If you are in business, chances are you have a channel. But is it really working for you? Here are 8 things to do to make sure your channel is working well for you and your customer.
1 – Build a Channel Map
A channel is the way in which you connect with, and deliver value to, the end users of your product or service. While it’s often referred to by its ‘old-school’ name of Sales Channel, it has a much bigger role than simply a pipe to push product or services through to end-users.
The concept of an end-user or consumer is important when we consider our channel; for example – a parent will buy a toy, but it’s their child that is the end-user or consumer. The parent in this case is still considered a crucial part of the channel.
What does your channel involve? Who are all the players that are involved in creating end-user value?
The chart shows some of the possible combinations used to reach the market.
Any activity you undertake, whether it adds value or not, adds cost. And who pays for that? The customer through the price paid for the product of service, and/or the channel members (including you) through lower margins.
Make sure your channel communications are operating in both directions so that each participant can be sure that their activities are adding value and not doing anything that is superfluous or subtracts value for the end customer.
Focus on creating value for the end user as efficiently as possible . Recognize that highly efficient end-to-end value streams offer a fantastic competitive advantage.
And to do that you will first need to take a good look at the current state of your channel, and to do that you’ll need a map. Below is a map that shows how all the pieces can fit together. What does your map look like?
Start by drawing the map of your Channel on your white board.
2 – Monitor the value your channel members add
Each channel member must contribute unique value to the end-user. It should be value that they alone are best suited to provide. Anything else reeks of inefficiency. The best way to examine this is from the customer’s perspective. You need to look at:
- End-users ability to ‘find’ your offering (retailers, promoters, geographic presence. Does your channel:
o Make it easy to find your products or service?
o Address all the appropriate verticals and geographies?
- How quickly end-users may need it (distribution, points of sale). Does your channel:
o Hold stock?
o Offer same day shipping?
- End-users ability to understand the value (communications, consultants, direct sales, demonstrations). Does your channel:
o Have on-site expertise?
o Offer trials?
o Provide live or video demos?
- The value end-users hope to derive (is it a complete solution or does it need integration, installation, calibration, training, customer service). Does your channel:
o Offer needs analysis and consulting services?
o Provide installation or integration?
o Have a 24 hour help line?
o Have good web resources?
o Offer calibration?
o Guarantee valuable outcomes?
Start by listing all the things that your channel contributes to the value your end user gets.
3 – Get Your Message to the End User
A good idea around the boardroom table, with great charts and diagrams, and a flawless strategy often peters out long before it gets through the channel to the end user. We call this message decay. The owners of your channel members may get it but does it make it all the way to the front line?
- Strategy.Your company has worked hard to develop its overall strategy that will guide your business for the next 3 to 5 years.
o Do all of your channel members know what that strategy is?
o Do they support your strategy?
o Is their strategy in synch with yours?
- Position. Your strategy has led to crafting a market position that explains where you will play, what you have to compete with and how you will win.
o Does your channel know your market position?
o Are they differentiating you, and your offering, correctly?
o Are they selling to the market segments you envisioned when you created your offering?
o Out of ignorance, are they selling on price whilst you have built a position based on quality?
- Brand Promise. You have made a promise to your target market that says what they will get if they buy your stuff or do business with you. Your channel becomes part of that promise.
o Are they delivering on your brand promise?
o Does their brand reflect yours?
o Are they following all of your visual brand guidelines?
o Does their marketing activity and customer service fit with your brand?
Start by interviewing your channel’s line- staff and their customers.
4 – Capture and Listen to Channel Feedback
An effective process must have feedback loops. Some call it reporting, some call it sales metrics, some call it customer service. You and your channel members are all part of the same value stream. What should you be getting feedback on? Well…everything! But that would overwhelm so think of a dashboard – you don’t need all the data all the time but you do need to know high-level status and if things are going sideways. Some key areas are:
- Competition. Your channel members are closer to your competition than anyone else. You need to know about new products or services, lost deals, new resellers, promotions, mergers and acquisitions, new competitors.
- Customers. What are they saying about their current needs, their future needs, how well they like / dislike your stuff, why they are buying or not buying.
- Value Flow. From your channel’s point of view, what can be done to improve the value flow – remove constraints to increase speed and volume? What can they tell you about the user experience – pricing, delivery, packaging, features, and referrals?
- Conversion ratios. How well is the channel delivering (and selling) your value.
Start by looking at your (new) Channel Map and noting where the points of measurement are, or aren’t. Can you see value flowing and building?
