This is a presentation that I have given over the last few months to groups of companies from Switzerland, United Kingdom, Columbia and Mexico who are just scoping out how to Go-to-Market in the USA.

1. Choosing &
Managing
Sales Channels
for Your Startup
Stephen N. Davis
“Partnering With Clients to Drive
Sustainable Profitable Growth”

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What We’ll be Covering
 Developing your channel strategy
 Types of sales channels
 What it takes to succeed
 Managing channel relationships
We will not be talking
about online sales

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Not Having an Adequate
Profile of Customers

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Start-ups Fail

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Not Having an Adequate
Profile of Customers

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Confusing the End-User
with the Buyer

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Confusing the Buyer With
the Channel Partner

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Channels NOT In-Sync
with Targeted Buyers

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Thinking Your “Value Proposition”
is the Same as Theirs

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Failure to Consider Licensing
or Joint Ventures

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Not Enough Margin For ChannelsCommon Sales Strategy
Mistakes

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Insufficient Marketing BudgetCommon Sales Strategy
Mistakes

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Not Aligning
Marketing & Sales

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Going to the Channel
Before You’re READY

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Don’t Focus on ALL
Potential Buyers

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Establish a
BEACHHEAD

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Find Passionate
Customers

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Brand Ambassadors

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Build the
Buyer’s Profile

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People Don’t Strive for
the Unknown

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People HATE Change

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They Protect
the Status Quo

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What’s The
Buyer’s Journey?

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Customer Demographics?

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What is Their PAIN?

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What do They FEAR?

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What Can They GAIN?

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What Do They
Care About?
Value
Consumer Business
Health
Status
Environmental
Family
Finance
Convenience/Time Saver
Usability
Lower Risk
Saving Money
Productivity
Customization
Customer Engagement
Market Penetration
Competitive Advantage
Increased Sales

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Where Do You
Find Them?

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Who or What
Influences Them?

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How Do They Want to
Engage and Buy?

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Who is Involved in the
Purchase Decision?

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Types of Sales Channels
 Direct 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.)

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A product with better
distribution will always
win over a superior
product with poor
distribution or customer
access. It’s not fair. It’s
not right. But it’s reality!
Stephen Davis
Managing Director,
CXO Advisory Group
“
”

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Channel Costs

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Channel Costs

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Channel Costs
Freemium
Cost
Minimal
Touch
Channel
Sales
Inside
Sales
Direct
Sales
Force

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Computer Distribution Channels

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What Do These Firms
Have in Common?

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Do You OFFER a Whole Product?
The
Product
Pre-Sales Support
Post-Sales Support

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Choosing a Channel
 Considerations
• Fill whole in product offering
• Link to end-user targets
• Fit with existing channels
• What role do they play in the sale?
• Geographic coverage
 How do I generate business for them?
 Can I support them?
 Do the financial requirements make sense for
our company?
 Do I have enough profit margin for them?

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Do You Have Enough Profit
Margin for the Channel?
Cost of Goods
Gross Profit
Suggested List Price (SRP)
or Street Price
End User
S. G. & A.
62%
15%
23%

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Do You Have Enough Profit
Margin for the Channel?
Cost of Goods
Suggested List Price (SRP)
Your Revenue
End User
Consumer
Retailer
Street Price
S. G. & A.
Gross Profit
15%
50%
23%
12%

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Do You Have Enough Profit
Margin for the Channel?
Cost of Goods
Profit +
S.G. & A
Suggested List Price (SRP)
Your Revenue
End User
Consumer
Retailer
Distributor
Street Price
15%
50%
23%
10%
2% Gross Profit
Is
NOT ENOUGH
S. G. & A.

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Is Your Buyer Package
up to Snuff?

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Is Your Buyer Package
up to Snuff?
 Marketing materials
 Product Liability Coverage
 Price lists
 Outline of your marketing campaign
 Product samples - Packaging
 COOP/MDF funds and campaigns
 In-store merchandising
 Prospect & customer correspondence
 Sales training & support for their personnel
 End user training & Support

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Strategic Partner/ OEM
/ Private Label

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 Quick penetration – less risk
 Established market presence
 Provides localization of product
 Handles all marketing, sales,
distribution & support
 Provides ongoing market analysis
 Provides ongoing competitive analysis
 Usually won't carry competing product
 Tough sale – long sales cycle

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Approaching a Potential Strategic Partner/ OEM /
Private Label
 Be Ready to Explain Key Product Advantages
 Do Your Homework
• Why should they be interested?
• Fills competitive hole
• Enhances existing product line
• Prevents having to compete against you
• You could develop market in your home country for their
products
 How easy it will be to work with you
 Support you will give them
• Technical
• Training

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Key Issues in Licensing
Agreement

