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The Handbook
of
Channel Marketing
How to select, motivate, and manage
the people and organizations who sell your goods and services:
Direct, Distributor, OEM, VAR, Systems Integrator, Rep, Retail
by
Edwin Lee
E-mail: edwinlee@alum.mit.edu
—
Innovators and early-adopters edition —
© 1995, 1996 by Edwin Lee, All Rights Reserved
No part of this book may be reproduced in any form or by any means
without the express written permission of the copyright holder.
To
Arnold Jorgensen
An engineering craftsman, a recreational adventurer, my mentor, and my friend.
i
ii
Thanks
Thanks to Rich McClellan, Mike Campo, Jack Blakemore, Jeff Blackden, Larry Reierson, Jeff Miller,
George Satterthwaite, Peter Benedikt, Ted Lusk, and Bruce Michels for diligently reviewing early drafts
of the book and for providing me with so many helpful comments and suggestions on how to improve it.
Thanks to Tom McCall, Brad Paul, Dave Paul, Bob Dietz, Tom Eisenstadt, George Rozzaza, Ron Ferara,
Jerry Horrowitz, Pete Rocco, Rich Kelliher, Dennis Jordan, Ken Ericksen, Kathy Ericksen, Mary Pim,
and many others for sharing so generously about their Sales Representative, Distributor, and VAR
businesses, and for their many encouragements.
A special thanks to Bob Dietz, founder of the Association of High Technology Distributors. He enabled
me to join that organization and to experience the world of hi-tech selling from the perspectives of its
members.
A singular thanks to my mother, Betty Lee, who has rigorously edited this book twice; enthusiastically
correcting her son’s occasional misuses of the king’s English. Any mistakes that you find were probably
created after she finished editing.
Rev: November 10, 1997
iii
iv
Table of Contents
Thanks iii
Table of Contents v
Author’s Foreword 1
Introduction 3
Who can use this book? 4
Overview 5
Section I: Methods and Tools
1. Defining the Objective 9
What is a Marketing System? 9
When is it Successful? 10
The Six Cornerstones of successful business partnerships 13
Exercises 16
2. How to Produce the Objective 17
The learning process: through complexity to success 17
The Scientific Method: our problem solving tool 19
Commentary on the process 22
Using it to design and manage a Marketing System 24
Short Cuts 26
Exercises 26
3. How to Motivate and Manage Decisions 27
Maslow’s Hierarchy of Personal Needs 27
The need for fun 28
Management by Personal Attractors 29
A Personal Attractor’s pull 30
Money and Personal Attractors 32
Competitive Alternatives 33
The Principle of Three to Five 34
Reasons to manage by Personal Attractors 36
The bottom line 37
Exercises 37
4. Decision-making Attitudes 39
Overview 39
Adventurers 41
Craftspeople 43
Bureaucrats 44
Victims 45
v
Other attitudes 45
Market timing for Adventurers, Craftspeople, and Bureaucrats 46
Impact on selling 46
Exercises 47
5. Customers’ Buying Processes 49
The buying team 49
The buying process 50
Shortcuts in the buying process 54
Timing of the buying process 55
What customers want or need 57
Timing of goods and services 61
Exercises 63
6. Customer/Supplier Relations 65
Relative importance of Customers and Suppliers 65
Critique of “the Customer is King” 67
The desired outcome: Profitable Customers 68
The bottom line 70
7. Manufacturers’ Selling Processes 71
Selling sequence 71
Timing of the selling process 75
Summary 76
Exercises 76
Section II: Channel Organizations
8. Introduction to Sales Channels 79
Direct 80
Manufacturers Representatives 81
Distribution 82
Value Added Resellers 83
Other Channel Resources 86
Classifying organizations is tricky 87
Exercises 87
9. Direct Sales 89
Structures 89
Key people 92
Economics 94
Strengths 95
Weaknesses 95
Management issues 96
Best customers 97
Worst customers 97
Exercises 97
vi
10. Manufacturers Representatives 99
Structure 99
Key people 99
Economics 103
Working relationships 109
Strengths 110
Weaknesses 111
Management issues 111
Best customers 112
Worst customers 112
11. Distributors 113
Structures 113
Key people 114
Economics 115
Working relationships 115
Strengths 115
Weaknesses 116
Management issues 116
Best customers 118
Worst customers 118
12. Retail 119
Shelf Space 119
Structures 120
Key people 120
Product Packaging 121
Economics 121
Strengths 122
Weaknesses 122
Management issues 122
Best customers 122
Worst customers 122
13. Value Added Resellers 123
Structures 123
Key people 124
Economics 125
Working relationships 125
Strengths 126
Weaknesses 126
Management issues 126
Best customers 127
Worst customers 127
vii
Section III: Where the Rubber Meets the Road
14. How to Design Your Marketing system 131
Where we are in the design process 131
Simplifying Principle #1 131
Simplifying Principle #2 132
Eight Questions that shape your Marketing System 133
Summary of values added by channel organizations 139
How to develop a Marketing system from scratch 140
How to optimize an existing system 142
Guidelines for adding channels 142
15. How to Hire Sales Professionals and Channel Organizations 143
General approach 143
Interview and hiring tips 144
Interviewing Sales Executives 145
Interviewing Reps or VARs 146
Use the old-boy network 149
Eight common mistakes 150
Exercise 151
16. How to Get Them to Sell for You 153
Background 153
Plan Overview 154
