1. Presents: Driving Growth Though Distribution Strategy and Sales Management Students to Start-Ups Entrepreneurial Skills Workshop Series

2. Agenda Distribution Channels –Examples –Channel selection –Channels management Sales Management –Sales priorities –Sales management model –Building sales capabilities –Sales productivity Case Studies

3. Strategic Innovators What do these firms have in common?

4. Strategic Innovators It was not just what they sold but, how they sold it! (reconfiguring the value chain to achieve lower costs and/or better service)

5. Distribution Channels - Examples Field sales reps Corporate resellers Master or local distributors Integrators Value-added resellers Manufacturer’s agents Brokers Franchises Telemarketers Inbound telesales agents Internet sites Extranets e-Marketplaces Direct Mail OEM’s Retail Kiosk’s Strategic alliances Agents (consultants, affiliates, etc.)

6. Channel Continuum (illustrative) Value Add Of Sale Cost per Transaction High Low High Low Internet Tele- marketing Tele- marketing Retail Stores Retail Stores Dis- tributors Dis- tributors VAR’s Field Sales Field Sales “Low Touch Channels” “High Touch Channels” Direct Channels Indirect Channels Direct Sales Channel

7. Channel Selection… Channel strategy must start with the customer –Who are our target customers, what do they need and how do they want to do business with us ? –What drives them to make a purchase? –What kinds of experiences are they seeking from their vendors? –What has real value to them in the sales process – value their willing to pay for? –What channels do they use today, and what channels are they planning to migrate to over the next year? –What specific actions would cause them to increase significantly their volume with your firm?

8. Channel Selection… Channel strategy must be aligned with the maturity of the market –Do you need to develop a new market or fulfill needs within an established market? –Are there dominate vendors or distribution channels already established? –Are you targeting a narrow or broad market? –Do you have the funds necessary to build all the required services (pre and post sales) to compete? Can you spread the costs over enough volume to be competitive? –Do you have a narrow or broad product offering? –Who are the key purchase influencers?

9. Channel Selection… How you sell has to fit with what you are selling –Are the channels selected the ones that customers actually use to buy the things that you are selling? –Channels chosen must make economic sense, given what you are selling –The channel selected must be well suited to the complexity of your offering –You can not be everywhere at all times for every customer There is a trade off between market coverage and control

10. Sales Control vs. Coverage… ControlCoverage Goal Channel Approach “We want to dominate and lead in our core customer base, to protect the brand, and control the relationship with the customer” “We want to reach and serve new markets and customers, and to grow as fast as possible” Field sales force High-end partners, thoroughly trained, with binding contracts covering all aspects of the sales process Retail, mass merchants Telesales Distributors Value-added resellers Internet Strategic alliances 3 rd party service agreements Etc. Source: “Go to Market Strategy” by Lawrence Friedman

11. Market Coverage Example 1 Large, enterprise customers Mid-sized accounts Small office / home office Simple, “off the rack products Mass-customized products Markets Products Complex, unique solutions Source: “Go to Market Strategy” by Lawrence Friedman (unserved market) Mail order catalog Corporate Resellers VAR’s, Solution Partners Direct, Field Sales Reps

12. Market Coverage Example 2 Large, enterprise customers Mid-sized accounts Small office / home office Simple, “off the rack products Mass-customized products Markets Products Complex, unique solutions Source: “Go to Market Strategy” by Lawrence Friedman Direct, Field Sales Reps Business partners + Telechannels + Web sites

13. Integrated Multi-Channel Model - Single Channel Direct Field Sales Business Partners Tele- channels Direct Mail Lead Generation Qualification Internet Sales Task Channel Bid & Proposal Negotiation/ Close Sales FulfillmentCustomer Support Sales Cycle Cost Source: “Go to Market Strategy” by Lawrence Friedman

14. Integrated Multi-Channel Model - Reduce Cost & Increase Sales Direct Field Sales Business Partners Tele- channels Direct Mail Lead Generation Qualification Internet Sales Task Channel Bid & Proposal Negotiation/ Close Sales FulfillmentCustomer Support Sales Cycle Cost Source: “Go to Market Strategy” by Lawrence Friedman

15. Integrated Multi-Channel Model – Example 1 Direct Field Sales Business Partners Tele- channels Direct Mail Lead Generation Qualification Internet Sales Task Channel Bid & Proposal Negotiation/ Close Sales FulfillmentCustomer Support Sales Cycle Cost Source: “Go to Market Strategy” by Lawrence Friedman (Over $25,000) (Under $25,000)

