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Archive for October, 2010

Channels Of Distribution: What Can Manufacturers And Resellers Expect From One Another?

A manufacturer that produces a product must identify the right combination of direct sales resources and indirect channelssuch as distributorsto effectively reach its target customers. Too many times a manufacturer chooses the wrong channel partner has unrealistic expectations or does not know what to do to ensure accountability for the sale of the product.

Firms that make many of the gotomarket strategy mistakes can suffer from a loss of market share encounter customer satisfaction problems and experience a struggle for growth says John Henderson President and CEO of Frank Lynn amp; Associates Inc. a market strategy consulting firm in Chicago.

Smart Business talked with Henderson about how firms can choose the right reseller partner for their product or service and what to expect in return.

Can any company expect great sales from a channel partner without giving it an exclusive sales territory?

Many suppliers product or service feel that they get more attention from resellers or third parties by giving them an exclusive territory. Our view is that while granting an exclusive territory may give you peace of mind you have limited your market access. Very few resellers are capable of effectively reaching all the target enduser customers in a given market.

The more successful companies we work with have segmented their customer base and understand how to match certain types of resellers with certain types of customers. As a result you end up with a nonexclusive type of gotomarket approach that utilizes multiple channels to market.

Should a company expect a third party to generate demand for its products/services?

Our view is that it is the supplier’s responsibility to generate demand. The thirdparty reseller for the most part services the demand. While resellers can steer demand to a specific brand/supplier in many cases the reseller markets the availability of a supplier’s product or service. They inform the customer as to where the product can be attained but are not very good at educating a customer on a new product or service. The supplier creates the demand for the product while the reseller assists in the pullthrough merchandising and fulfillment of the product.

How do a supplier’s business objectives need to be adjusted for each market?

Manufacturers and service providers that analyze their market position by geography or vertical market characteristics are usually going to find themselves in different competitive positions within each segment. Their market share is likely to be different by market their growth opportunities will be different and their competition may be different. As a result the channel partners they need to use to get to market may be different as well.

A common flaw occurs when management creates a generic strategysuch as a generic growth strategynot recognizing the dramatic differences by market segments. This type of shotgun approach is seldom successful in the long term.

Should all resellers be treated equally?

No. Every indirect channel reseller essentially has a business model that defines a set of activities it performs for the manufacturer or the supplier. Costs are directly related to the number of activities and functions that the reseller can or will agree to perform. Some perform more services for a supplier than others. Problems result when the supplier fails to acknowledge the full list of activities and functions that the reseller performs and fails to compensate the reseller adequately through commissions fees or discounts. If this occurs the reseller cannot afford to perform all of the desired functions.

If the manufacturer overpays a reseller for the level of functions and activities performed then the reseller will generally pass the savings on to the customer in the form of a reduced price.

How important is it for firms to enforce their policies with a distributor/reseller?

It is extremely important. First some of them may be contractual and if you do not enforce them they will no longer be binding. Other policies may be stated in documents that convey your expectations of the reseller relationship.

Manufacturers often do not enforce policies/requirements out of fear of retribution by the reseller or for fear that they do not have enough leverage in the relationship to demand that the policies be followed. These are not good reasons. It’s up to the product or service supplier to determine what they value from the reseller and enforce their values. If you do not value it then do not make it a requirement.

Do not worry about upsetting a reseller by asking him or her to follow policies you have set forward. You are more likely to upset the resellers that do follow the rules when you do not enforce the rules with others. If two distributors or resellers are competing with each other it often gives a cost advantage to the one that does not adhere to your requirements.

About the writer:  John Henderson President and CEO of Frank Lynn amp; Associates has more than 26 years of extensive consulting experience in diverse industries. He developed the firms channel economics practice and is a noted author speaker and management trainer.

Cdbc

By all accounts we’re heading into difficult economic territory. Credit’s tightening. Advertising spending in the traditional spaces isn’t predicted to increase as it has in years past.

What’s a marketer ad agency or advertising rookie to do? I think the current situation calls for CDBC.

Last week we debuted “Conversations About the Future of Advertising” cosponsored by the Minneapolis College of Art and Design and the Minnesota Interactive Marketing Association with an insightful presentation called “Dada.Data.Alpha.Beta” by Jan Leth Vice Chairman Global Digital Creative at Ogilvy Mather.

From my point of view Jan’s presentation offered at least two keys to surviving the economic storm: Data and Beta. To those I add Curiosity and Community.

Curiosity. It’s about learning to adapt.

When asked why he practiced so much the saxophonist Branford Marsalis said something to the effect of “If a storm comes and washes the bridge out I want a bunch of different options for getting home.” How many different marketing solutions are you prepared to discuss and deliver? I’m an old school TV and print creative. I’ll admit to being less than curious about the intricacies of Search in year’s past. I’ll also cop to being foolish. The as of 2006 9.4B allure of search engine marketing isn’t subsiding. It’s gaining in marketing priority faster than ever before. So what am I doing with my free time now? Playing around with Facebook’s Social Ad program operating a Google AdWords account and absorbing as many insights as I can from the smart people. And if I already was a Search expert I’d likely be very curious about livecasting social network development or mobile. In difficult times it’s time to get curious about how marketing works outside your comfort zone.

