Category: University of Mumbai BMS Notes

Ethical sales behavior, in its purest form, is making a daily, task-by-task decision to put the customer first and serve them from a heart of honesty and servanthood.

1. Your sales team puts the customers needs ahead of their own.

When salespeople focus purely on meeting their quota by any means necessary, both the salesperson and their customers lose. Potential customers pick up on unethical sales practices almost immediately, and when they do, it immediately destroys any hope creating a fruitful relationship.

Ethical salespeople don’t see their potential customers as a list of potential transactions, but as a group of people whom they might have the opportunity to listen to, understand, and guide to a solution that helps them with whatever problems their product or service can solve.

2. Your sales team builds customer relationships based on trust and reliability.

Day after day, regardless of whether a potential customer is seeking to make a purchase, ethical salespeople are always ready and willing to help customers tackle their problems and lend a helping hand however possible.

Being a consistent, reliable, and always-helpful presence is how truly fruitful sales relationships are cultivated and maintained for years, turning satisfied customers into devoted advocates for your product or service.

3. Your sales team always gives honest and knowledgeable insight to customers.

When customers ask for insight into your product or service’s capabilities, it can be tempting to for salespeople to embellish the facts in order to secure the contract or finalize a sale.

However, over time, the truth eventually does find its way to the customer, and if your sales team has exaggerated the claims of your product, you will find yourself with a customer base that is deeply dissatisfied and distrusting of anything your company has to offer now or in the future.

Simply being knowledgeable and honest about what your product or service can and cannot do is the key to securing loyal, satisfied customers who trust your company and want to recommend it to others.

4. Your sales team holds themselves accountable for problems.

When tempers flare over a missed shipment or a faulty piece of equipment, it’s easy and tempting to want to point the finger elsewhere.

While offering an excuse might diffuse some of the tension in the moment, and though it might feel like an innocent white lie, should the truth ever make its way to the customer as it often does the customer’s trust in your company is permanently damaged.

Accepting responsibility for when things go wrong, providing a truthful explanation of what went wrong, and putting in motion a plan of action to correct the mistake speaks volumes to your customers about your credibility and trustworthiness.

5. Your sales team provides customers with prompt and helpful follow-up.

Whether one of your salespeople checks in with a prospective customer to set a meeting date or they are following up with after a successful sale, prompt follow-up with a customer communicates to them that you sales rep is truly invested in their success and the level of satisfaction they have with your product or service.

6. Your sales team provides fair comparisons between your company and its competitors.

Throughout any salesperson’s career, they will naturally encounter the “Why should I choose you rather than your competitor?” question.

While it’s vital that you and your sales team believe in the products you sell, when comparisons arise, your salespeople shouldn’t seek to slander or belittle your competitors.

When those questions are encountered, simply give an honest assessment of your competitor’s offerings. Your salesperson’s honesty, product knowledge, reliability, and true understanding of the customer’s needs and expectations are what form the foundations of sales success not the slander of your competition.

There Are Eight Principles of Ethical Marketing

 The common standard of truth will be observed in all forms of marketing communication.

 Personal ethics will guide the actions of marketing professionals.

 Advertising is set apart from entertainment and news and the line is clear.

 Marketers will be transparent about who is paid to endorse their products.

 Consumers will be treated fairly, depending on who the consumer is and what the product is.

Consumer privacy will be respected and upheld at all times.

Marketers will comply with standards and regulations set by professional organizations and the government

Ethics should be discussed in all marketing decisions in an open and honest way.

Ethical marketing, for all its positivity, has its own sets of advantages and disadvantages. To make the situation even more complicated, unethical marketing is usually pretty effective. Add to that the fact that unethical behavior is not necessarily illegal behavior and it isn’t hard to see why more companies use unethical marketing, rather than the ethical alternative.

Take the case of diet pills, for example many people buy them, even though they are hardly ever effective. Why is this so? Because companies that sell diet pills exaggerate their claims and manipulate customers into buying them. If such companies advertised their products in an ethical way, they wouldn’t last very long. While their business model might make you angry, however, it’s not illegal and so they continue to sell.

If you’re looking to build a positive brand image and develop good relationships with your customers, such unethical marketing practices can lead to your downfall. Customers do not like brands that manipulate them. In order to develop trust among your customers, therefore, you should consider using ethical marketing. If your product lives up to the claims you make when you advertise it, then it will reflect positively on your whole company. The consumer will feel like you care about the value you provide them.

