Venture Garden - ACT by For Communication

Distribution Channels

How does the Product get from our factory to the Customers?

Step 1 - Identify Your Customer Channels  



Channels are touch points try a new method to reach customers and see how successful you are how cost-efficient your communication is

Step 2 - Assess the Strength of Your Customer Channels analyze the strengths and the weaknesses of these different ways of communicating  Besides e-mail, the combination of portfolio and a personal blog ,get in touch with your customer segments (and others)  face-to-face could be a better method to approach the local companies  Trade fairs (expensive…)  Different customer segments often have different preferred channels for communication What was it that made channel partners interested? excited? 

Step 3 - Plan New Customer Channels 



LinkedIn could be a possible cost-efficient way to reach more customers, communication always costs either time or money. consider how you can systematically bring in more target customers

Physical versus Virtual Channels

How Do You Want Your Product to Get to Your Customer?

    

Yourself Through someone else Retail Wholesale Bundled with other goods or services

Web Channels

Physical Channels

How Does Your Customer Want to Buy Your Product from your Channel?

     



Same day



Delivered and installed



Downloaded



Bundled with other products



Αs a service



…

Types of Channels Direct

Indirect



  

Licensing

OEM(one company makes a part or subsystem that is used in another company's end product) VAR(value added reseller) Reseller Distributor 10

How Do the Economics Work in Different Sales Channel?

How Are Channels Compensated? 

Commission



Percentage of sales price



Discounted pre-purchase

Channel Economics: “Direct” Sales

Source: Mark Leslie, Stanford GSB

Profit + SG&A + R&D

Discounts

Cost of Goods (Supply Chain))

End Consumer

List Your Revenue Price

Cost of Goods (Supply Chain))

Source: Mark Leslie, Stanford GSB

Profit + SG&A + R&D

Reseller

End Consumer

Your Revenue

List Price

Discounts

Channel Economics: Resellers

Channel Economics: Distributors/Resellers

Source: Mark Leslie, Stanford GSB

Profit + SG&A + R&D

Reseller

Discounts

Cost of Goods (Supply Chain))

Distributor

Your Revenue

End Consumer

List Price

The Channel as a Customer 

Some products are embedded in others (OEM)



Some products are resold by others (VARs)



Some products are distributed by others



Who’s the customer?

How Are Channels Motivated or Incented? 

Money! – what makes them the most?



Training



Marketing to the channel



SPIF -sales performance incentive fund, synonym for the word "bonus"

Book Publishing Channel Example

Book Publishing Percent

of Retail

Publisher

National Wholesaler

Distributor

Retailer

35%

15%

10%

40%

€7.00

€ 3.00

€ 2.00

€ 8.00

Customer

€ 20.00

• You get -35% of retail - the distributor gets 10% - the wholesaler gets 15% - the retailer gets 40% -less any discount they offer the customer 19

Travel Industry Channel Example

Travel Services: Impact of Changing Technology

The Advent of GDS Systems (1980 -1995) worldwide computerized reservation network

Turning the Screen Around Online Travel (1995-2015)

Customer Relationships

How do you Get, Keep and Grow Customers?

Step 1 - Analyzing Your Customer Relationships â&#x20AC;˘

â&#x20AC;˘

understand what kind of relationship you have with your client improve customer retention, so that you spend less time on finding new clients

Step 2 - Identify Customers Value •

•

• •

how much you believe that the client you've just worked with can provide added value for your company in the long run What is your customer acquisition cost? What is your customer lifetime value? Build demand creation budget and forecast.

Step 3 - Assess Your Customer Segments •

•

figured your current type of clients you have Are these your preferred clients? Or are there others you'd like to attract to your business. identify these potential opportunities and build a picture of who your ideal client is.

Customer Relationships Physical & Web Mobile Are Different

ÂŠ 2012 Steve Blank

Customer Relationships Physical Products – Get Customers

Customer Archetypes Drive Get/Keep/Grow 

What’s their role? 



Who are they?  



Discretionary budget (name of budget and amount)

What matters to them? 



Buyer’s name Position / title / age / sex

How do they buy? 



How this person is evaluated / promoted / compensated?

What motivates them?

Who influences them? 

What do they read/who do they listen to?