Data. The new key to storytelling.

We’re talking about the effect of numbers. Jan argues one intriguing result of data is the opportunity for better storytelling. I agree. If you haven’t already I suggest making data your friend especially when budgets tighten. Buy lunch for anyone who can run you a report from Nielsen NetRatings Plan or comScore. Use Social Ads to discover for example just how many of your target audience exist on Facebook i.e. “out of 19708060 people on FB in North America 6120 people 18 are interested in Marketing while 4940 are interested in Advertising”. It’s not just about making the case for your ideas. Data can often reveal hidden connections and insights that lead to more compelling and more useful ad ideas. Need proof? Read The Davinci Code. I believe an understanding of and familiarity with data how it’s generated and how to leverage it will define the success of advertising strategists and creatives in the future.

Beta. As in “always in…”

Jan’s third element is all around us. Being “always in beta” means being flexible dynamic and always listening and reacting quickly to your customers. It means you believe in and empower conversation. Being “always in beta” is a distinct departure from advertising practices of old affecting financial systems traffic/project management and HR. Is your agency or client relationship structured around rigid finite systems born from decades of producing for rigid finite media? That model is too slow and inflexible when time and money are in shorter supply. A recession should encourage greater investment in and reward for innovative budgeting staffing creative development and the ongoing management of creative ideas. Instead of ratcheting up heavilyfocus grouped highdollar production that goes offtheair or offthenewsstand almost as soon as it starts shift your messaging and production to forums that continue the conversation.

Community. Whos got your brands back?

Who can you turn to when the costs of acquiring new customers goes out of reach? In a clinical sense I’m talking about CRM. But “Customer Relationship Management” sounds too clinical and too controlling. In a recession we’re all suffering together right? It’s communal. So it’s not about “managing” relationships so much as encouraging and enabling them. It’s about nurturing conversations with your brand’s evangelists who know more about your brand and how to sell it to their friends better than you ever will. It’s about listening. If it were my budget I’d be heavily invested in developing and participating in communities and social networks related to my brand right now. I’d be engaged in listening more than speaking. Because if your friends can’t or won’t help you no one will.

Practiced together practiced well Curiosity Data Beta and Community provide a form of marketing arbitrage in difficult times.

That’s my two cents. I’d offer more but times are tight.

About the writer:nbsp;nbsp;Cyrus is president of Astoria Communications a New York Citybased PR consultancy serving clients in financial/professional services technology and real estate. His clients include law firms legal organizations technology companies and several nonprofit organizations. Before opening his PR consultancy in 2004 Afzali worked at several New York agencies as an editor and as a writer at several media outlets ranging from small daily newspapers to CNN Financial News.
You may also find articles by Cyrus at the TalentZoo.com website under Marketing Moxie.

Capturing Markets With Maslow

Marketing has never been identified as something that is crucial to the wellbeing of humanity and your product probably isn’t either. But your product should be positioned so that is relates to something essential like safety or shelter. Identifying this position make it simpler to reach your target audience.

The bottom tier of Maslow’s pyramid has to do with a person’s basic needs like food water shelter and air. All necessary human operations like sleep and so on are included in this tier of the hierarchy.

The hard part about selling a basic product or service that everyone needs is the immense competition from commoditization. For example everyone needs to eat. However what are you going to do to make your food appeal to more people than the burger joint across the street? Some of the solutions to this dilemma might be offering lower prices tastier food pleasant service or a more hospitable eating area than the competition. Of course the food you are offering should be such that it automatically becomes high on a customer’s list of choices.

The next stage of human need deals with safety and security. Turn the TV on for five minutes and see how many ads about insurance retirement plans or home alarm systems play during the commercial break. How would the use of your product enhance feelings of safety and stability in your customers’ lives? Stress these factors as your main selling points and get at the root emotions of your prospects.

Love and belonging make up the third tier of Maslow’s hierarchy. We would all like to be closer to loved ones. We would all like to have more friends. Some of us would like to find someone special to share our life with. Owning a club or a personals website means that you must try to appeal to these inner desires. Tell people how successful they can be in these areas using your site or club. Don’t do all the work; publish testimonials from previous customers who found your service useful. A testimonial is a powerful tool for picking up new customers.

Esteem is the next section or Maslow’s theory on human need. One major esteem area deals with status and attention as well as recognition from others. The other major area deals with esteem of the self and includes areas of confidence achievement selfrespect competence and independence.

There is a commercial for a hair product where the character strolls through an office and everyone watches her in a complimentary way. She ends by entering a meeting and stating that she is not employed by the company so everyone must be watching her due to her shampoo selection.

The ultimate level of the Maslow Hierarchy is that of selfactualization. This is the “be all that you can be” attitude that encourages individuals to strive and make an effort to be responsible and participatory citizens in the world today.

You can get your customer’s attention by catering to his needs. This must be done in a responsible manner. Psychological motivators apply to both you and your customer. If you know your customer and can figure out his motivation you will be better prepared to convince him to buy your product or service.

About the writer:  Daiv Russell is a marketing and management consultant with Envision Web Promotion. Read more Articles about Management learn about Maslow and Maslow’s needs hierarchy.