Of course, we can’t say that any company is completely ethical or completely unethical. Ethics is quite often neither black nor white but a sea of varying shades of gray. The boundaries shift and what is ethical today may not be ethical tomorrow. Moreover, many companies that are ethical in one part of their marketing campaign can be unethical in another, or they may be ethical in their advertising but unethical in their production processes, which is another subject altogether.

Again, consider the case of Dove soap. The company ran an ad that featured supposedly real models. The point was to encourage girls to love their bodies just as they were and not feel pressured to live up to a supermodel ideal. The problem is that ads by Dove soap before that ad, as well as ads since that ad, have focused on the same stereotypes of beauty that were being shunned then. This shows just how hard it is to always be ethical. Any company that claims to be ethical in their sales and marketing will have to make it a part of all of their advertising, not just do it once and brand themselves ethical.

A budget report is an internal report used by management to compare the estimated, budgeted projections with the actual performance number achieved during a period. In other words, a budget report is designed to compare how close the budgeted performance was to the actual performance during an accounting period.

What Does Budget Report Mean?

Since budgets are financial goals based on estimates and future projections, they are often inaccurate and can differ largely from the actual financial performance of a company. During an accounting period managers often compare the budgeted numbers that were prepared at the beginning of the period to the actual numbers they are incurring. This serves two main purposes.

Example

First, managers can correct problems occurring in the business to make the performance more inline with the financial goals in the budget. Second, they can evaluate how realistic and accurate their predictions were. If their predictions were way off during the period, they can adjust their next budget accordingly.

The budget report is used to compare both sets of data. An example budget report typically follows the same formatting as an income statement. The sales and revenues are listed first followed by the cost of goods sold, selling expenses, general and administrative expenses, other expenses, and finally a net operating income number.

There are usually two columns listed side by side for the budgeted numbers and the actual performance results for the period. Often there is a third column added to list the variances. Favorable variances occur when the actual numbers are better than the budgeted numbers. These are marked with an F in the margin.

Unfavorable variable are just the opposite. When actual numbers are worse than budgeted number, a U written in the margin identifying the poor results in that area. Depending on the operation, manager, and company these budgets can be reviewed on a monthly, weekly, or even daily basis.

A Budget Report’s Content and Sections

A company’s budget report will have different sections depending on its financial needs and the data available for the business. Common sections include:

• General income and sales information,
• The fixed and flexible expenses that are necessary for the business to operate to full potential, and
• The net worth of the entire company, including assets and liabilities.

More extensive budget reports might also include a letter from the company owner about any major financial changes in the company during the reporting period, and predictions for the future.

It’s important to recognize that there’s a difference between financial reporting and financial statements. A budget and similar financial reports are useful tools, but that’s all they are. Financial statements make more formal representations of a company’s value, and must meet specific legal and regulatory standards.

Types of Budget Reports

Budget reports or financial reports are written and created based on the needs of the business. A smaller business with a modest level of annual sales may only require a single financial year budget. However, a larger business with several hundred sales per day may need a budget report several times a year, also called quarterly reports. Keeping track of the finances and budgets makes it easier to compose the annual report for the business.

Readers and Usage of Budget Reports

The business owner and company executives are the common readers of the budget report. They use the information internally to create financial plans and projects that suit the limits of the budget in hopes of creating a larger annual profit. Growth and expansion are often the general goal with a budget report, though the opposite can be true in hard times. For example managers in departments with projected growth might hire additional staff, while others who face cuts to their operating budget might need to freeze hiring or even let staff go.

Budget reports are also read by outsiders, such as stockholders and investors. Investors and stockholders are interested in how a business is operating and doing financially before making any large decisions. It’s also a useful tool for evaluating the company’s management: If the company’s real-world results are consistently different from the budget’s projections, it reflects poorly on their decision-making and analytical skills.

Channel performance measurement is a key activity when a sales organization employs different types of channel partners. In more complex multi-channel structures, it becomes even more important due to the number of people, processes, and roles involved. The performance of a channel can be measured across multiple dimensions. The parameters that are measured usually are effectiveness, efficiency, productivity, equity and profitability of the channel.