5 – Monitor and Constantly Improve Channel Effectiveness
Your channel is not only responsible for fulfillment but should also be developing new business. You need to know what channel members are doing and how effective they are:
- Lead generation. Are they generating leads? What quality are they? How are they doing it? How many? How can you work together to improve?
- Lead leakage. Are you losing deals to other solutions offered by your channel member? Or to their competition? How many? Why? How can you work together to improve?
- Lead conversion. What percent of leads become prospects? What percentage become sales? What is the time / cost to generate and convert each lead? How can you work together to improve?
Start by mapping out your channel members’ sales and data capture processes.
6 – Increase your Mindshare
You should have 100% mindshare of channels that you ‘own’ (think direct sales). But even then, the channel may have various products and services competing for its time; are you cannibalizing or expanding revenues? Is this aligned with your strategy?. For shared channels that carry other products and serve other value chains, you will have less mindshare. Is it enough? Some key things to understand are:
- Financial. What percentage of each channel member’s revenue, gross margin and total transactions does your stuff represent? Most companies measure top line so Revenue is an easy question. Most well run companies know where their profits come from so Margin is a better question. Really well run companies know how to manage overhead so % of transactions is a truly insightful question.
- Competition. What other products or services do they carry? Are they direct or indirect competition? Direct is an either or product. Indirect can simply be competing for your end-users’ budget or attention.
- Importance. Compared to other suppliers, how important is your stuff to them in terms of their profitability? How important in terms of strategy?
Start by discussing the questions above with each channel member.
7 – Stay Flexible and Adapt
Too often companies become stuck with a legacy channel structure that is almost impossible to modify. Their channels were built decades ago and have calcified into combative systems that may add value for the channel members but little for the end-users, or you. End users are constantly evolving how they buy. How often do you conduct a blank sheet rethinking of your channel? Maybe you aren’t doing it but you can bank on it that new competitors are. Is it time to eat your young? Factors to consider are:
- Channel agreements: Are they fair and do they give you (and your channel) the flexibility they need?
- Territories and Verticals: As they say ‘It’s a global world’ and people can buy from anyone in the world in any currency they chose. How does your channel use this to create more value for the end customer (and you too).
- Aligned strategies: Do you know what your channel partners are trying to accomplish. Do they know what you are trying to accomplish?
- Use of technology: What is your technology road map? How does that fit with your channel and end- users?
- Information sharing: What do you share with each other? How frequently?
Start by taking a blank sheet approach – “if I was starting from zero today, what would I build?” and explore the difference.
8 – Own and Manage your Reputation
Your channel is the last link, the final twitch on the threads of the fastball, your last chance to influence your end-user’s value perception. How do you measure this? One way to do this is to conduct an NPS survey.
Net Promoter Score ® This is a very effective and simple way to assess the value your product or service is being delivered effectively to the end user. We use a short survey asking how likely are they to recommend your stuff to a friend/colleague/relative? This can provide you with channel-wide feedback as well as feedback by individual channel members resulting is extremely useful insights.
Start by conducting an NPS survey of your channel members and their customers
Whether you are building a new channel, or assessing an existing one, your sales channel is a critically important part of the value stream that starts with your suppliers and flows to the end user. You need to have intimate knowledge of how your channel works , how well it is aligned with your own strategy and how to keep it running efficiently. Key areas of investigation are:
1. Build a Map– build an end to end value creation map
2. Monitor Value Add – How does your sales channel add value – what is missing? What should be cut?
3. Manage your Message– Is your story making it all the way to the end user or does it decay?
4. Capture and listen to Feedback– Do you have the information traps in place to know what’s going on?
5. Monitor and Improve Effectiveness – How well do members convert leads to deals?
6. Increase Mindshare – Would they miss you if you left? Do you rock their world?
7. Stay Flexible – What’s changed since you last adjusted your channels?
8. Reputation – What do people really think about you? What should you do about it?
Andrew Penny is in the business of helping companies grow. He has provided advice to hundreds of small and mid-market organizations in just about every vertical market. With almost 20 years of consulting experience he brings unmatched knowledge of what works and what doesn’t. He and his team at Kingsford Consulting look at all aspects of revenue generation and operational efficiency. He works directly with business leaders offering insights and an effective sounding board for new ideas.
Andrew is Chair of the Ottawa Chamber of Commerce’s Economic Development Committee, Advisor to the University of Ottawa’s Telfer School of Business MBA program and holds the CMC designation with the Canadian Association of Management Consultants. He has a BA (Hon) from Concordia University in Montreal and an MBA from the University of Ottawa.