Changing your company’s distribution channel approach can be a good strategic move, but new opportunities also create new challenges.

Many companies have gone into electronic commerce without fully considering the consequences, or preparing the sales force for the new challenges.

Good old Kotler
As a marketer, you are probably very familiar with the four Ps of marketing – Product, Price, Place and Promotion. True, these Ps can be a bit sketchy and narrowly defined, but they can be very useful as a discussion platform for what it takes to be successful...

Products: Even the most stubborn technicians and engineers usually admit that it’s not easy to maintain a sustainable product advantage. These days, it’s much too easy to copy competitors’ products, so good products are rarely enough.
Price: There’s almost always a downward pressure on price. That’s why it’s important that you can produce cost effectively. However, most companies find it difficult to consistently having the lowest prices on all products whilst remaining profitable.
Promotion: Branding is not in itself a magic formula. Your communication must pave the way and facilitate the sales process, but it’s not in itself enough.
Place: Distribution - including how you sell your products to your customers - is gaining greater interest. Ultimately, orders are placed in connection with the distribution.

One or several channels to market?
In Business-to-business settings, there are typically four main ways you can reach your market:

• Internet (electronic business and commerce)
• Telemarketing (canvass selling, customer centres)
• Channel partners (distributors, agents)
• Sales force.

You’ll notice that the order of these is not entirely coincidental. The Internet is usually the cheapest distribution channel, whilst your own sales force will be the most costly.

It’s well-known that a sales force is expensive, so there has recently been a trend towards less costly distribution channels, including the Internet. On the other hand, it is recognized that the Internet channel has a number of weaknesses which is why it’s best viewed as one out of several ways to reach the market.

A number of companies have either embraced or rejected the notion of electronic commerce without first carefully checking whether it is actually financially sound. Yes, it’s tricky to carry out extremely accurate analyses, but you can get very far with some level headed examinations.

It really boils down to how much more money you can make by increasing your sales and reducing your cost. If you do such a roughly accurate analysis, you’ll probably see that the simpler and more well-defined your products, the greater the lucrativeness of utilising electronic commerce.

That’s because, simple and well-defined products do not require guidance and by and large there’ll be limited need for negotiation. Why not, then, let technology take over as a distribution channel for these types of products?

Focussing the sales force on more complex matters
Since the sales force is the most expensive distribution channel, it’s clear that it should be used optimally. The sales force resource is better used selling complex products and handling large customers.

That also means that sales teams should no longer chase every single opportunity and that can create some resistance - “what about my good, old customers - they’ll be let down this way”. Many sales people will realise that their job will be somewhat more difficult, because they now have to concentrate on complex products and solutions and selling to bigger customers.

Here’s how you can help the sales team:

1. Analyse big customers (find decision makers, uncover choice criteria, etc)
2. Give the sales team the necessary tools (for instance a working CRM system)
3. Redesign sales training to focus on new tasks
4. Measure and reward behaviour according to new policies.

Key Account Management
It’s amazing how many companies have introduced Key Account Management (KAM) apparently for the sake of it. KAM is not just done with just a new business card title, if the sales team members continue working as they have always done.

One frequent reason is that sales persons do not know enough about their big customers, even though they have been clients for some time.
If, for instance, the sales persons do not know all persons involved in the decision making process, they’ll just continue selling to the same people to whom they’ve always sold.

Another important reason is that many companies focus more on market share than customer share, even if it’s almost always easier to sell more to existing customers than to new ones.

So, ask yourself whether sales colleagues are getting encouragement and reward for selling both deeper and wider into existing customers instead of wasting time and effort trying to chase new customers.

At Clarity, we help you apply fact-based marketing by providing insight into markets, customers, and competitors.

If you'd like to know more about how we do this, and how we might be able to help you with optimising your distribution channels or other marketing issues, just call us now at 0870 745 6899 or fill in the form below to arrange an initial free-of-charge consultation:

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