Paid Demand Creation Activities “Paid” Media Demand Creation     

 

Public Relations Advertising Trade Shows Webinars Email marketing On-line SEM Biz Dev -The Biz Dev Skillsets: Strategy, Sales, and Relationship Management

Free Demand Creation Activities “Earned” Media Demand Creation

    

 

Publications in journals Conference speeches/papers Educational seminars Public relations Blogging / Sharable content Social Media Communities

Customer Relationships Physical Products – Get Customers

Customer Relationships Physical Products – Get Customers CAC = Customer Acquisition Cost

Customer Relationships Physical Products – Keep Customers

Attrition/Churn

Customer Relationships Physical Products – Grow Customers

Customer Relationships Physical Products – Get/Keep/Grow

LTV = Customer Lifetime Value

Customer Relationships Web/Mobile Products– Get Customers

Web/Mobile Productsâ&#x20AC;&#x201C; Get

Customers

CPM = cost per thousand hits

ÂŠ 2012 Steve Blank

Web/Mobile Products– Get

Customers

CPA = Cost per Action

SaaSProducts– Get Customers Organic Traffic, SEM, Other Paid Sources

Registered Visitors Qualified Leads

Raw Leads

Inside Sales Closed Deal

Web/Mobile Productsâ&#x20AC;&#x201C; Keep Customers

Example Marketing Funnel Quick Marketing Calculation 50% amount of traffic that is organic versus paid â&#x201A;Ź1.50 cost per paid visitor (Google AdWords, etc.) â&#x201A;Ź0.75 Cost per visitor (both paid and unpaid) 3% visitors convert to raw leads 20% number of raw leads that turn into qualified leads

1 qualified lead 5 raw leads required 167 visitors required $125 Cost of visitors (also = Cost per qualified lead) Source: David Skok Matrix Partners

Example Marketing Funnel Quick Marketing Calculation 50% amount of traffic that is organic versus paid €1.50 cost per paid visitor (Google AdWords, etc.) €0.75 Cost per visitor (both paid and unpaid) 3% visitors convert to raw leads 20% number of raw leads that turn into qualified leads

1 qualified lead 5 raw leads required 167 Visitors required

€125Cost per qualified lead Source: David Skok Matrix Partners

Our Example Marketing Funnel Cost per Qualified Lead Leads to closed deal Marketing Costs per closed deal

â&#x201A;Ź125 10 â&#x201A;Ź1,250

Source: David Skok Matrix Partners

We Can Compute CAC(cost to acquire a customer) and LTV (lifetime value) Lead Gen costs per deal

€

1,250

Excludes people costs (Cost per qualified lead x no of leads required per closed deal)

Selling costs per deal

€

1,620

Excludes cost of sales management

Total CAC

€

2,870

Total LTV

€

16,000

Excludes people costs in marketing, and sales management. (CAC= Cost to Acquire a Customer) Calculated by dividing average monthly gross profit per customer (ARPU x Gross Margin ) by the churn rate

This excludes people costs in marketing, and sales management costs

Source: David Skok Matrix Partners

What Investors are Looking For A well balanced business model

Monetization (LTV)

Cost to Acquire a Customer (CAC) Source: David Skok Matrix Partners

The Balancing Act • • • • • • • • •

Viral effects Inbound Marketing Free or Freemium Open Source Free Trials Touchless conversion Inside Sales Channels Strategic partnerships

Monetization (LifeTime Value LTV)

Cost to Acquire a Customer (CAC)

• • • •

Scalable Pricing Cross Sell/Upsell Product line expansion Lead Gen for 3rd parties Source: David Skok Matrix Partners

The Balancing Act • • • • • • • • •

Viral effects Inbound Marketing Free or Freemium Open Source Free Trials Touchless conversion Inside Sales Channels Strategic partnerships

• High Churn Rates • Low customer satisfaction

Cost to Acquire a Customer (CAC)

• Field Sales • Outbound Marketing

Monetization (LifeTime Value LTV)

• • • •

Scalable Pricing Cross Sell/Upsell Product line expansion Lead Gen for 3rd parties

Source: David Skok Matrix Partners

Customer Relationships Web/Mobile Products– Keep Customers

Churn  

1% to 2.5% churn per month is acceptable Higher than that, you are filling a leaky bucket 

Need to understand why you have low customer satisfaction and address the problem

Source: David Skok Matrix Partners

Customer Relationships Web/Mobile Products– Grow Customers

Customer Relationships Web/Mobile Products Get/Keep/Grow

ÂŠ 2012 Steve Blank