The various channels have different purposes in the value chain; however, each task needs to support the overall corporate goals. As the number of channel partners increases, it is difficult to ensure that the channel partners are performing their specific roles as effectively as required. For example, the goal of a business might be to increase the number of strategic accounts. However, in order to gather maximum possible commission, channel partners might be engaged in getting the maximum number of accounts possible with total disregard towards prioritizing the acquisition of strategic accounts. It is therefore important to audit the channel partners and incentivize them for activities that are aligned with the corporate goals. The channel performance should also be judged on the ability to fulfill given tasks. A few carefully chosen metrics can give a good indication of the performance of each channel.

The channel performance measurement is primarily a four-step process.

Sales Objectives

The first step in channel performance measurement is to define the sales objectives for the company. These objectives are outlined and discussed in sales meetings to ensure a shared understanding between members of the marketing and sales teams.

Determine Channel Performance Metrics

Evaluating the performance of a distribution channel depends largely on the agreed upon performance metrics. Choosing the right number and type of performance metrics can help to monitor and improve the performance of channel partners. These metrics provide an understanding of how well the channel partner is doing in reaching its performance targets.

Though it is possible to evaluate a channel on hundreds of performance metrics, this would make reporting and analysis of the performance a cumbersome job. When determining channel performance metrics, a key performance driver, such as sales or units sold, should be chosen to identify and measure the most important tasks. A series of performance metrics are then decided based on the key performance driver.

Set Channel Partner Targets

After overall sales objectives are defined, it is important to assign specific targets to each of the channel partners to ensure they are in alignment with the overall objectives. Properly set targets provide a benchmark to measure channel success, monitor performance, and take corrective action to meet expectations. Each channel partner has a specific role towards fulfilling the overall sales objectives. Performance targets should be set to reflect the channel partner’s contribution to the overall objectives

Manage Channel Performance

This is the final step in channel performance measurement. It uses the agreed upon goals, assigned performance targets, and identified performance metrics to manage channel performance on an on-going basis and to identify the performance shortfalls of the channel partners. During this step, management gains an understanding of the strengths and weaknesses of each channel. Management can then take corrective action to ensure efficient performance of the channel.

The success of a channel and its efficiency are determined by the efficiency of channel intermediaries in delivering goods and services to customers and the quality of services offered in the process. Developing a comprehensive marketing plan that provides clear and concise direction about marketing activities and strategy is critical to the organization’s success.

While the Sales Audit may sound a complex term, it is actually quite simple. It is usually performed by an external auditor with both Sales and Marketing teams and analyzes the components that make up the sale.

It is very important that both Sales and Marketing teams need to be there for the audit since both divisions are closely knit and the interpersonal relationship and dependency of each division is what brings in the business.

Four Main Steps in Sales Audit

1. Manpower audit

Sales Auditor may check and scrutinize the hiring methodologies of sales reps used by the company. A complete record of the Salesperson is checked including, background, references, method of selection, salary, increase or decrease in training programs for the Sales team and any other component which may be important.

2. Market Audit

Market conditions are evaluated by the auditors to determine whether the targets given to employees are feasible or not and they are compared with market standards and industry growth rate. This helps to not only determine the feasibility of sales targets but also helps to determine early bird advantage if any for the company.

3. Sales procedures

The auditor then goes on to check Sales procedures employed by the company including the price, discounts, promotion offers, special offers and ultimately the net profit margin. This is an elaborate step and requires a detailed analysis by the auditor. The auditor compares ideal sales procedures vis-à-vis the actual procedures carried out.

4. Customer service evaluation

Since the retention of customer and repurchase of product or service solely depends on customer service and after-sales service, Sales Auditor performs a check on them. Also, a genuine customer feedback is obtained from the Customer service which can be passed on to the respective teams.

Thus, the sales audit involves detailed analysis of the sales procedure starting from the sales objectives set up till the ultimate sales done by the company’s sales staff, methods used to achieve the sales figures and viability and future of the trend if carried forward along with suggestions and improvements if any.

Tips for Sales Audit

1. Sales Objectives

 Each sale should a clearly pre-defined objective like increasing the Sales from 10% to 16% this year or increased customer acquisition.

2. Policies

The internal and external organizational policies are to be followed for the performed Sales.

3. Sales team

If the Sales team is under or overstaffed. The distribution and achievement of the target are done properly or not.

4. Sales Methods

Whether or not the methods employed to achieve Sales are within the limits of the organization and do they cross the ethical lines.

