International Channel Management - one size doesn't fit all!
"What's your biggest channel management frustration?"
"We have a hard time finding enough reps."
"OK. I understand. Let's assume you had as many as you think you need, what would be the next biggest frustration?"
"Only a few of them actually sell anything or even bring us any projects."
This is a typical conversation I have with companies wondering whether their channel management can be improved. Almost always the striking element of the discussion is that there is a single approach used throughout the process.
Sales Channel is a heterogeneous group
I often compare a sales channel to children or employees. If you have kids or manage employees (and if you do both you'll really understand what I mean and share some gray hairs) you intuitively understand that each is a different person. Different aspirations, personalities, idiosyncrasies, strengths and weaknesses combine to create the amazing fabric of life. And you adapt your approach to the person and the circumstances.
Of course you are fair and consistent - but also skilled in tailoring your parenting or managing to the individual.
But more often than not, when that same skilled manager puts on their international sales
hat, suddenly everyone must be a distributor to be "managed" by a monthly excel report and revenue targets.
How's that work? Well, remember I mentioned I have the conversation frequently? That's because it works poorly.
Who says it must be 'distribution'?
Distribution is a great channel model in many circumstances. It offers a number of characteristics which helpful particularly for products which require extensive local technical or maintenance support.
Companies often prefer to have a degree of foreign receivables protection and are happy to have a local company consistently responsible for importation and other transactional issues.
But distribution is one of many possible models. Agent/rep, own employee, JV, licensee, franchise, acquisition or subsidiary are other examples. Each offers advantages and disadvantages - and each requires a nuanced approach to channel management
Who's the customer?
Let's take a step back. Who's the most important arbiter of the best channel model? You? Your convenience or comfort? I'd argue that while that is precisely the way many companies approach the process, the real determinant of the best channel is the target customer. They understand how and from whom they want to buy and why. (I'm talking at a high level, based on cultural and industry norms.)Amazingly few companies can succinctly answer this question. There's often some anecdotal or gut feeling experience in pockets throughout the sales force - and marketing often talks in terms of financial and technical buyers. But precious few companies have taken the time to create complete buyer personas for their domestic market - much less for key target international markets.
Without that, though, your selection of channel is determined to satisfy you. Probably not the best approach for maximizing revenue and profit!
Regions, industries, maturities
To extend the parenting/managing analogy, potential buyers exist on different planes.
So do you really think that the same channel model is ideally suited across the board?
- Between different geographical regions (increasingly between metro areas) within countries, practices and expectations are very different.
- Different vertical applications, even of identical product, are spec'd, sold and used with different purposes - and bought accordingly.
- Different markets and industries also operate with different levels of 'maturity' - some may expect EDI integration while others fax orders
More work but massive improvement
If your goal is to sit in your office in the US and harvest any orders that come through internationally, then don't bother reading further. (And that's OK. Many companies start as accidental exporters
and later, challenged by slowing growth domestically, decide to strategically embrace the export opportunity.) But if your goal is to maximize the opportunity then the appropriate approach is to create a 3D matrix of product, geography and industry vertical identifying the optimal channel solution in each case. And remember that other strategic factors will figure in. For instance, if Brazil is a key target market (don't just chase the BRICs - make sure it is a legitimate target for substantive business reasons) then a JV which would allow you to do some KDA (knock down assembly - manufacturing your product in the US to a nearly complete stage but shipping components to be used in final assembly locally) could be important to circumvent enormous tariffs.
Alternatively, based on current distressed valutions of Portuguese companies and the traditionally strong trading relationships between Portugal and Brazil, this could be a perfect opportunity to acquire channel in Brazil and pick up inexpensive European exposure. Find a company wiht a solid business but distress due to innability to find local financing, and you could simultaneously solidify your position in multiple markets - for a bargain price.
Later this week we'll dive into the question of international customer personas and how those will drive your model selection. In future articles we'll also explore the role of channel in marketing localization and how to exceed their expectations for support. And we'll also tackle an important and overlooked topic - why should channel pick you?
Want to take a more strategic approach to your channel management? Contact Consilium Global Business Advisors
to discuss how we might help.
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