How To Build & Manage Effective Distribution Channels

Let's talk about building and managing effective distribution channels...third party distribution channels that can help your company to take itself to the top of its market and beat your competition. Many companies, for years, have looked at third party distribution channels as a vehicle for fast acceleration of their sales. There's a plethora of different types of third party distribution channels out there that you can select, develop and manage for sales success. Those range from value added resellers, to system integrators, to manufactures reps, to OEM's, to distributors, and to agents as well as international representatives. All of these types of third party distribution channels are immediately available to many companies and can be deployed for a fraction of the cost of a direct sales force.

In addition to that, the cost can be very variable and can be absorbed by the actual sales revenue as it's produced, as opposed to being up front, fixed and unavoidable when you deploy a direct field sales team or inside sales team.

One of the biggest mistakes that companies make when they deploy a third party channels however, is to think that the companies that they sign up are going to do the work on their own without any support from you. One of the things that we've seen over and over again as companies spend a huge amount of resource and effort to go start, create, deploy third party system integrated value added reseller networks but they don't provide any resources, any management, any support to them after they come on board. If your company is thinking about deploying those kinds of third party distribution channels one of the hidden costs associated with that which you want to make sure that you factor in, in addition to discounts and commissions that you're going to pay, is the amount of sales support, distribution, product support, technical support that you're going to need to proactively supply to those resellers in order to make sure that they're optimized in their sales performance for you.

A lot of companies think that if they can sign up a network of system integrators and resellers they'll go sell on their own. But the fact is, when the distribution channel of the ones that provide active support in the form of lead generation, in the form of sales support, and in the form of technical support training for their reseller, they gain active share from their resellers, so their resellers are thinking about promoting their products verses their competition. All sorts of incentives, rewards and recognition programs are available to be put in place just as you would put in place for your direct fields sales team if you were to have a direct sales force.

The rule of thumb that I've found is treat your resellers and third party distributions channels just as if they were your own employees. Understand how to motivate them, how to get to know them, create relationships with them, spend time with them in the field, make sure that they have the resources and support in order to be effective at their job and you can win the distribution channel and get them selling for you. If you think that you're going to get something for nothing from third party distribution channels, you're probably wrong. The fact is, nothing is free in sales and it certainly implies to the notion of third party distribution channels. We'll talk in subsequent articles about how you can actually improve the management you sell through using some basic techniques of channel management.

How to Handle the Distribution Channel Section of Your Marketing Plan

If you are planning to recover a distressed business, you need to develop a Turnaround Plan. This plan will contain a Marketing Plan that should be a standalone component and distinct from the overall Turnaround Plan. A critical component of the Marketing Plan is the Distribution Channel section.

The Distribution Channel section of the Marketing Plan should describe the methods used to distribute products and services in the current company and what, if any, changes will occur in this channel after the business turnaround occurs. It should emphasize any key aspects of the new distribution channel that will improve the chances for success of the overall Turnaround Plan.

To illustrate what to included in the Distribution Channel section of the Marketing Plan, we will use a fictitious company called XYZ Company. XYZ Company sells high-end medical lasers used in surgery.

[Beginning of excerpt from Marketing Plan]

Distribution Channel
In the current company, all educational materials are delivered via printed books and physical classes at our onsite educational facility.

In the transformed company, all educational products and services will be delivered over the Internet or at the customer location. We will provide service and support coverage remotely with a 24-hour support line. Overnight Federal Express will handle any required equipment repairs or exchanges.

The inventory will consist of online products stored in files and backed up in database repositories online. The Internet service provider will maintain these databases. Therefore there will be no physical inventory. This will result in a significant reduction in facility costs.

All products will be distributed using online methods. A typical transaction for an educational product will take place as follows:

Customer arrives at the XYZ Company website and clicks on Products. From the product menu, customer selects XYZ2590 Expert Training module, Online live session.