Advantages of Sales Audit

1. Maximizing profits

Effective Sales Audit will not only find loopholes but also find opportunities unexplored for the Sales of the company, thereby maximizing Sales and increasing the profit levels.

2 Budgeting

Auditing helps in Sales budgeting for the subsequent period for the organization since budgeting involves all the processes involved in Sales Audit.

3. Reputation

A Sales Audit which is effective will provide transparent data to the organization as well as the shareholders, thereby maintaining the reputation amongst the external stakeholders and also growing it consistently.

4. Capital Market

Standard audit reports are accepted by all major banks and public authorities. Thus a standardization is maintained as well as the company makes a name in the capital market for itself. The organization has to remain under the guidelines of the capital market for which the Sales Audit reports are useful.

5. Lower Capital Cost

By performing regular and timely auditing, the organization can issue clear and error-free financial statements for the public. The errors avoided today can save billions for the organization in later years thereby reducing capital cost.

6. Fraud

Sales audit can spot and stop Sales Fraud, unethical behavior selling if any and prevent tarnishing of the company’s reputation in the market.

7. Operational improvisations

Since Sales Auditors are involved in revenue generation of the company in almost every step, they can effectively guide – better than the Marketing team – to improve the operations thereby improving efficiency.

8. Business Value

Sales Auditing helps in developing the value of the business. A moderate-sized business with a moderate turnover with clear Sales audit reports will always earn value than a huge multinational with unclear Audit reports.

9. Dispute Settlement

Audit reports can always be used to settle dispute claims of past accounts. Maintenance of past accounts can be cumbersome and auditing them on urgent basis can be even more problematic. In such cases, if the company has followed the protocol of regular auditing, time and money can be saved.

10. Ethical behavior

Sales Audit reports are crucial in taxation, for shareholders, for legal bodies and for company’s own record keeping and analysis. Regular auditing can help create goodwill of the company in the market and ethical values are incorporated in employees which are carried wherever they move with them. The company is considered a benchmark for other industries.

Disadvantages of Sales Audit

1. Cost

The Sales Audit involves dealing with Sales and Marketing departments and its heads, and also sometimes with every team member to go over specific details of a particular sale. This can be tedious on account of Auditor and at times the auditor may also have to go to other departments for clarifications. This involves a lot of cost on the company’s account.

2. Staff harassment

Since numerous employees are involved in Sales Auditing, there is a chance that some of them may feel harassed and unnecessarily bothered with time and time again. This can lead to conflicts.

3. Chances of Fraud

Since the information of Audit report can make or break a company’s reputation, auditors are often made to commit fraud in reports. Internal fraud can be beneficial for the company in the short run but in long run, it can damage company reputation.

4. Manipulation

Audit reports are often based on the data presented by the company, and many times, the reports may be manipulated thus the audit reports themselves may be fake. This is a major concern of Sales Auditing.

Auditing starts at the micro level. Self-auditing as a person would improve us even at a personal level and in turn the company at the macro level. Sales Auditing would be similar to Self-auditing.

Several Methods were used to evaluate the capacity, talent and overall performance of salespersons in a company. The most common methods used to evaluate the performance are through

• Sales Target
• Sales Territory and
• Sales Report

They are discussed as below.

Evaluating Performance of Salesperson by Sales Target

The organization sets sales. Target for each salesman that he has to attain. Such targets may be set either on the basis of units to be sold or based on the value of sales. However, while setting the target it is important to consider the following points:

Several methods were used to evaluate the capacity, talent and overall performance of salespersons in a company. The most common methods used to evaluate the performance are through

• Sales Target
• Sales Territory and
• Sales Report

1. Sales Target

Evaluating Performance of Salesperson by Sales Target

The organization sets sales. target for each salesman that he has to attain. Such targets may be set either on the basis of units to be sold or based on the value of sales. However, while setting the target it is important to consider the following points:

Methods of Evaluating performance of Salesperson

• The target for sales must not be impossible to attain.
• It must be reasonable.
• It must be set taking into account the past records, market potentials, etc.
• Sales target must not be rigid.
• The incentives to be given to the salesmen shall be linked to the targets.

Advantages of fixing Sales Targets

Setting targets for the salesperson will offer the following advantages:

• Fixing sales target enables the salesman to work according to a plan.
• It provides a basis for the evaluation of the salesman’s performance.
• It is possible to coordinate production and sales.
• It does not allow any salesman to be insincere or careless.
• It enables efficient salesperson to earn more by way of incentives by attaining the target each time.

