MH: So where do you start planning channel strategy, Guy?

GS: You first have to ask yourself why are you using channels, and here I include direct, as well as indirect, routes to market.  That may sound obvious, but the obvious questions are often the best.  And a lot of people never ask this one at all.  Instead, they set up a direct arm because that is what their competitors are doing, or they rush online for similar reasons.

MH: So why do suppliers use channels?

GS: I find that most reasons fall into five camps. Cost is a big one. You may believe that a particular channel is less expensive. The second is growth. Suppliers may feel that they cannot achieve sales targets unless they open up new channels.

A third reason is reach.  You may feel that certain influencers are gatekeepers and that if you work with them you will reach more senior management in the customer. Or you may be trying to reach a new kind of customer and don’t have a presence in their preferred channels.

Fourth is expertise – some companies may have skills in certain industries that you lack. And, finally, we have visibility.  For example, companies who sell through mass retailers typically achieve much higher levels of brand awareness, and are perceived as being far larger than they actually are.

MH: What is so important about all this?

GS: Your particular reason for wanting to sell through channels determines which channels you should be looking at, and how you will reward them. For instance, if the real reason you want to go through a specific channel is to reduce cost, then you clearly don’t want a high-cost channel!  On the other hand, if you are looking to grow fast or to show a presence in a particular market before a sale or a flotation, then cost may not matter that much.

“You end up with detailed shopping lists of activities that you want your partners to fulfil.”

MH: OK, and the next step is to go and talk to potential partners?

GS: No!  You really have to go back to basics, and look at the final customers and what experience they want from the solution they buy. So this involves segmenting customers and potential customers and looking at what each group wants.

MH: Segmentation is easier said than done!

GS: Yes, and I don’t want to go into segmentation techniques in great depth.  But there are two important principles.  The first is that segmentation should really be by behaviour. Many people do a demographic carve-up into, say, small, medium and large, and often this is not very useful, because some small companies may be very sophisticated. Secondly, I think it is important not to be overly complex.