The Vice President, Sales Channel Management: Your Guide Along the Divergent Pathways to Market
Just a decade or two back—before technology convergence, digital transformation, and the Internet of Things remade the world in which we live and work—in most industries, the sales channels, or conduits, between a company and its customers were well defined, long established, and not subject to much change, let alone evolution. A company’s predominant channels largely depended on its industry and the complexity or diversity of its products. For example, industrial component or system manufacturers brought their offerings to the marketplace through direct field sales, distributors, or manufacturers’ representatives; software makers through B2B direct sales forces and consumer-retail outlets; consumer goods and apparel houses through department stores, specialty shops, and direct mail; and packaged goods producers through supermarkets, restaurants, and other segments of the retailing and foodservice sectors. In many instances, a company had a primary sales channel and, at most, perhaps one or two secondary channels. For example, an industrial component manufacturer would employ field sales to sell in large volume but would also use distributors or inside salespeople to sell to small-volume buyers.
That was Then, This is Now
These days, as control of company and customer interaction increasingly shifts from the seller to the buyer and cost-effective sales processes become crucial to profitability, many companies are faced with the challenge of engaging their customers through an ever-increasing array of sales channels. For example, in the past, major office- and desktop-publishing software makers were well served by comparatively simple, dual sales-channel structures featuring dedicated face-to-face account teams for enterprise buyers and retail distributors for small-office and consumer purchasers. However, more recently, confronted with the need to maximize sales efficiency and effectiveness across a fragmented customer base, they have had to introduce tele-sales and re-seller teams for mid- and small-enterprise customers, online stores to serve both enterprise buyers and consumers and, in some cases, even brick-and-mortar stores to cater to the latter. What’s more, whereas formerly the marketing efforts that support these sales channels were confined to such long-familiar media as print and broadcast advertising, events, and in-store merchandising, today’s media mix is characterized by an explosion of digital vehicles ranging from the countless variations on Web and e-mail marketing through the many permutations of social media.
The Sales Channel Mix—Varied Currents in Your Products’ Stream to Market
Just as a river’s course to the sea varies according to the topography through which it flows, the way a company’s products proceed to market is determined by its channel mix, which is itself influenced by multiple factors such as the company’s economic sector, industry, product set, competing offerings, and target markets, along with in some cases the robustness of its internal sales organization and the availability of third-party partners. Consequently, the desired background and qualifications of the head of sales channel management can vary widely among companies. The following is an examination of the elements that can dictate the necessary skills and competencies of the position in two markedly different business sectors.
A Tale of Two Industries
The term Sales Channel Management can be literally construed to mean a company’s management of a single internal or external sales channel; more pragmatically, however, the phrase refers to a function found in companies equipped with external sales channels, either in addition to or in place of their own internal channels. The two examples below adhere to the second model.
Consumer Packaged Goods. Channel management first emerged as a sales function in the consumer packaged goods industry, specifically the processed foods business, wherein the function is sometimes still referred to as trade management. Unlike end-product manufacturers in business sectors such as computing and software, who have largely managed to obviate the “middleman” and sell directly to the end-user, packaged food producers—which include some of the world’s largest and oldest consumer companies, such as Proctor and Gamble, General Mills, and Nestlé’s—sell almost exclusively to wholesalers. This means that they must engage in a push and pull strategy, on the one hand aggressively targeting distributors, food brokers, and institutional food service operators through partner-reward programs and volume discounts designed to increase large-scale “middle man” purchases and inventory stocks while on the other hand squarely taking aim at the end-customer via advertising and in-store marketing such as end-cap displays, on-product coupons, and point-of-purchase promotions geared to increase consumer purchasing. The ultimate goal of the push and pull approach is to provide the manufacturers’ products with sufficient momentum to push them through the supply-chain and incite sufficient demand to pull them into the hands of customers who are the final purchasers end users.
Industrial and High-Tech Components. The B2B component industry’s channel structure is more multi-faceted and—as of late, at least—evolutionary than that found in the processed foods business. Industrial and high-tech component manufacturers—such as valve, fitting, connector, integrated circuit (IC), semiconductor, and nanofiber makers—must often employ multiple channels to bring their products to market. Their principal customers are seldom final end-users, but rather original equipment manufacturers (OEM) or system integrators (SIs) who incorporate the component manufacturers’ products into their own end-user offerings or, alternatively, they are the OEM- and SI-repair functions or partners that service these offerings in the aftermarket. OEM and SI products might range from specialized in-plant machinery, industrial field gear, and automotive or other transportation industry equipment to home appliances like dishwashers and refrigerators to consumer electronics such as home entertainment systems, mobile phones, and other portable electronic devices.
The sales channels through which component manufacturers address their target markets are usually determined by a market’s average transaction size and range from channels that address “upstream” pre-production customers, e.g., product designers and component specifiers, to channels focused on “downstream” post-sale product-service customers, e.g., maintenance, repair, and operations (MRO) technicians. The deciding factor is typically the cost of the channel as it relates to the target market’s sales potential. Hence, as alluded to above, high-cost individual face-to-face field salespeople, or, depending on the size of the sales opportunity, an entire field sales team—are typically assigned to upstream pre-production customers whereas lower-cost channels—such as inside sales teams, distributors, and e-commerce storefronts—are employed to address downstream, post-sale customers. Such channel diversity can prove challenging for components manufacturers and for the leaders of their channel-management functions because different sorts of channels require different types of resources and support, as do the customers to whom they sell. Moreover, the channel management leadership must carefully analyze and rationalize the channel mix to obtain optimal sales ROI for the company.
What to Look for in a Channel Management Executive
The answer, of course, depends on the many factors and elements already described above, as well as on the channels that your company already has in place or plans to develop. This having been said, there are indeed common competencies to look for in channel management leadership, whatever your company’s current or planned channel mix. Because channel management has many marketing-related aspects—and because marketing is in a constant state of evolution, particularly in regards to integrated marketing in general and performance analytics in particular—a good understanding of digital and traditional marketing is desirable. Beyond this, a successful sales-management track record with experience in key account development, the drafting of sales plans and partnership contracts, and the negotiation of discount- and value-added service agreements are strong assets, if not outright requisites. Finally, unlike some other areas of sales and marketing in which non-industry specific, transferable skills might be more valuable than extensive industry knowledge and experience, a deep industry background is hard to beat in sales-channel management, especially when one considers the vast potential variations in channel mix among industries, such as the differences described earlier in this article between preferred channels in the processed food versus industrial components businesses.
Along these lines, when recruiting candidates for channel management executive positions, it is often also helpful to turn to search firms that have hands-on functional or sourcing experience in your company’s industry rather than those with little or no direct industry experience in your area. The first are far more likely than the second to be able to find and vet the sort of individual you need for such a challenging role—a leader who can guide you through the strong currents and sometimes treacherous shoals of channel management in your business sector.
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- Posted by Stuart Glassman
- On July 20, 2017
- 0 Comments