Problems in setting Sales Targets

• It is difficult to evolve a basis upon which the target may be set.
• Certain unpredictable changes in the market conditions may render the targets unrealistic.
• The same target cannot be set for all salesmen as the potentials of each person and each market differ.
• Some salesmen are capable of doing much more than the target set for them. Thus, sales targets limit the initiative.
• The target cannot be rigid. What was possible last year may not be possible this year. Therefore, the target needs to be revised periodically.

2. Sales Territory

Evaluating Performance of Salesperson by Sales Territory

A sales territory is a small segment of the entire market for a product or service. Each salesman is usually made in charge of a particular area or territory. For the trend in sales in each such area, the salesman concerned becomes accountable.

Thus, sales territory enables the business to not only evaluate the performance of the salesman but also to know the sales trend.

Advantages of Establishing Sales Territory

The advantages of establishing sales territory may be mentioned as follows:

• It enables the business to cover the entire market more effectively.
• It makes it possible for the salesman concerned to maintain good rapport with the clients in his area.
• It is possible to compare the progress in sales in each territory.
• It also gives scope to compare the performance of salesmen working for different territories.
• It avoids duplication of work by salesmen in the same area.
• It ensures proper allocation of funds for different territories.
• It also helps to have knowledge of the extent of competition in each area. A particular area, having intense competition, may require more funds for sales promotion.

Factors to be Considered in Establishing Sales Territories

• The sales territory should be so determined that it should be possible for an average salesman to cover it within the stipulated time.
• Having a particular sales territory should be profitable for the business.
• It should also give scope for the salesman to undertake any promotional campaign.
• Each salesman shall, as far as possible, be allotted not more than one territory.
• Each territory should be subject to periodical review. Additional manpower or finance may be provided depending upon the requirements.

3. Sales Report

Evaluating Performance of Salesperson by Sales Report

Salesmen are duty bound to prepare reports on the progress of their work and forward the same to their organization for necessary action. As the salesmen are the persons who know the dealers, buyers and competitors in each area, they are expected to send periodical reports to their office at regular intervals.

Contents of Sales Report

Such reports usually contain information on the names and addresses of the customers, the orders received or to be received from them, the terms of the deal, the preferences of the buyers, the action required on the order from the organization, etc.

Advantages of Sales Reports

• Sales reports enables the concern to take suitable action at the appropriate time.
• The report is an evidence of the actual work done by the salesperson.
• It helps to evaluate the performance of the salesman.
• The sales report is also an indicator of the effectiveness of the sales promotional activities of the business.
• It also indicates the trend in sales in each area and the steps to be taken to increase sales in certain places.

Sales performance is the measurement of sales activity against the goals outlined in your sales plan. The simplest method of tracking sales performance is to establish sales goals for your team and for individual team members and then evaluate performance, either monthly or quarterly. You can then improve performance using new processes and sales tools.

Even world-class products and services don’t sell themselves. Sales and marketing are particularly important for startups that don’t have the established reputation of Microsoft, McDonald’s or the Mayo Clinic. A business can fail if it has the wrong product, but even the right product needs someone to sell it.

Unless you’re gifted at sales yourself, your business team needs at least one member who knows and understands selling. Lay down the basic sales plan for the company:

• How will the sales team generate leads?
• How should the salespeople approach customers?
• What’s the appropriate conduct and manner for the team? If you’re selling sports equipment, customers may expect a different demeanor than if you’re selling funeral plots.
• How can the sales team identify qualified customers as opposed to those who are never going to close the deal?
• What customer demands can the salespeople accept? Which demands are negotiable? Which ones are complete deal breakers?
• How does the team close deals?

Sales is a teachable skill. You or your sales executive can share the basics of good sales performance with your employees so your company has the best chance of a successful launch.

Evaluating Sales Performance

It’s important to know if your team’s sales performance is adequate, but it’s not easy to measure. If your sales revenue is good, that could be because of your sales team or in spite of your sales team. Revenue doesn’t tell you if they’re delivering peak performance or if it’s possible to increase sales.

