product/brand
choices
Selling
Availability
Packaging
Logistics
Installation/
Configuration
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Integration
Customization
Training
Maintenance
Advice/helpline
Warranty/returns
Upgrades
Repairs
Testing
Techsonic
Which channel(s) for 901?
Which channels for GPS?
 Marine
dealers
 Mass merchants
 Direct: Techsonic catalog
 (Direct: internet)
Required for sales success…?
promotion
selling
fulfillment
service
Channel Capabilities
function
promotion
Mass
merchants
Marine
dealers
low
medium
selling
very low
high
fulfillment
high
very high
(marcomm)
service
low/medium
medium/high
higher value-add channel
“High(er) Value-added” Channels
are used for products that are:
– Technically complex, and/or…
– Higher priced, higher margin (%)
– Hard-to-sell/explain (incl. first-of-type);
require sales efforts in addition to
manufacturer-initiated promotion
– Application-specific
– Require significant support services (install,
configure, maintain, customize,
help/advice)
……..and conversely for
“low(er) value-added” channels
Two Additional Considerations
 Your
channel partner(s) is selling
(many) other products, not just
yours
 Channels
can (sometimes) accept
lower gross margins on products,
if they can make money on service,
support and add-on sales
High-Tech Channel Options
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Direct (own salesforce, agents, telemarketing,
direct mail, catalog, internet)
Original Equipment Manufacturer (OEM)
Distributors (“warehouses”)
Dealers/Resellers/Retailers
VARs/VADs
Systems integrators (sell or refer)
Consultants (refer)
Franchises (uncommon for tech products)
Channel Alternatives
-- 5 most common in color --
OEM
Systs
Integr
VAR
“You”
Dealer
Distrib
Endcustomers
Manufacturer-Channel
Relationship Elements
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Price, and volume discounts
Contract timeframe
Degree of exclusivity
Sales area (region or customer type)
Product support
Selling support
Marketing support
Delivery commitments (logistical
support)
…
Deciding on Channels - 1
Ability to satisfy customers’ needs
 Customer decision processes
 Customer preferences/expectations
 Market coverage
 Product characteristics (e.g., complexity)
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Deciding on Channels -2
Competitive strategy/situation
(advantage, shelf space, mind share,
preemption, response)
 Availability of partners
 Competencies of potential partners
 Channel management (conflict, cost)
 Financials (revenue/margin and
expense; start-up and ongoing)!!
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higher value-added channels have higher expenses,
and need higher gross margins to make a profit
Channel Economics --- example
List price = $100
Manufacturer
channel
price
COGS = 35
expenses = 20
65
Channel
Partner
end
user
price
90
COGS = 65
expenses = 20
gross margin % = 30/65
= 46%
gross margin % = 25/90
= 28%
OI % = 10/65
= 15%
OI % = 5/90
= 6%
Those who sell for you
require lots of support……
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Training (product and sales)
Ongoing technical support
Selling support
Marketing “air cover”
Advertising support (“co-op”)
Promotional programs (incl. pricing)
Ordering/sales management systems
Logistics (delivery/expediting, parts,
returns,…)
Sales Readings
for 11/2 Class
 Going
to Market - read to understand
types of sales channels, and the reasons
for choosing them
 GolfLogix:
Measuring the Game
of Golf (case)
GolfLogix Case Summary
A
start-up company in 2002
 Uses GPS technology to aid golfers
 Two product versions: “distance
only” and “complete system”
 Currently selling to/through golf
courses
 Considering also using retail
channels (would require a
modification to their product)
Sales questions for 11/2 class
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What are the most significant end-customer and sales
channel benefits of the each of the GolfLogix
products?
What is the market potential (number sold and
GolfLogix revenues) of each of the GolfLogix
products?
Who are the appropriate target customers for the
Distance Only product? For the Complete System?
What are the positives-and-negatives of selling
through golf courses? Through retail channels?
If only one of the channels can be chosen, which one
should GolfLogix use? Given the option of selling
through both channels, should GolfLogix do that?
Sales Channels: Learnings
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The basic sales functions: (promotion), selling,
fulfillment, and service
Channel value-added: Higher and lower valueadded channels; value-added functions
Specific channel options: direct (multiple types),
OEM, integrator, VAR/VAD, distributor,
dealer/retailer, etc
Channel decision criteria: considerations in
matching products, customers, and channels
Channel economics: channel margin, profit
Channel conflict: coordinating multiple channels
Reading for Next Week:
Internet Marketing
HubSpot:
Inbound Marketing and Web 2.0
(a case that focuses on
“new” methods of promotion
using the internet)
HubSpot Case Summary
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Timeframe is 2009
HubSpot was founded in 2006; currently has
~1000 customers
Sells “inbound marketing” software that
businesses use in their marketing/promotion
efforts
HubSpot has built its business by (exclusively)
using inbound marketing techniques and its own
products/tools
To grow it’s business further, it faces questions
about which customer segment to target, how to
generate customer interest/contact, and which of
the “interested” customers to pursue…
…and whether to engage in outbound marketing
Mix elements: Promotion
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Branding (creating a company or product
“image”)
Advertising (multiple media; paid and free)
 Direct marketing (mail, catalog, telemarketing,
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internet)
“Reference” customers (testimonials)
 Public relations
 Industry relations (trade orgs, industry
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analysts,…)
Trade shows and events
 Price promotions
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Inbound vs. Outbound Marketing
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Outbound (traditional) marketing “pushes”
information about the company and its products
out to customers
- mass and targeted advertising
- trade shows and events
- direct mail, etc
Inbound marketing “pulls” customers and tries to
get them interested enough to contact the
company on their own initiative
-search engines
- blogs
- social media, etc
Assignment Questions
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Which customers should HubSpot target: Owner Ollies
or Marketer Marys? Why?
(see next chart for things to consider in making a decision)
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Does HubSpot have the right set of products for your
chosen target customers? If not, what changes should
they make?
What are the positives-and-negatives of HubSpot’s
software-as-a-service pricing strategy?
What benefits would undertaking some outbound
marketing have for HubSpot? What outcomes, if any,
could outbound marketing deliver better than inbound
marketing?
(see second following chart, AIDA, for some hints)
Selecting Target Customers:
some considerations
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Segment size and revenue opportunity
Customer benefits
Customer interest (incl. current relationships)
Customer ability-to-pay and leverage
Competition/market coverage
Sales issues: sale time/complexity, cost,
channel and associated profit margin
Cost to serve/support
Customer loyalty/lock-in
Customer lifetime value
Strategic value
AIDA Marketing Model
 Attention
capture customer’s attention; create awareness
of the company and/or product
 Interest
create interest in the product’s features,
benefits or value
 Desire
customers want it and/or feel that they need it
 Action
customer takes action; buys the product