The primary objectives of the establishment of a business entity is to create customer satisfaction and increase profitability for the company. One of the major ways of achieving these objective is by ensuring that the products and services that the businesses produce are available to the customer at the right place, the right time, the right quantity, and at the right price.
And the identification and selection of a channel and partners to achieve this fit can either improve the fortunes of the business or retard the progress or the profit aspirations of same. Thus, selecting the right partner(s) is vital to the success of an organization. Inappropriate partners and distribution structures can be very difficult to change once you are in the market.
Many organizations the world over have declared their companies as being customer centric. In fact, it is hard to find a CEO or any senior executive in an organization who won’t declare, often quite loudly that their company is customer centric (Blakeman, 2013). This simply implies that the customer is at the heart of everything they do including, serving them through their preferred channels.
As indicated earlier, organizations that give greater attention to their channels of distribution will have a competitive edge over its rivals. Many at times however, the same CEOs who declares organizations as customer centric are the same people whose first approach to cost cutting/management is to reduce incentives of partners, thus limiting their operations, and forcing the ultimate beneficiary, the customer, to go through difficult time locating the product or service of the producer.
Organizations with such mentality are bound to suffer since we have moved on from the era where organizations decide solely the channels of distribution, to an era where the customer plays a significant role in deciding where the products are located. To this end, organizations should look elsewhere in cost management than cutting the budget of sales and distribution.
An important decision in sales and distribution is the choice between the firm’s own channels of distribution and independent distributors. Although the former guarantees greater control over marketing activities in the market, many researchers have shown that independent distributors, especially in global business, is the best alternatives. Rosson (1987) notes that independent distributors represent a low-cost form of market entry, and their knowledge and contacts in the local market are strong motivators for firms that are entering an unknown market for the first time. Business International (1985), noted that “…an ineffective distributor can set you back in years; it is almost better to have no distributor than a bad one in a major market.”
Relative to other functions within today’s organizations, sales leaders and their sales forces are uniquely focused on driving performance every minute, hour, day, month and quarter of every business year. To do otherwise is to sacrifice sales and profit and to diminish the satisfaction of the customer, which can lead to poor performance of the entire business and failure to deliver satisfactory returns to shareholders (Dancer and Wallace, 2012).
The very existence of profit making organizations depends on the sales and revenues that they make, ensuring that they increase their net revenue on a monthly basis, and are always EBIDTA positive. These top level objectives can only be achieved through the recruitment of the appropriate sales channels, and the recruitment and retention of the right and seasoned sales team to either manage the customer purchase journey (in the case of direct channel) or, manage the channel partners.
In many organization, especially the mass-product companies, the indirect channels contribute between 60% and 80% of the total revenues from sales, whilst the direct channels contribute an average of 20%. On the other hand, with products or service that are corporate with high entry prices or specialized services, there are usually no intermediaries except value added resellers (VARs) who usually do not just sell but add special value to the service they render.
It is important that organizations who are involved in the manufacturing or production of seemingly mass nature with relatively lower entry level pricing, do invest more in the indirect structure of their channel. These investments could range from logistical support for the sales team, higher distributor margins, regular training of distribution sales executives, etc. And those involved in special and high valued product and services should rather focus on recruiting high valued, seasoned sales team that have the knack for closing more complex and complicated deals, with high negotiation and customer handling skills, to manage their customers.
Some organizations focus purely on middle level target audience with an average entry level prices of goods and services. With such organizations the customers are approached from both direct and indirect sources, warranting the engagement of both channels. The SOHO/SME Markets falls within this category because of the share size and their likeness for P&S packages that fall between the consumer and Corporate.
And their MRC or ARPU, even though is often slightly higher than that of the consumer, is far less than a typical corporate client. With such organizations, there is no much difference in the sales and revenue contribution from both channels. Business that fall within such categories need to invest in both channels because their customers are diverse from both the business and consumer communities.
There is usually a dilemma however, with respect to where the greater investment should be; channel with higher ARPU but less volumes, or channel with lower ARPU but higher volumes. This is because even though the Corporate segment contributes less in terms of numbers, their ARPU is always significantly higher. Thus, organizations with higher Corporate customer base tends to have better revenue contributions. This dilemma is very prominent in the Telecom industry where the Corporate and consumer segment competes for limited resources. To be able to reach the consumers with lower ARPU however, because of their pervasiveness, there is the need to make that massive investment in logistics and people to drive the volumes.
Technology has in the recent years influenced the purchase behaviors of the consumers, and by extension, the Route-To-Market (RTM) strategies of many organizations. There have been tremendous surges in online businesses in the last 5-10 years following the introduction and implementation of many electronic payment platforms. The Mobile Money Interoperability which allows seamless transfer of money from one network to the other has also provided the comfort and convenience for customers to freely make payment on items they purchase online.
The social media platforms have seen significant growth in recent years, affecting the lifestyle of the consumer. This phenomenon has had a significant impact on consumer channel selection because the platforms have innovatively been used by many producers/manufacturers to get to their customers. Currently, any organization who is consumer focused has a presence on social media through which consumers can interact with them and eventually make purchases. These platforms have significantly affected the channel selection decision by the producer.
Businesses are currently struggling to reach out to the customers because, the customers who are the ultimate beneficiaries, have decided on their channels of transactions, thus companies are required to ensure that they meet these customers at their points of need. To be able to get to all their customers wherever they are, organizations must focus on employing the hybrid Sales Channel. By this, organizations must build and manage a coverage model that maximizes every aspect of their direct and indirect resources to drive maximum growth in a market place where the customer gets to choose how they buy. The end goal is to provide a differentiated experience for the end-user that causes them to buy more of your products and services than those of your competitors.
>>>The writer is Head of Agency Banking at Fidelity Bank