To judge sales performance, you need KPI, or key performance indicators. These are metrics that measure your team’s success and help you identify areas of improvement for sales reps:

• How much time does the sales team put in on the job?
• How is their time spent? Do they spend most of their time pitching clients or hunting for leads to potential customers? Do they waste a lot of their time?
• How quickly does your sales force respond to leads? If someone calls and asks to meet, they’re probably looking to buy. If a salesperson doesn’t move fast, the lead may turn to some other company.
• How many presentations actually lead to a sale?
• How many potential customers are in the pipeline to be pitched? A good sales team needs lots of leads because they won’t all result in sales.
• How much time and money does it take to close each sale?
• How much money do customers generate after the initial sale?
• How much does your company spend on sales, including salary and benefits? Is it more than the team is bringing in?
• How much sales revenue does the team generate?

It’s important to choose the sales performance metrics that work for you. If your business strategy calls for steady sales growth over time or prioritizes repeat business, those goals should shape your KPI.

Sales Performance Management

Sales performance management involves monitoring your team’s performance, evaluating KPI and finding ways to increase sales. It’s easier than it used to be, as various software can do a lot of the monitoring for you, but it also takes judgment. Good management involves knowing when your salespeople are screwing up and when there’s nothing they could have done to close.

• Good sales performance management requires a transparent sales process: You know how many leads team members have, how they’re generating them and how individual sales efforts are going.
• Accurate sales performance projections give you benchmarks against which to measure your team. Projections need to be ambitious but realistic. Setting them unattainably high gives you a distorted view of sales performance.
• Motivation drives sales, as it does most other parts of business. Keeping your team motivated may require competition, showing them how they compare to each other or offering added incentives for those who increase sales the most.
• Keep accurate sales figures. Even if you rely on spreadsheets, one error can give a salesperson too much or too little commission.

Incentives to Increase Sales

Offering incentives is a time-honored way to increase sales. Commissions based on how much sales revenue an individual generates are a common incentive, as are bonuses. However, an incentive plan can easily turn into a disincentive plan, discouraging the team from giving its best effort.

• If you value teamwork, setting bonuses and rewards based on total sales team success is the way to go. Focusing on individual or competitive incentives could actually discourage the team from pulling together.
• Take some time to learn what your team wants for rewards. Cash is fine for some, but less-tangible rewards might appeal to others.
• If you have a strategic shift, such as increasing the pursuit of new customers, you need to adjust your incentives to suit the new goals.

Sales Improvement Plan

Suppose you review your sales KPI and discover the team is lagging. Sales aren’t keeping up with your forecasts, or they’ve been good but started dropping recently. To prevent a slight drop from becoming a free fall, you may need to draw up a sales improvement plan to increase sales once again.

• If you don’t have a sales plan for the team setting goals, objectives and strategies, then draw one.
• Use software for your team to track leads, contacts and opportunities.
• See whether your KPIs and your incentives are doing the job or need adjustment.
• Meet regularly with the team. This could include weekly meetings with the team as a whole and individual chats with each member. The meetings let you focus on the team’s energy and hear from them on problems about which you may not be aware.
• Find ways to get the team better leads for sales calls.
• Train the team to make better cold calls on new prospects.
• Word of mouth by satisfied customers is a great way to bring in new business. Encourage your sales team to make this a priority, such as giving customers their contact information and saying they’d welcome a referral.
• Have the team members work to improve their sales pitch.
• Is your team running into the same objections from prospects over and over? Work with your salespeople on finding ways to get around the common objections they hear.
• Keep an eye on your customers and potential customers. If there’s a change of management at a steady customer, you might contact them and renew the relationship. If it’s a potential customer to whom you haven’t sold, the change may offer a fresh opportunity to pitch them.
• Keep an eye out for underlying issues. It may be that the problem with sales performance isn’t the team but instead is new competition or software that doesn’t meet their needs.

Success and Failure

A sales improvement plan can’t work if you’re unrelentingly negative about sales performance. If your sales team is doing good work, celebrate that even as you ask them to do better. Present your plan as a way to do better, not an attempt to point fingers or treat them like losers.

If you do see them making serious mistakes, don’t look away. Talk to your team about their failures and discuss what lessons you can learn and how the team can improve for the future. As long as the team trusts you to help them move past their mistakes, they’re less likely to sweep failure under a rug.

Channel management involves the marketing and sales strategies your company uses to reach and satisfy consumers, the techniques you use to support your partners who help with the distribution process, and how you manage vendors.