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Key Issues in Licensing
Agreement
 Marketing Obligations
 List Price of Product
 Performance Requirements
 Warranties
 Limitation of Liabilities
 Development Support
 Rights to Updates
 Termination
 Source Code Access
 Specs & Deliverables
 Acceptance
 Grant of License
 Terms
 Payments
 Bookkeeping Requirements
 Ownership
 Use of Trademarks
 Training
 Decision Making Authority

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Grant of License

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Specifications & Deliverables

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Acceptance Testing

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Payment Terms

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Source Code Access

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Contract Termination

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Distributors/Wholesalers

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What Distributors Look For
 Products with proven demand
 Product's packaging, ease of use & install
 Marketing budget
 Quality tech & Customer support
 Ability to scale up to demand
 Financial stability
 Training
 Distributor staff time required
Only 1% - 2% of products presented get chosen

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Manufacturer’s Representative
 Alternative to own sales force
 Both authorized to solicit orders in designated
area
 Receive salary or commission
 Usually bear no credit risk
 Maintains no inventory
 Requires same support & training as internal
salesforce
 Carries several lines
 References, References, References

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Typical Rep Territories - USA

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Typical Rep Territories - Canada

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Sourcing GOOD Reps
 Customers and potential customers
 Known GOOD Reps
 Companies with complimentary products to yours
 MANA (Manufacturers Agents National Association)
• Manaonline.org
 ERA (Electronic Representatives Association)
• Era.org
 AIM/R (Association of Independent
Manufacturers'/Representatives)
• aimr.net

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Rep Agreement Caveats
 Most rep agreements have commissions due on order
• Commissions should be paid ONLY AFTER YOU COLLECT
 Commissions should be on NET Sales
• Sales MINUS returns and any upfront market development
funds paid to the retailer
 Splitting commissions
• Between rep territories
 Territory definition
 National (House) accounts
 Termination issues
 Automatic renewal

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Retail

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Retail

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Retail

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Retail Packaging that Sells

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Slotting Fees

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Most Overlooked
Marketing/Sales Opportunity

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Association Marketing
- Over 7600 Trade Associations
- Over 21K Professional Associations
- Over 151K Associations Worldwide

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How the Channel Views
Vendor Internet Plans

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Final Thoughts

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Take the Long Term View

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Train Your Partners Well

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Frequent Communications

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Avoid Channel Conflict

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Align Marketing
& Sales

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Sales Says

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Marketing Says
“We Send
Qualified Leads
To Sales &
They Fall into a
Black Hole”

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10 More Min/Week
= $57,000
Source: IDC Sales Enablement Research
Additional Revenue Per Year

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Better Aligned
Source: MarketingProfs
Faster Growth Year-to-Year Basis
Than Competition

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Close More Business
Source: MarketingProfs
Better at Closing than
Non-Aligned Competition

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Source: MarketingProfs
Less Customer Churn
Than Competition

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Review Channel Strategy Yearly

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Driving Profitable Growth

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Driving
Profitable Growth
We help companies optimize business
development and marketing; accelerate
sales; and seize the most attractive
growth opportunities.

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CXO Advisory Group
 CXO Advisory Group is a strategic operations advisory
and management firm comprised of proven C-level
executives with both breadth and depth of experience.
 CXO Advisory Group Team members have achieved
success in positions ranging from: President/CEO to
COO, and VPs of Sales, Marketing, Corporate
Development and Human Resources.
 Has proven success in business development and in
building US sales and distribution channels

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How Can We Help You?
Business Strategy Services
• Audit business practices and organization
• Evaluate product and pricing strategies
• Evaluate effectiveness of sales channel
• Assess effectiveness of existing sales and marketing
programs
Market Entry Program
• Analyze competitive landscape
• Market launch strategy and plan
• Channel strategy and programs
• Establish sales channels
• Generate sales and manage relationships
• Identify and develop strategic partnerships

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How Can We Help You?
Sales Channel Management
• Review and revise sales channel strategies
• Channel partner identification, prospecting and recruitment
• Eliminate channel conflict
• Channel contract development and negotiation
Interim Management Resources
• Interim CEO, COO, CMO, CSO
• Interim VP of Sales and Marketing
• Consultant on staff
• Launch team coaches

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How Can We Help You?
Venture Advisory Services
• Fine tune operations, business strategy and market entry
• Assist with due diligence
• Strategic business assessment of portfolio companies

96. Stephen Davis
Interim COO/VP Sales & Marketing |
Business Consultant | Sales Channel and
Business Development Expert | Author &
Speaker
Contact Information:
“Partnering With Clients to Drive
Sustainable Profitable Growth”
Phone: (508) 528-7571
Email: sdavis@cxoadvisorygroup.com
Website: www.cxoadvisorygroup.com
Linkedin: www.linkedin.com/in/stephendavis
Twitter: twitter.com/stephendaviscxo