Plan Objectives 154
Plan Sequence 156
First training session 156
17. Eight ways to Keep them Selling for You 159
1. Provide dependable, timely support 159
2. Build on strength 159
3. Have the best sales professionals visit the factory 161
4. Publicize competitive ratings among top performers. 162
5. Conduct participative and interactive sales meetings 162
6. Establish a “Top Sales Professionals” council 164
7. Establish a Council of channel organizations 164
8. Establish an effective and continuous training program 165
18. A Fresh Look at Classic Issues 167
What makes the Sales Forecast counterproductive 167
Individual Quotas and Incentives 170
Launching New Products 171
19. Automating Your Marketing system 173
Examples of effective automation 173
Eight tips on how to automate 174
Suggestions for computer-resistant executives 177
viii
[...]... a systematic and useful perspective on the selling process and selling systems; one that you can use to select and manage sales executives It analyzes the costs, risks, and benefits of selling through each channel It provides checklists of the goods and services that each channel organization provides It contains how- to information such as: how to find the optimum mix of channels, how to develop a... on their personal results, the quotas and budgets of their organizations, the support they receive from the business, and on their customers’ reactions • Customers measure success on how well the marketing system meets their individual price, delivery, technical support, and personal needs They don’t concern themselves with its revenue quotas or overall budget The key to sustainable success is to manage. .. This book is about how to operate a marketing system successfully in its pond (environments, contexts) Its pond includes the business it supports, the customers it serves and the competition it faces We will study the dynamics of the pond and the significant interactions between the frog and the pond Now and then, we will dissect dead frogs to better understand the living ones Second, the term “system”... associate member of the Association of High Technology Distributors and interacted with its members All these people were incredibly open and helpful They encouraged me to communicate what I was learning Most of them were particularly frustrated with the ignorance and arrogance of many CEOs and regional sales managers They wanted to be better understood, to be respected for what they did, and to be treated... project Their ideas about the product are too simple because they have yet to go through the design process to discover all the technical issues Most engineers pad their budgets and schedules to allow for unknowns However, they either underestimate the padding needed or it is eliminated by shrewd managers As engineers go through their design process, they find out why they needed more time and more... uses the interim results from an action to modify the action itself until the final result is successful For example, we use feedback to drive an automobile To control the car’s speed we push on the accelerator or the brake To control its direction we turn the steering wheel However to drive at an intended speed, we use our eyes to observe the car’s speed, compare that to our desired speed,, and then... your peers have used to improve their sales and profits It suggests workable solutions to the usual conflicts between suppliers and channel organizations It gives you new insights into your suppliers, customers, and your own employees that can make your job easier and more satisfying You can use copies of this book as gifts for the CEOs and regional managers you work with If you’re a technologist who. .. probable solution The Scientific Method 3 4 5 6 21 Divide the hypothesis into bite-sized elements and specify each element Solve each element Integrate elements into a theoretical solution Verify the theoretical solution in the real world Steps 1, 2, and 3 are the top-down or context -to- object planning sequence Steps 4, 5, and 6 are the bottom-up or object -to- context solution development The steps may... solution to the specified need It’s also an educated guess based on what we know at the time An hypothesis has properties and involves resources that are unique to it and not otherwise part of the need We identify and quantify these characteristics and resources in an hypothesis specification Step 3 Divide the hypothesis into bite sized elements When a hypothetical solution is too complicated to be actualized... always in the context of sustainable success It eschews selling gimmicks that temporarily increase sales or profits at the expense of customers, people in the selling system, and future business The book has three distinct sections: Methods and Tools, Sales Channels and Channel Organizations, and Where the Rubber Meets the Road Section I: Methods and Tools (Chapters 1 through 7) describes the fundamentals .
The Handbook
of
Channel Marketing
How to select, motivate, and manage
the people and organizations who sell your goods and services:
Direct,.
Direct, Distributor, OEM, VAR, Systems Integrator, Rep, Retail
by
Edwin Lee
E-mail: edwinlee@alum.mit.edu
—
Innovators and
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