SMP-20 a) Design principles for channel selection.pptx

Introduction to Sales channel

1. SMP-20 Sales & Distribution Develop and Manage

2. Discussion Flow

3. What do distribution channels do

4. Sell / Fulfill Prospect/ Detail/Educate/inform/advise Reach close to customer/Stock/ Display/ Unbundle/ Simplify and standardize transactions Logistics/Finance Meet downstream channel expectations ( credit) Customize After sales service What do Channels do They do all the above because they exist – therefore by default As the market place eco-system evolved, channel VALUE ADD has been augmented – we will see in the next slide

5. Channel Evolution Channels evolved to create a common exchange to Simplify both the buying and selling transaction. ( Reduce and standardize) Build and manage relationships locally Flexibility to build centralized capacities even while reaching product close to customer

6. Distribution Channel Value Addition Reduce cost of reaching product by sharing overheads/opex ( Company perspective) Desired SKU/variety (Break- Bulk) ( Consumer Perspective) Facilitate Search– Category of outlets ( Consumer Perspective ) Facilitate high freq. purchase– How?? ( Consumer Perspective ) Sorting for unbranded products ( Consumer Perspective ) Basket of products thru single window (Consumer Perspective) Competitive comparison (Consumer Perspective) Assurance for unbranded/new products ( Consumer and Company perspective) Time Value ( Demand side) Q 1 How does retail channel reduce cost of distribution.

7. Branded Retail Exclusive Stores Company Own Store / Franchisee End Customer Example : Branded apparel, watches, Spectacles, Footwear KEY FACTORS : Brand pull, Store location Q 2 : Why is branded retail more common in the product categories listed above

8. FMCG Company / Marketer C & F Agent Distributor End Customer Wholesaler Retailer Organized Retail & Institutional customer Example : FMCG, Pharmaceutical products KEY FACTORS : Distributor ROI ( Working capital rotation, Opex) Distribution width/depth (by SKU),Stock hygiene 8 Q3: Many companies have an additional intermediary---- Super distributor---- particularly in smaller market. What is the intended role? Organized

9. Think about it 9 Q4 Super Stockist/Super- Distributor: Many companies have an additional intermediary---- Super distributor---- particularly in smaller market. What is the intended role? Q5 Do Non-advertised/unknown brand in FMCG follow the same distribution structure?

10. FMCG Context Trigger (Problem recognition, motivation) Consider (Narrow down brand/product options) Evaluate (Compare consideration set) Purchase (Arrive at final decision) After-Purchase (Use, re-evaluate, repeat) Buying Process for consumables

11. Who Sells– FMCG context FMCG At the end of the distribution chain we have the retailer selling the product to end customer Buying Characteristics of FMCG products : High Frequency Repeat purchase of a brand with which customer has usage experience ( in most cases) Customer buys a basket of products and not just one ( most cases) Decision is taken quickly Selling characteristics Sales in Self service stores are growing rapidly Neighbourhood store: Serving many customers simultaneously Unit price of product and margin to retailer is “LOW” The retailer has a limited role in selling. Exceptional when customer is undecided

12. Q 7 How is the pharma channel different from other product? Q 8 What product attribute is crucial in making for the difference Pharma Channels

13. Pharma OTC products Company / Marketer C & F Agent Distributor End Customer Wholesaler Retailer Organized Retail & Hospitals KEY FACTORS : Distributor RoI ( Working capital rotation, Opex) Distribution width/depth (by SKU),Stock hygiene 13 Distribution channel of OTC products in pharmaceuticals is very similar to FMCG but distribution width may be in category of outlets that is consistent with the nature of the product and not as wide as FMCG products

14. Pharma Prescription products- Physical distribution Company / Marketer C & F Agent Distributor End Customer Wholesaler Chemist Organized Retail & Institutional customer KEY FACTORS for physical distribution: Distributor RoI ( Working capital rotation, Opex) Distribution width/depth (by SKU),Stock hygiene 14 Distribution restricted to chemist outlets. In many markets you could also have a multi-brand pharma distributor who aggregates products of smaller companies/brands and sells to chemist

15. Pharma Prescription products- Information flow National Product/ training team of pharma company Patients/ Customers Medical Detailing Executives Doctors National accounts ( Doctors/ Hospitals 15 Demand stimulation: Medical Detailing and Chemist Stocking by company MR/MDE The MR plays a unique role of product placement and demand generation. Doctors would also get information thru brochures/mailers and medical journals The chemists and doctors may not have a structured information exchange – and often the customer/patient could be a info-bridge Chemist

16. Durable, Appliances Company / Marketer Distributor Authorized Dealers (MBO) Customers Example : Consumer Electronics, Appliances KEY FACTORS : Multi-brand OR Exclusive, Density Company owned Exclusive Dealers Q4: How do the brands control customer experience and detailing in multi-brand outlets ?