If the Customer has an account with XYZ Company, then they go into the Order Entry system; if they do not have an account, they are sent to the New Account menu, their email address is added to the main Customer List in the XYZ Company database, and the customer is sent to the Order Entry system.

- Customer specifies the dates for the online class
- Other add-on products are offered.
- Customer is moved to the checkout screen.
- Customer enters payment information.
- Payment information is verified and a confirmation message is displayed.
- Customer receives a printable receipt and class information in their email box.

If the order included any downloadable products, the links for these products are sent to the customer email box.

[End of excerpt from Marketing Plan]

Defining the Distribution Channels For Your Business Startup

Whether you are still developing your business idea or already know exactly what you want to do, it is important to define the best distribution channels for your product, for your customers, and for you. The distribution channel is the way your product gets to your customer. Traditionally, businesses relied on a single distribution channel. These days, the most successful startups use multiple routes to reach a broader customer base.

For some products, the route to getting it into customers' hands is self-evident. For specialized, service-only ventures, you or your employees will personally deliver to the client, either on-site or at your place of business. Selling retail products, on the other hand, allows multiple options for distribution -- online sales, brick-and-mortar storefront, direct sales through sales reps, etc. Consider the distribution routes used by your closest competitors. Are they using the most effective channels? Is there any way to modify or improve on the standard methods that will still be appropriate for your product?

Your target customers also play an important role in the distribution channels you select. If you are selling directly to the end user, you probably have more options than if you are targeting distributors to market your product. Think about it from your target market's perspective. What is the easiest way for them to access your product? Under what circumstances are they most likely to be looking for what you offer? If it is easier for your customers to buy from you than your competitors, they will come.

Your own work style and personality are also relevant in considering distribution channels for your product. If the idea of spending your days chatting up strangers is distressing to you, then a brick and mortar storefront is probably not the best option. If spending countless hours in front of your computer sounds agonizing, avoid any wholly web-based options. Be honest about your preferences -- one of the greatest advantages of starting your own business is the freedom to choose how you get work done. Don't sabotage yourself by choosing a business that requires you to be out of your comfort zone for every sale.

Many modern startups have a broad range of choices about how to distribution their products. Consider all three factors -- your product, your customers, and yourself -- before deciding the best routes for your business. If possible, consider developing multiple distribution channels within your startup, even if you only start with one initially. The more ways your product can get to your customers, the bigger your potential market.

Setanta Sports - Channel Distribution

So we all know that Setanta has ceased trading in England, Wales and Scotland, however it is still operating in the Republic of Ireland, Northern Ireland, USA, Canada, Australia and Africa. Now what does this mean for the distribution of the Premier League's live UK television rights? Previously Premier League TV rights were split into six packages, each consisting of 23 live matches, making a total of 138 games being screened on live television each Football season.

Now you may think that this is not a big deal, and some big shot company like Sky will just reap the profits and monopolize the market holding all six packages for the season....but you'd be wrong. Industry regulators demand that the six packages must be split between more than one broadcaster, so in actual fact there must be a direct competitor to Sky as no single broadcaster are able to own all six packages. This deal was agreed in 2005 with the European Commission. Previously Sky, held four of the six packages(this will be held for the 09-10 season), meaning that the British broadcaster will show 92 live matches next season.

The remaining two packages of 46 games, which were previously held by Setanta were taken over by American broadcaster, ESPN. You may also recall that there were talks of ESPN bailing out Setanta.....guess they had other plans in mind. ESPN have launched a new channel to screen the newly-acquired live matches, that consumers will be able to purchase on top of their current Sky TV subscription as well as other British providers such as Virgin media.

Now this is for the current season.....what will happen in the 2010-2011 season is a different story, my guess is that Sky will attempt to gain more of the games from ESPN. Possibly upping their number of games from 92 to 115 or so, leaving ESPN with 23 games. May that be the case or not, we may be in for a power struggle in the coming year between New commers to the GB premier league ESPN and GB veterans Sky!