When establishing your channel management solutions, you must set clear goals for each channel. (A channel is how you intend to sell your goods or services to your target audience). In addition to clear goals for each channel, you want to:

• Define the policies and procedures to manage your channels
• Identify which products you offer that are suitable for a particular channel, and
• Develop sales and marketing programs for each channel to meet the actual needs of your target customer, not what you think their needs are.

Identifying channel management solutions

When trying to identify a channel management solution that will complement your business, look at the big picture. Communication internally and externally is key to finding a solution that will help you meet your company’s goals.

How to choose the best vendor management software for your business?

As you search for a vendor management software solution, first identify your needs, then how the software can help you accomplish your goals, improve efficiency, and increase profits.

Next, evaluate the technology that your channel partners will be utilizing as well. Technology updates, communication and enterprise alignment are vital to success. View your company as a whole, and understand how each part interacts with the other, from the smallest purchase at the local office supply store to complex technology systems, and don’t lose sight of the most important aspect of your company, your customer.

Examples of channel management 

According to Simplicable, the main types of channel management include:

1. Channel architecture

Channel architecture is the basic framework for your channel. It encompasses how the product is provided by the producer to the consumer.

2. Channel strategy

This aspect involves your sales and distribution blueprint, such as how you plan to expand your market and what specific action plans you will put in place to improve your e-commerce channel.

3. Channel design

How will you implement new channels? For instance, you may create an affiliate program to encourage certain types of people and companies to help sell and promote your product.

4. Sales management

This aspect involves how you will manage sales and other partners. This could include things such as what incentives you will offer to drive sales.

5. Channel conflict

How do you plan to address conflict between channels that are unfair to one party or counterproductive? For instance, if you are using an e-commerce solution that undercuts your affiliates, you must address this conflict. When designing channels, you must pay careful attention so one channel does not create a conflict for another channel.

6. Relationship management

This aspect involves establishing and managing relationships with vendors, affiliates, etc., over time.

7. Brand experience

How do you plan to develop a brand experience that is consistent across all channels, including if you sell online, through social media, etc., as well as physical locations such as stores, boutiques, and more? For instance, if your brand voice emphasizes making customers feel loved and appreciated, this should happen no matter where your customers go. For example, various beauty brands make their customers feel pampered. This is much easier to do in person, as this can allow you to massage, apply makeup, etc. Nevertheless, the online experience must also go above and beyond to give the same personal touch by using the right words, offering exclusive deals, etc.

8. Pricing

This method involves using channel-based pricing strategies. For instance, a luxury bakery that only sells certain products in upscale areas is an example of pricing as channel management.

9. Sales and operations planning

This method involves taking the time to match the goods or services you are producing with the general demand. For instance, if you have a product or service that is more popular during certain times of year (i.e., Christmas), you want to increase production in the spring or summer.

10. Revenue management

How will you optimize revenue for your available inventory? For instance, a retail store may sell swimsuits at full price until near the end of the summer, at which time it would likely discount the inventory to make more room for fall and winter products.

11. Distribution

This aspect is focused on how you will deliver on your obligations to both channel partners and customers. For example, this could include properly managing logistics, such as product exchanges and returns.

Channel partnerships may have changed in recent years, but they remain as important as ever. Previously, the partner model was centred on resale, margins and collecting upfront revenue, but as the technology sector has transitioned to a more service-based industry, the partner channel has followed suit. Nowadays, it is not enough for channel partners to offer good technology, they must also provide responsiveness, flexibility and strategic enablement. Of course, the potential benefits of a modern channel partnership depend largely on who you choose to partner with, which is why this decision is proving so important for businesses across all industry sectors.

Channel partners are great for business; they grow both the company and brand allowing you to know that working together is driving increased profits and even more customers to the company.

Criteria for selecting the right channel partner

1. Market Focus

 Determine your potential partners’ specific target markets, whether they are based on geographic considerations or business type. Discover their current selling and networking activity. Is their existing customer base demanding better, more advanced solutions? Does their existing customer base suit your business in terms of size, location and application?

2. Target Market

Look at the channel partner’s target market, their focus, their customer base and their marketing strategy. What experience do they have, what successes? How knowledgeable are they about their market and competition?

3. Business Stability

How stable and secure is the channel’s business model? Consider factors like size, viability, suitability for target market, management competency, their profitability and growth.