16. Integrated Multi-Channel Model – Example 2 Direct Field Sales Business Partners Tele- channels Direct Mail Lead Generation Qualification Internet Sales Task Channel Bid & Proposal Negotiation/ Close Sales FulfillmentCustomer Support Sales Cycle Cost Source: “Go to Market Strategy” by Lawrence Friedman Sales support for key accounts

17. Partner Channel Development… 1.Define the scope of the channel 2.Define partners’ role in the sales process 3.Develop robust and attractive channel policies 4.Build a strong base of partners 5.Build a strong channel support infrastructure 6.Measure and manage channel performance Source: “The Channel Advantage” by Lawrence Friedman

18. Sales Management…

19. What are you selling… to whom? Customer Fragmentation Value Proposition Complexity High Low High Low Call Efficiency Dominates Call Effectiveness Dominates

20. Sales efficiency & effectiveness… Definition Typical Performance Levers Driving Mechanisms Sample Measures Sales Efficiency Sales Effectiveness How to get in front of the right customers, for the right amount of time, at a minimum cost Territory design / coverage Activity reporting systems Compensation systems Sales support Systems Structures Coverage Call rates Cost per call Once there, how to maximize sales potential Selling skills Account strategy Application knowledge Effectiveness models Recruiting Training Coaching Sustainable margins Repeat business Source: Huthwaite, Inc. 1988

21. Setting objectives / priorities… Current Business New Customers More From Current Customers More of current product use? Cross sell other products? Higher prices / better product mix? Eliminate unprofitable accounts? What kind of customer? - Size - Type of business - Attitude / usage Where? What geography? What products / services?

22. Requires different sales skills… “Hunters” Current Business New Customers More From Current Customers “Farmers”

23. Sales management model Strategy/ Mission Sales Support Sales Force Deploy- ment Individual Selling Skills Coaching & Super- vision Recruiting & Training Infor- mation Resources Motivation & Compen- sation Sales Strategy Effectiveness Efficiency Capability Building What is the value proposition and the role of the sales force in its delivery? Is the sales force (and channels) organized for optimal coverage of selected markets? Does the sales force have adequate coaching & supervision? Does the recruiting and training match selling skill requirements? What critical selling skills are required for the sales role in the value proposition? Is support adequate to maximize the selling effort? Does the incentive compensation plan meet management’s objectives and pay the sales force fairly? Are information systems being fully utilized to support the selling effort?

24. Building your sales capabilities… Motivate & support sales force Develop skills for effective selling Organize for efficient coverage Develop sound selling strategy Clear segmentation Explicit objectives, goals and priorities Winning selling proposition Realistic time frame/expectations Right structure Right size Territory / account Assignments for adequate coverage Define necessary skills Develop training, recruiting and coaching programs for: Product knowledge Buying process Sales methodology Planning & execution Align measurement and reward systems: Compensation Recognition Provide necessary organization support (systems, etc.)

25. Example sales productivity model… Sales Force Productivity Profit contribution per $ direct selling cost = $4 Selling Margin 40% profit contribution margin Selling Rate Revenue hr. actual selling time = $1000 Sales Force Utilization Hrs actual selling time per day per rep = 5 Direct Selling Cost $500 / day per rep Effectiveness Profit contribution hr. actual selling time = $400 Efficiency Direct selling cost Hr. actual selling time = $100 ●—●●—● ●—●●—● X Compensation plans Sales tools Value proposition Skills assessment Territory / opportunity planning Partnerships Reduced overhead costs Centralized sales admin Sales force automation

26. Case study #1 (The early years)

27. Case study #2 (The early years)

28. Case study #3 5 Year Old S. CA Professional Services Firm

29. Additional Resources  Books The Channel Advantage, Lawrence G. Freedman, Timothy R. Furey Go To Market Strategy, Lawrence G. Freedman  People UCI Center for Entrepreneurship and Innovation CEI@Merage.uci.eduCEI@Merage.uci.edu SCORE Orange County www.score114.orgwww.score114.org

30. UPCOMING WORKSHOPS April 4 th Nuts & Bolts of Business Structure and Licensing April 18 th Refine Your Unique Value Proposition RSVP CEI@MERAGE.UCI.EDU Students to Start-Ups Entrepreneurial Skills Workshop Series

31. Questions Mike Mata Michael.Mata@SCORE114.org

32. Thank You!