| take a look at some of the things a company should | | | | are generally only advisable for direct distribution |
| consider in formulating a direct vs. indirect sales and | | | | approaches. |
| marketing strategy. | | | | If on the other hand, you have available to you a |
| HOW COMPLEX IS THE PRODUCT? | | | | large budget and a wide variety of promising |
| It's always important to start with the product in | | | | promotional programs, that often is coupled with a |
| considering any aspect of your sales and marketing | | | | broad distribution strategy. If you're promoting in |
| strategy. Is the product complex to sell? Is it | | | | many different places, that may drive demand in a |
| complex to install? If a typical installation is highly | | | | variety of different channels. In general, I say use |
| complex and customized for the client, there may be | | | | them all. And I'm rarely a proponent of selling "indirect |
| a high level of services required that can only be | | | | only"--you tend to lose valuable information without a |
| delivered by experts within the company. If this is | | | | direct link to the customer. You will also leave money |
| the case, a direct model usually work best. | | | | on the table by giving up margin on customers that |
| If there is what I would term a "medium" complexity | | | | would prefer to buy direct. But occasionally |
| to the product, this often lends itself to the utilization | | | | companies are so dependent upon channels, that it |
| of VAR and System Integration partners. This class | | | | doesn't make sense to manage the channel conflict, |
| of partners is attracted to products that allow them | | | | and deflect the ill will that selling direct sometimes |
| to bill configuration and service hours, which is really | | | | generates within a channel. |
| how they make their money. This key here is that | | | | WHAT CHANNELS ARE AVAILABLE TO YOU? |
| the product isn't so complex that the partners can't | | | | Oftentimes, the decision on how to sell is made for |
| be reasonably trained on the product, to deliver | | | | you. If your company is in a missionary situation |
| these services somewhat independently in the field, | | | | where you are creating a new market, or you are in |
| with a minimum of hand-holding by the vendor. | | | | a very narrow niche, you usually don't have any |
| The last case is a product which is very simple and | | | | choice but to sell direct. If it's a new market, channels |
| standard, or has minimum customization that can be | | | | might develop later. But in most cases, selling direct |
| performed by the end user. This level of product | | | | initially, either solely or in conjunction with channels, is |
| complexity usually lends itself to multiple distribution | | | | highly advisable. There is no channel in the world that |
| channels, including direct and mass market channels, | | | | will be able to figure out how to sell a product--that |
| which provide great distribution breadth, but minimal | | | | the company itself hasn't figure out how to sell itself. |
| support. VARs and Integrators may also sell products | | | | It's always good to conduct trial and error marketing |
| of this nature, but they won't put much focus on | | | | sales campaigns directly, and then transfer that |
| them, since they don't drive service revenue. VARs | | | | knowledge to your channels. |
| will essentially "take orders" for this type of product | | | | If you have a product that is broadly attractive to a |
| as a convenience to their clients. They won't be a | | | | variety of channels, and you have the resources to |
| "strategic" channel for this type of product, but since | | | | promote and sell effectively through all of them, I |
| they are a large channel, the sales can still add up to | | | | say go for it. As I stated early on in this article, it's |
| a substantial total--so you shouldn't ignore them if | | | | my belief that this is the best way to optimize your |
| they are appropriate. | | | | return on assets. The only caution is to make certain |
| HOW HIGH IS THE PRODUCT PRICE? | | | | that you have the necessary resources, and are in a |
| A high price can lead you in two different directions: | | | | position to support all channels. If not, it's better to |
| Direct-only, or to a VAR/Systems Integration | | | | "go slow" and add channels one at time--if you |
| distribution strategy. If you're selling an Enterprise | | | | alienate a channel, they have a very long memory, |
| Software Product into a narrow niche, with an | | | | and it will be hard to get back in their good graces. |
| average deal size of $2M, you're probably going to | | | | One type of partner we haven't discussed yet is the |
| end up selling the product direct. | | | | OEM. In some cases, there may be a large, dominant |
| If, however, you selling a $50-100K average sized | | | | player in your business that you are tempted to |
| deal, and the addressable market is a bit larger and | | | | pursue as an OEM channel partner. While occasionally |
| more well-defined, it's very possible that the VAR | | | | this leads to making the principals of a small company |
| Integrator channel may provide real leverage. | | | | quite rich, I've found in most cases its fools gold. No |
| For products that fit into the $9.95-$995.00 range, a | | | | one sells your product like you do. Most OEM deals |
| multi-channel marketing and distribution model may | | | | that I see end up with revenue levels in the range of |
| once again be your best bet. Products in this price | | | | 5-10% of the small company's initial expectations. This |
| range usually are very standard or have | | | | can still be a substantial, important source of revenue. |
| user-customizable features, and lend themselves to | | | | But the message I'll leave you with is that I prefer |
| "sales-intensive" distribution channels, rather than | | | | early OEM deals to be non-exclusive, rather than |
| support intensive. This could mean a focused direct | | | | exclusive. The exception is for a product that fits in a |
| marketing model with direct downloaded software | | | | new market you don't plan to participate in directly. |
| sales from a website, or sales through computer | | | | Too many times I've seen clients "bet the farm" on a |
| retailers or mass market stores. | | | | major OEM early in theie development, and the |
| WHAT DOES THE PROMOTION MIX LOOK LIKE? | | | | company was either killed or severely wounded by |
| High priced, directly distributed products tend to have | | | | the experience. Pursue OEMs, but it is usually best to |
| very simple promotion plans. The reason for this is | | | | do so as part of an overall, comprehensive |
| that high priced products typically have small focused | | | | distribution strategy. |
| markets, so it's pretty simple to get your marketing | | | | HOW DOES THE CUSTOMER WANT TO BUY? |
| message to the customer. The simplest promotion | | | | Finally, the most important question to consider is |
| strategy is what I call "Door to Door marketing." | | | | "how and where does the customer want to buy?" |
| Door to Door marketing means relying on the sales | | | | One of my most closely held beliefs is that you |
| force exclusively to promote your product--with little | | | | maximize revenue by offering the customer a |
| or no investment in marketing programs. Or maybe | | | | product that is priced, packaged and sold via the |
| due to limited resources, your promotional budget | | | | channel he is most comfortable with. So if your prime |
| only allows a monthly Ad in a highly targeted trade | | | | prospect is a direct buyer, sell direct. If it's a diverse |
| journal. These aren't strategies that I generally | | | | audience that has a number of preferences on where |
| recommend, but for narrow markets, it is sometime | | | | to buy, strive to be in all of those channels. This may |
| appropriate. Bottom line, simple promotional strategies | | | | be the most important advice that I can provide. |