Sales Channel Selection Criteria and Direct Sales Management

Transcription

1 UCLA Anderson 2006 Global Access Program Sales Channel Selection Criteria and Direct Sales Management Prof. Bob Foster September 5,

2 Sales Channel Selection How do I sell my products in the U.S.? Hire our own sales representative? Sell through a U.S. distributor? If so, how do I find one? How do I decide? 2

3 Agenda Sales channel functions Sales channel selection criteria Sales using U.S. distributors Hiring your own U.S. sales representative 3

4 Sales Channel Functions Generate sales leads Provide pre-sale technical support Write and present sales proposals Negotiate and close sales Provide customer credit May take legal title to product 4

5 Deliver, install, test and train Stock local inventory & spare parts Provide post-sale sale technical service Build local brand image Provide local public relations Provide marketing research feedback 5

6 Channel Selection Criteria 5 Major Questions to Answer: What does the U.S. market look like? How good is your product? How easy is it to sell your product? How much time do you have? How much money do you have? 6

7 What s s the U.S. Market look like? Geographical dispersed? How many potential customers? How many competitors? Level of competition? Market ready to buy a new technology? Are you too early? 7

8 How Competitive is your product? Whole,, complete product? Strong value proposition? Compelling reason to buy? Technically complex? Difficult to install? Customization required? After sale service/support required? 8

9 Is your product Easy to sell? How many sales calls to close sale? How long? How strong is the competition? How long to train sales person? Need a sales quotation and proposal? Is it competitively priced? Adequate gross profit margin? 9

10 How much Time do you have? How soon do you need to break-even? even? Have enough calendar time to build your own sales organization? Have management resources and skills to build your own direct sales force? Have time to recruit and train a sales staff? 10

11 How much Money do you have? Do you have enough money to build a direct sales force? Can you afford the start up costs : Recruiting fees Autos, computers, cellular phones, fax, copiers Product and sales training costs Building a pipeline of qualified prospects 11

12 Better Products Are Easier to Sell If product is much better than the competition... it s s faster & easier to sell If product is only marginally better.. It takes longer to sell Competitive pricing is related to a product s s value proposition 12

13 Sales Channel Options Direct using own sales force Use independent channel partners Use Internet Combination of the above 13

14 Direct Sales 3/4 of total industrial sales dollar volume is sold direct 20% of industrial manufacturers sell direct exclusively Generally more expensive & more complex products 14

15 Sales Through Distributors 3/4 of total industrial sales unit volume Generally less expensive, high volume products are sold through distributors 80% of industrial manufacturers use distributors, either totally or partially 15

16 Generally in U.S. Products over $30,000 sold direct Products under $10,000 sold by distributors Products between $30,000 - $10,000???? 16

17 But these expensive products are sold through distributors Cummins diesel engines Sun, IBM, HP, etc. computers Applications software Automobiles and trucks Hyster lift trucks, Cessna airplanes 17

18 Distributors are also called: Distributors/ wholesalers / resellers Dealers/ retailers Manufacturers representatives Value Added Resellers (VARs) Independent Software Vendors (ISVs) System Integrators (SIs) 18

19 Advantages of Distributors #1 -Trained, instant sales organization #2 -Pay only for sales performance #3 -Know customers and market Stock local inventory Install, train, service Provide credit and collection functions 19

20 Disadvantages of Distributors #1 - Hard to manage #2 - One step away from your customers #3 - Hard to find and recruit good ones Many poorly managed & undercapitalized 20

21 Manufacturer s s View of a Distributor What products do they currently sell? Will I be a major product line for them? How much sales rep mind share will my products receive? Why do they want to sell my product? How long do they keep product lines? 21

22 What markets do they currently sell? How successful are they? Financially secure? Well managed? Sales representatives reputations? What do their customers and competition say about them? 22

23 Problems Managing Distributors Want exclusive sales territories May sell competitive products Negotiating annual sales quotas Sales commissions issues Minimal marketing & sales staff work Distribution & follow-up on sales leads generated by manufacturer 23

24 Distributor Sales Territories Geography By country, state, county, postal code Industry Customer revenue size Product Application Welding, painting, machining 24

25 Distributor s s View of a Manufacturer Their products fit with my other products My current customers buy these products? My sales reps know the application & technology? My startup costs? Time & $ How sales commissions calculated? 25

26 How long before my first sale? How many units can I sell in a year? How much inventory must I carry? Do I have to give up a product line? Can I make money selling this product? Target is 20-30% ROIC How easy is it to terminate? It will be 6 to 8 months before know if made a good decision 26

27 Trade Off: Control Versus Cash If you have enough cash and need to control the sales process, sell direct using your own sales staff Less money means having to use distributors, resulting in having less direct control over the sales process 27

28 How Do I Find a U.S. Distributor? 28

29 Answer: Join the U.S. industry trade organization or association related to your product Subscribe to U.S. industry magazines Attend trade shows & conventions 29

30 Thomas Register Business-to to-business directory Free at Search by: industry & product/service & location Presents all companies that sell that product: Potential distributors and/or competition 30

31 U.S. Trade & Professional Organizations Encyclopedia of Associations: National Associations of U.S. by Thomas Gale 140,000 associations $1,400; may be available via service 51 on software 27 on Internet web sites 31

32 Automatic Transmission Rebuilders Association 27,000 members pay $85 a month Can purchase members contact information Monthly magazine GEAR National Association of Manufacturers & Installers of Security Systems 500 members 32

33 The Marketing Resource Center Directory of associations $170 for one month usage Many other useful resources listed 33

34 Industry Magazines & Publications List of U.S. magazines & trade journals Free 34

35 Tradeshows & Conventions The ultimate tradeshow resource Lists future and past trade shows Coffee resulted in: 15 future and 16 past trades shows in world 35

36 Vertical Search Search engine for business-to to-business listings for automobile transmissions Lists articles, web sites, journals, papers Free 36

37 Go To Direct Selling Presentation 37