CHANNELS & SALES IN NEW VENTURES MKTG 241 Dr. Dawne Martin March 29, 2012

Dates and Learning Objectives Paper 4 – Due Tuesday, April 3 Quiz 4 – Thursday, April 5 Paper 5 – Financials, Due April 10 Learning Objectives: To review the contents of Paper 4 – Marketing Strategy and Tactics To investigate changes in the nature and purpose of channels of distribution To analysis the decisions needed to create a ;channel that implements strategy and accomplishes goals

Paper 4: Marketing Strategy Due Tuesday, April 3 Marketing Strategy Marketing objectives and relationship to overall corporate (or enterprise) objectives Identify key strategies issues such as: Value proposition and competitive advantage Positioning relative to the competition Marketing Programs Product Features & Benefits Quality Packaging and labeling Related services Branding Product development & management Promotion Channel levels & types Channel functions Channel member selection criteria Managing channels and multiple channels

Paper 4 (cont.) Pricing Strategy Pricing objectives Cost & breakeven analysis Customer perceptions and demand Competitive situation – reference prices Promotion Strategy Personal Selling Role of sales person Number of sales people Qualifications for sales people Sales Management – selection, training, compensation, evaluation Public relations & publicity Advertising Goals & objectives Audience Exposures Costs Sales Promotions Web-site Support - Customer Service Strategy

Channels of Distribution Unique combination of distribution and sales effort that creates a way to reach the target customer with customer’s desired point of purchase service level sought producing effective sales opportunities for business in a cost effective manner Strategic Benefits Sales growth Customer value Competitive advantage Video: entrepreneurship entrepreneurship

Channels Haven’t Changed Much Direct or indirect Mass production and consumption have lured intermediaries into the junction between buyer and sellers: These intermediaries have either Taken title to the goods or services during the flow from producer to customer In some way facilitated this by specializing in one or more of the functions that must be performed for such movement to occur Distribution channels Flows of title and functions The intermediaries who have facilitated them Prentice Hall © 2009Rethinking Marketing, 1st Edition 12-6

Dealing with the channel for a product or service ranks as one of the key marketing quandaries Distribution channels generally involve relatively long- term commitments If managed effectively over time, they create a key external resource They exhibit powerful inertial tendencies Once in place and working well, managers are reluctant to fix what is not broken Prentice Hall © 2009Rethinking Marketing, 1st Edition 12-7

Prentice Hall © 2009Rethinking Marketing, 1st Edition 12-8 So... Is anything happening? Recent years have in fact witnessed significant changes Result of major shifts in the environment of business Changes in legislation have Freed channels Broken restrictive trading practices Changes in economic circumstances Changes in cultural and social values Changes in technology Result has been disappearance of some channels and development of new Book stores versus Amazon, Itunes

Prentice Hall © 2009Rethinking Marketing, 1st Edition 12-9 Back to Basics: What is the purpose of a distribution strategy? “ Goal of marketing is the matching of segments of supply and demand” —Wroe Alderson 1958 Purpose of a distribution channel Right quantities of the right product or service available Right place Right time Distribution strategy unique—depends on physical location Old saying among retailers three keys to success 3 L’s, location, location, location

Internet Technologies Have Three Major Effects on Distribution 1. The death of distance Distance will have substantially less effect on distribution cost 2. The homogenization of time In a physical market, time and season predominate trading and, by definition, distribution Activities that occur by time of day and in social and climatic seasonality Virtual marketplace is atemporal; a website is always open Seller need not be awake to serve the buyer Buyer need not be awake, or even physically present, to be served by the seller Web is independent of season Prentice Hall © 2009Rethinking Marketing, 1st Edition 12-10

Prentice Hall © 2009Rethinking Marketing, 1st Edition The irrelevance of location Any screen-based activity can be operated anyplace on earth No longer is location key to most business decisions One can dispute whether the term even has meaning in the case of Internet pureplays Defining location itself becomes onerous Is it the address where the firm is officially registered? Is it where most of the people employed by the firm work? Is it where the server is physically situated? Is this true for all channels? In what businesses would location and time continue to be major marketing considerations?

Compare Marketspace to Conventional Bookstore – 5 Criteria 1. Content: Conventional bookstore sells books; Amazon.com sells information 2. Context (Interface with Customer): Conventional bookstore is in a shop with books; Amazon.com through a screen 3. Infrastructure: Building, people, lots of books, good location; Amazon.com requires fast, efficient server and a big database 4. Content: Conventional bookstore can never stock all books in print; Amazon.com stocks only those books that sell in great numbers, yet paradoxically stocks all books 5. Infrastructure: Conventional bookstore location is important; Amazon.com location does not matter Prentice Hall © 2009Rethinking Marketing, 1st Edition 12-12

Implications 1.Dis tribution media rather than distribution channels for most services and many products —they can create Virtual markets ( Virtual communities (NuNomad.com and LaptopHobo.com) Virtual worlds ( Primary relationship Not between customers With mediated environment with which they mutually interact “The medium is the message” complemented with the medium in the product Prentice Hall © 2009Rethinking Marketing, 1st Edition 12-13