17. Selling in Durables context Consumer durable/appliances/electronics/ Furniture/ Furnishing / Automobiles Consumer knows what he wants to buy May even have decided the brand/model/type. May not know aspects relating to warranty/service/EMI options etc Selling Opportunity multi-brand environment : Retailer can add value by explaining Product features/benefits Comparison with other brands/models What fits customers usage pattern/budget Warranty, payment In a exclusive branded retail outlet scenario, the process is similar – except for getting into brand options/comparisons. Principles of personal selling being applied except for prospecting

18. Specialty Products Company / Marketer Authorized Dealers (MBO) Customers Multi-Branded Dealer Example : Paints, Tyres

19. DSA Company / Marketer Direct Sales Agent Sales Executive ( SE) Customers B2B Selling : Production/ Packaging systems. Office Automation/ Office Productivity /Office consumables B2C Selling: Credit card and Banking products, Insurance, Telecom Postpaid KEY FACTORS : Lead Management ,SE Productivity , claw back norms. Commission paid is clawed back if customer does not complete specified tenure Think about it Q5: How does the SE Productivity impact the business model? Independent Sales Agent

20. DST channel Company Direct Sales Team End Customer Example : B2B Products / services, Telecom sales to large accounts, Financial products / services, Eureka Forbes KEY FACTORS : Productivity Q 6 For which customer/product segments is DST more appropriate?

21. Selling- DSA/DST format Personal selling obtains In B2B context as the buyer demands service and customization B2C Context When Need/demand is latent and needs to be stimulated When Customer decision making process is long and is based on several factors When Margin in the product/service ( CLTV where applicable) is good enough to afford the manpower/selling costs When there is pressure – Internal ( Sunk- Cost) external ( competition) to advance acquisition

22. Selling- DSA/DST format Product Characteristics in personal selling context High Value and High Involvement Value of the product is high ( MRP or LTV There are many variables to be considered Buy decision is taken after careful consideration. Buyer prefers to consult users/experts before deciding Need is not well developed/defined/urgent Resources are not immediately available

23. Selling- DSA/DST format B to C :Real Estate/Personal Insurance/Loan products and wealth management/Holiday time share/credit cards/ postpaid telecom/DTH b) B to B products/services. In these product categories the principles of personal selling come into play from prospect identification to fulfillment and even beyond till the customer service/ relationship team takes over for rendering ongoing services and add-on services These categories may still use brand advertising to generate awareness, create preference/expectations/desire but depend on personal selling either exclusively or as an integral/key component in selling

24. Online Company / Marketer Logistics Partner End Customer Multi category E-commerce site End Customer KEY FACTORS : a) Platform promotion b) Ease of discovery c) Vendor quality for non branded d) Operational efficiency b) Internet commerce has perfected the Catalogue/direct mailer methodology by offering dynamic information/search/ research/ COD/ Returns. c) Compare the characteristics of Online Vs Offline Logistics Partner Payment gateway Payment gateway

25. Multi-level Marketing Company Member End Customer / Member Example : Multi-level marketing brands like Amway, Oriflame, Avon, Tupperware KEY FACTOR : Self consumption, growing the member chain

26. Multiple Channels

27. Telecom: One product--- Multiple Channels Multiple Channels Postpaid Company Direct Sales Team End Customer Direct Sales Agent FOS Prepaid Company / Marketer Distributor Retailer Customers SIM bundled Handset brand Customer Handset distributor Retailer

28. Telecom: One product--- Multiple Channels Multiple Channels Postpaid + Prepaid ( Sales + Service) Company Own Store / Franchisee End Customer Company Online Website or 3 rd party web site End Customer Prepaid- Recharge only

29. Designing the Channel

30. Channel Design Decision Align Channel design to Competitive Business strategy

31. Have Fun learning