Channels are crucial because they are the connection point between your company and your customers and allow you to reach, sell to and support them. If something goes wrong with your channels, this could prevent you from selling your products and can thus seriously affect your profits and the sustainability of your company.
Companies have discovered that a thoughtful multi-channel approach can reach more customers in more markets and at a much lower cost. Customers tend to stick with vendors who make it as easy as possible to do business through the channels that the customer prefers.
One can distinguish between three different types of channels:
- Direct channels (sales reps, key account managers etc.)
- Indirect channels (distributors, resellers, retail stores etc.)
- Direct-to-consumers channels (telemarketing, ecommerce, direct mail etc.)
According to Friedman (2002), the following six steps help you to select the right sales channels:
|1. Build a universe of channels||Make a list of all the channel options available to you to then carefully select the right ones for your business. Take a look at what channels your competitors, vendors and partners use and subdivide the channels if necessary.
When you do your analysis, you should consider why they use those particular channels, who they are serving with them, how well these channels are working and what developments might happen in the future. Lastly, you should think about out of the box channels that you can create by entering into partnerships with companies or by applying other strategies.
|2. Apply customer filters||As the channels are designed to reach the customer, the first filter to apply is the customer filter. Go back to your universe of channels and rule out any channels that your customers don’t use or don’t want to use.
When eliminating and keeping channels, consider your customer’s needs and if the channel allows them to fulfill their needs. A great way to do this is to make a table where you plot your channels against the customer’s needs and see where the best fit is.
|3. Apply product-channel fit filter||The channels you select have to fit with the products you are selling. Sometimes it is quite obvious and other times it can be quite difficult to find the right fit. In order to narrow down the vast array of channels, you can look at the following criteria:
The more complex your products are, the more customised the sales process has to be and then only certain channels are eligible. If your products are complex the benefits might not be obvious and need more explanation and thus the right channels have to be chosen to adjust for that. You should also consider whether your product is risky in the sense that if it doesn’t fit for a customer they will lose money / time or other resources.
|4. Apply ‘custom’ filters||You should also consider whether your company needs any custom filters such as profitability or time-to-market.
The different channel can vary widely in their cost, depending how labour intensive they are. Hence, you should consider this when choosing your channel. If you want to sell products quickly, consider which channels are most appropriate. You can add further customer filters if you feel like your company needs them.
|5. Build ‘first cut’ market coverage model||This will define how your chosen sales channels are going to be applied to your target market. There are 3 ways to go about this:
Selective market coverage - where you allocate certain channels to certain markets so there is no overlap between channels.
Intensive market coverage - refers to a model where all channels sell most/all products to all customers, which allows customers to do business however they want and thus offers maximum flexibility.
Hybrid market coverage - refers to a model where premium customers are getting tailored, high-contact channels, whereas the rest of the market is served by a lower cost multiple channel mix.
|6. Pilot-test new market coverage model||Before you release the new market coverage model to all customers, it should be pilot-tested to minimize risks and eliminate problems early on. For your test, you should choose a market that is representative but low-risk and select one or two channels (one direct and one indirect), and you should make sure to monitor results by putting in place key performance indicators (KPIs).
Once you have tested an analysed the results, you will be able to tell which channels are most suitable, and if you have doubts, conduct some more tests before starting to serve the whole market.
(adapted from Friedman, 2002)
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Friedman, L.G., (2002). Go-to-market strategy: advanced techniques and tools for selling more products, to more customers, more profitably. Routledge.