Implications 2. Diminished effect on marketers’ ability to differentiate the product or service Commoditization: Process by which the complex and the difficult become so simple and easy that anyone can do them Solution Niche market too small to be attractive to others Rapid innovation to stay ahead of the pack Monopoly Mass Customization 3.Dis-intermediation and Re-intermediation – networks and universal service Prentice Hall © 2009Rethinking Marketing, 1st Edition 12-14

Channel Design Design Where are how are customers used to buying? Identify needs of customers and product Convenience, need to touch and feel, time pressure Need for information, education (sales effort) and consulting services, on-site service Need for smaller quantities, more product assortment Stocking and availability Financing Available channels and relative ability to deliver needs services

Example You are a forest products producer who has developed a “fire proof” pine roof shingle – what are the customers and product needs? What kind of information do construction contractors need? Are there any issues with building codes? Where is the product needed? On what time schedule? What are the relative costs of shipping versus stocking? What are the existing channel options?

Channel Management What tasks does the channel need to provide? How will you compensate the channel for the services provided? How will you ensure that the services are delivered at the level you need to maintain product and service quality? What support do you need to provide to the channel members? Marketing materials? Financing or floor planning inventory? Training and sale support?

Entrepreneurial Selling You are it! Sales is about identifying, building and developing value for customers You can’t makes sales calls to everyone – choose your target customers carefully You can develop sales skills – listen, ask questions, let the customer define the problems and benefits of solutions (SPIN Selling – Situation, Problem, Implications, Needs/Payoffs) Video

Traditional role of sales Management is preoccupied with making sure the salespeople are Making right number of calls Calling on the right accounts Pushing the right products Selling at the right price Closing the right number of deals

Principles Behind a New Mindset in Sales The sales function must become a source of competitive advantage in companies Great sales organizations are run strategically and with strategic intent Sales managers and salespeople must see themselves as entrepreneurs, and the sales department should be the most entrepreneurial area within companies Sales must be an opportunity-driven, rather than a resource- constrained, activity Innovation is a major responsibility of those in sales The ability to create, develop, and manage relationships with customers is the single biggest way in which salespeople create value in the marketplace The sales function is not separate from the marketing function Peak performance in sales is most likely when organizations have dynamic management systems to support the sales force Prentice Hall © 2009Rethinking Marketing, 1st Edition 13-20

Changes in markets affect sales Today’s market highly fragmented Terms such as relationship marketing and one-to- one marketing are being introduced to describe Market segmented into dozens and even hundreds of narrowly defined segments Individual customers must be approached as unique market segments Customer expectations continue to ratchet upward More emphasis on customized solutions for customers Prentice Hall © 2009Rethinking Marketing, 1st Edition 13-21

Result of Market Changes Those in sales must have more knowledge at their fingertips Customers expect salespeople to know about them and to make specific recommendations Speed has become a key source of competitive advantage Customer expectations are on the rise regarding response time to questions and demands Customer demands can overload salespeople who experience Information overload Role overload (burnout) Prentice Hall © 2009Rethinking Marketing, 1st Edition 13-22

Prentice Hall © 2009Rethinking Marketing, 1st Edition Salespeople “leverage” organizational resources Adept at tapping into a variety of resources within their own firms on behalf of customers Production Customer service Product development Credit and finance Senior management Build relationships with customers and key members of own firm Salespeople deal with a large number & variety of individuals within client organizations Understand the dynamics of how people influence decision- making process, more challenging Teams and networks make buying decisions No longer one or two individuals Growing reliance on strategic alliances Package “total solutions” for their customers Need to analyze lines of power and influence

Death of the Sales Force? 1. The creative sales force Creativity is soul of sales organization Vital in every facet of sales management and personal selling Creativity is about destruction and construction Abandonment of certain assumptions Rejection of accepted precepts Willingness to challenge established methods “Creative abrasion” Facilitate divergence Leadership that produces convergence Prentice Hall © 2009Rethinking Marketing, 1st Edition 13-24

Prentice Hall © 2009Rethinking Marketing, 1st Edition The creative sales force—cont. Results in concepts or solutions that can disrupt the work lives of people in companies Making them break out of patterns and comfort zones A fresh start, new way A path toward what can be To create is to matter, count, make a difference have an impact, be a source of value

Prentice Hall © 2009Rethinking Marketing, 1st Edition The expeditionary (or innovating) sales force Creativity results in innovation Novel methods Unusual solution Core competency Innovation is dynamic Must know the customer intimately Learn from competitors’ success and failures Salespeople are front line of the organization Monitoring external environment Deciphering patterns and trends Predicting change Developing strategy Expeditionary sales force is one that Leads customers Leads competitors Leads its own firm

Prentice Hall © 2009Rethinking Marketing, 1st Edition The strategic sales force Two dimensions 1. Connection between company as a whole and sales force 2. Connection between overall direction and priorities of the sales organization and the day-to-day operational decisions made by sales managers and salespeople Need for technology to assist in the process Document customer contacts Automate and customize communications Track customer purchase behavior and future needs