In today’s market, competition is fierce. Losing sales and market share to competitors is unacceptable. Over the years, I have observed that high-performance manufacturers and service providers consistently execute several key tactics that differentiate them and ensure their presence and market share despite changing market dynamics.
In this article, I have outlined ten of the most important tactics that winning marketers routinely do to maintain their lead. Let these ten tactics serve as a checklist to conduct a self audit of the effectiveness of your sales channel strategy.
Capture and Use Detailed Market Information
A broad and deep understanding of the market is critical to the creation of a sustainable market position. Winning marketers have developed a “map” of their market–including the most actionable segment definition, size/outlook, profit potential, buying behaviors and decision processes, needs/expectations, competitive dynamics and sourcing preferences. The market map provides an objective context for internal discussions regarding strategy alternatives and resource allocation decisions.
Accelerate the Planning Process
Markets are changing faster than ever before and so must your planning process. You cannot get caught in the never-ending cycle of analysis/planning that is characteristic of many organizations today. My view of the planning process of the future is one that is “decision centric” rather than “analysis centric.” The planning process should be designed to use the existing body of knowledge of your organization. Senior managers should be more involved, and involved earlier, in your annual planning process.
Rather than a management meeting to culminate a lengthy analysis conducted by several layers of the organization, the plan should be initiated by senior management. Use the senior management meeting to kick-off the planning process and define the strategy, then let the organization validate the assumptions. The result will be a quicker developed plan, much more reflective of current market reality, and one in which senior managers are much more invested.
Streamline Your Organization for Speed and Flexibility
Effective market management will require speed in decision making and flexibility in action. An organizational structure that supports this will consolidate channel management under one group within the manufacturer’s organization. A single point of contact will lend efficiency to the marketer’s channel relationships. In addition, consolidating all products, programs, and channel relationships will serve to enhance the manufacturer’s market power.
Regain the Power of Your Brand
One of the most vital tools the manufacturer has to retain customer relationships and power in the marketplace is the brand. Therefore, manufacturers will be well served to reinvest in establishing brand value. This will be done by clearly articulating the value your brand stands for and consistently delivering against this value. Brand value will be a powerful tool to secure your market presence. Many channel partners will see the brand value as a deterrent, thus keeping them from switching allegiance to your competitor. Others will see the brand as a clear benefit, causing them to seek you out. The result in either case is more effective “shelf space” in the market.
Win at the Local Level
A local market management philosophy may be the single biggest factor that separates the winners today. Customers have a wider range of channel choices than ever before. Information is more widely available. Customer segments are using these choices and information to evolve their buying behaviors in different ways and at different rates. The result is that the “map” of local markets is likely to vary widely, and the most appropriate channel strategy is likely to vary significantly from market to market.
The successful marketer will recognize these differences. Local market managers will be given the autonomy and flexibility to “customize” the local channel strategy to local conditions. Corporate policies serve as a set of guidelines and programs serve as a menu from which the local manager designs the unique channel mix to optimize share and profitability. Winning marketers have recognized that it often requires different skill sets and compensation for the local market manager operating under this construct versus a traditional sales capacity.
Create Multi-channel Strategies
The channel spectrum that has evolved in most markets is characterized by a wide spectrum of choices, ranging from highly efficient, logistics-oriented channels to highly focused, service-oriented businesses. Few manufacturers can assure optimum market presence by selling via only a single channel type. Market share leaders will include a variety of channels in their mix–and provide a differentiated offering to/through the channel to reflect the unique characteristics, needs, and market value of each channel type utilized.
Make Smart Choices in Channel Selection
One of the key changes occurring in most channel classes is consolidation. It is rare to find the true independent, “mom and pop” operator today. (Even when you do, that mom and pop is often part of a buying group or cooperative to help boost its market power and buying leverage.) Given this consolidation, the manufacturer runs a higher risk than ever before associated with a poor choice of channel partner. There are fewer alternatives to offer you market presence and share if your existing relationship does not pan out.
Winning channel managers address this risk through a more considered approach to channel selection. More time is spent up front defining the ideal characteristics of a channel partner. These characteristics usually include financial and management capabilities to support growth, sales/marketing capability to support manufacturer programs/goals, and operations considerations to help drive efficiency. Potential partners are put through a more rigorous screening process against these characteristics, resulting in fewer mistakes. The partners that are selected participate in a more rigorous planning and review process to help the channel show continuous improvement when measured against the ideal template.
Tackle Channel Conflict Management Strategically
In an environment where multiple channel strategies are the norm, conflict management should be considered an integral part of the strategy planning process. A fair and impartial approach to channel management helps control conflict through a variety of “ground rules”–around access to brand, product authorization, and economics that reflect the role of the channel. Additionally, clear policies and consistent enforcement around issues of authorization, channel standing, management issues and termination provide the most level “playing field” for your channel partners, allowing for effective conflict management.
Use Channel Pricing to Manage Market Complexity
Too often today, manufacturers still base their channel pricing on volume. This approach fails frequently in the environment where the manufacturer utilizes multiple channels with significantly differing business models. The volume-based approach invariably favors the logistics-oriented channel over the service-based models. This leads to destructive channel conflict for the manufacturer by putting relationships with the service-based channel model. Compounding this risk to the manufacturer is the fact that we find service-oriented channels are usually more effective in “creating” customers for the manufacturer, rather than just “harvesting” existing customers.
A more pragmatic approach to channel pricing is a value-based compensation model. This approach places a value on each of the functions the channel performs for the manufacturer, allowing your overall payments to the channel to more directly represent their role in your go-to-market strategy.