Sales and Channel Development

  • Add to list Added to list Added
  • Download PDFopens in new window
  • Cite
  • Share
  • Embed

Overview

Imagine you have developed a great product and received incredible feedback from prospective customers. People want to buy your product; however, you don’t know where to begin and how to bring your product to the mass market. Should you sell through Amazon, Walmart, or on your own? Choosing the right path to market your products and services can be a daunting challenge. This module will help you identify sales channel trends, critical players, and processes in order to better prepare you to launch your product or service. Obtaining market access via the right sales-distribution channel is essential and represents one of the greatest challenges a new business can encounter. We break down the process into four parts of understanding: channel architecture, marketing, order fulfillment, and account management.

What is channel architecture? In short, channel architecture is how your product or service reaches a customer. There are a variety of different means to gain access to the marketplace, whether through retailers like Walmart or through multiple resellers such as wholesalers, retailers, and brokers. As an entrepreneur, you will have to find a way to break into an acceptable distribution channel in order to effectively place your products and services with end users. For example, how did X-Box become a leading platform for online gamers?

A picture shows a black home video game console. A black wireless controller is leaning against the box.

Source: Phil Barker/Future Publishing via Getty Images.

XBOX was supported by retailers like GameStop and Best Buy that provided consumer access to purchase gaming systems, games, and accessories. Naturally, as XBOX placed millions of units into the marketplace, additional means were implemented to provide greater market access through direct product sales and product placement with mass market retail.

Sales and distribution channels are often used by competitors to keep their products on the retail shelf and not your products. Successful entrepreneurs find and develop ways to ensure distribution channels don’t just sell, but actively promote their products, whether through special shelf displays or seasonal discounts. Beyond thinking out existing means to bring a product to market, an entrepreneur must develop the vision and agility to deal with market changes and uncertainty. Structuring distribution channels is just like a game of pool; the shot you take now should set you up for the next series of shots after.

Once you discover potential sales channels and brainstorm marketing strategies for your product, you will also be challenged on how to best price your products and services so that your business is profitable and your channel partners are incentivized to help you achieve your business objectives. How should you determine the ultimate retail price for your product or service? What is your ideal profit margin with wholesalers and retailers?

As the business grows, you will likely need to structure and manage a sales force that is responsible for maintaining customer accounts. How many representatives should you have? Should you arrange by customer type or geography? How should you select and manage sales representative performance? Answers to these questions are context dependent, but in going through a variety of examples, we hope you will refine your instincts, confidence, and appreciation of the many possible paths you can take.

Further Reading

Cespedes, F. V. (2014). Aligning strategy and sales: The choices, systems, and behaviors that drive effective selling. Harvard Business Press.
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation. Harvard Business Review, 93(12), 4453.
Kim, W. C., & Mauborgne, R. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard Business Review Press.
Koch, R. (2011). The 80/20 principle: The secret of achieving more with less: Updated 20th anniversary edition of the productivity and business classic. Hachette.
Lee, H. L. (2002). Aligning supply chain strategies with product uncertainties. California Management Review, 44(3), 105119.