Switching Channels

An integrated channel-marketing campaign will make the most of your incentive dollar

BY: DOUG PRESS, PRESIDENT

All too often, companies run sales incentives to motivate the sales staff, distributors and dealers by using a Go-to-Market Model: a description of the path your products and services take, from the point of manufacture to the point of consumption. Typically ignored is any consideration of altering how you distribute and sell your business from one channel to another (e.g., doing more business through manufacturers reps and less through in-house salespeople). By examining this "leveraged channel mix," you can dramatically lower selling cost and increase profits.

The most important aspect of designing channel sales incentives is that many of these individuals are not your employees and therefore have choices with respect to the loyalty of their selling efforts namely, to push your competitor's product over yours. Understanding this, the way to win is by addressing the question, "What's In It For Me?" and structuring a channel incentive for each participant - resulting in a true integrated marketing mix.

To address this, our company uses a four-step review process before implementing a customized sales performance - improvement campaign.

Step 1: Understand

• Markets: What are your customers' requirements and business environments?
• Competitors: Analyze strengths, weaknesses, opportunities and threats from competing products.
• Cost Structure: Review various projected volume levels.
• Differentiation: Why would our solution work for this

Step 2: Select

This is where we determine the desired channel mix, calculating the percentage of our business we want to be handled by each selling channel. Customers come in many different shapes and sizes, and exhibit just as many different buying behaviors. The trick is to sell profitably; everywhere the customer wants to buy. To do this, you must take advantage of all leveraged channels to achieve your particular coverage and gross margin requirements.

As an example, the computer industry's channels (in order of lowest-value to highest-value channel) are:

• Electronic outlets (e.g., Prodigy, Internet)
• Direct marketing (i.e., mail order)
• Department store or mass merchant
• Computer dealer (both store-front and business-to-business)
• VAR (value-added remarketer), a company that makes software for a particular brand or hardware and then sells the two together
• Agent, or independent rep
• Manufacturer's sales force

Each channel has its own cost structure and customers from which you can benefit.

Step 3: Execute

In this step, the company develops an integrated marketing and incentive campaign to uniquely and cost effectively address each channel in its new Go-to-Market Model, as well as the ultimate consumer or other end-user. Performance incentives recognize the synergistic benefits that accrue from harmonizing the "push" and "pull" forces of your marketing plan from advertising channel management to incentives and recognition. A well-orchestrated plan for sending your signals to employees, the trade and consumers will assure an increase in "mind share", and hence market share.

Some examples of sales incentive programs that can be integrated:

• Merchandise catalog award programs and market development funds that use point earnings to steer the channels.
• Travel recognition programs to reward top attainment against specified marketing objectives. Companies can use a status-based sales club (e.g., Presidents Circle) or individual travel awards.
• Dealer council trips, which serve to bring customer information back to the manufacturer about how their products and relationships are performing.
• Consumer sweepstakes, rebates and other promotions to drive consumer awareness, shelf space and store traffic.

Step 4: Review

If you can't measure it, you can't manage it. So we suggest the careful development of a set of standardized performance measures by which success is judged. For most channels, these include revenue, market share, gross profit and customer satisfaction. Measurements should also include inventory turns, accounts receivable and channel satisfaction.

Having performed an effective review of your Go-to-Market Model, you will undoubtedly be adding several new sharp shooting channel participants and shifting your coverage mix.

With ready rifles, carefully aimed on new revenue and profit targets, your sales incentive will direct your new marketing partners to fire away…bulls-eye!

- July 1995 -