4. Financial Security Soundness and Structure

Understand the the channel partner’s financial position. Request information about their revenue, size, growth, gross margin and profit, balance sheets and cash flow, are they a private or public company, how is their business financed?

5. Does their process and practice fit with yours?

Will partnering with you create a ‘solution conflict’ potentially reducing maintenance revenue, territory size or services? Are you able to provide new business opportunities, services and competitive advantage? Will your solution allow them to sell more and provide maximum potential revenue for you?

6. Skills and Experience

Does the channel have the skills and experience to sell and support your solutions? What is their sales experience, what might your solutions be as a proportion of their total revenue? What specialist skills can they offer? Who are their employees, their background and experience? What is their SE capability, their marketing strategy, their staffing resource and their contact level for their customers and prospects? Do they have the staffing capability for field sales, telesales marketing etc? How do they measure progress and customer satisfaction?

7. Technical Expertise

What specialist resources does the channel partner have? Do they have sufficient training plans, experience in network infrastructure, experience in presenting/demonstrations, knowledge of your implementation issues, the ability to be self-sufficient technically, a customer service mentality?

8. Who else are they resellers for?

What is the channel’s track record, and their experiences, (good and bad) are they locked-in to any specific agreements?

9. What Knowledge do they have of you?

Sales, Telesales and Marketing?

10. What is their Partnership mentality?

How committed is the channel to partner with you? Are they willing to dedicate staff to your business? Do they have lead generation plans and lead follow-up processes? Are they prepared to invest in demo-capability and training? Are they focused on a long-term partnership, willing to work together to develop a partnership plan and to commit to minimum targets ?

Remember that unlike direct selling, the sales relationship between you as the vendor and your channel starts after the sale. Finding the right partner is definitely the first critical step. After that the key to building a successful partner relationship will depend on the education and support provided by the vendor.

Tips for Successful Channel Partner Selection

1. Knowledge of You

Ask them how they know you, where they’ve seen you before and see if they understand what it is you actually offer.

2. Other Resellers

Find out if they have any long term agreements with other companies, ask about the channel’s track record and what their experiences are, both good and bad. Try to put together the image they are trying to portrait by piecing together their responses.

3. Partnership Mentality

What’s the commitment level to work with this partnership? See what their plans are with dedicated staff, sources of lead generation, lead follow up plans, investment into demo’s and training, is this going to be a long term relationship and are there any plans to commit to minimum targets.

4. Technical

Does the partner have the ability to implement, train and be self-sufficient with the technicals? Are they able to offer presentations and demonstrations to a high standard? Sometimes if the partnership is solely based on a online basis with the product being SaaS etc it would be wise to have everything set up for the partner limiting any potential barriers along the way.

5. Skills and Experience?

When it comes to selling your service/product what sort of skills does the channel have that can be used in conjunction with the offer? What are their specialist skills and what sort of background do their employees have? Are the team capable of effective telesales and field sales processes or is this something that extra training will be needed for?

6. Fit and Purpose

Partnering can be great but sometimes you need to understand if it’s a worthwhile idea. Will territories, revenue or services be in conflict if the partnership was put in place? Will there be new business opportunities that wouldn’t have existed before? Will the channel be able to sell more and increase revenue due to the new market/customer base?

7. Market Focus

Find out the channels specific targets such as geographic focus and business type. See what sort of network they have in place and determine if the size and location suits your business.

8. Target Market

Consider the channels target market and see what sort of successes and failures they’ve had along the way. What is their focus and strategy to get ahead in their market are they aiming to be number 1 or just to grab some market share? What is their knowledge and expertise?

9. Financials

Understand the channels financial position, are they growing? What’s their profit and loss? Cash flow, size, revenue and are they a public or private company.

10. Stability

Does the channel have a stable and secure business model? Consider their market and viability alongside offering and financials to understand what their position currently is.

Finding the right partners is critical right from the start as generally speaking it’s a long term strategy that if not aligned correctly right from first contact you’ll find it difficult to get moving.

The relationship starts after the sale when it comes to channel partners so questions like above are vital for success.

Activating your channel is the most fruitful opportunity available for accelerated sales growth over the next 12 months. For many companies tapping into an indirect sales channel, only 20 per cent of their channel partners is amassing the sales to have a positive impact on the bottom line.

But, what if you can activate the other 80 per cent of your channel network to generate new sales? The task of converting 80 per cent of your channel partners from passive to active status starts with understanding their needs and motivations. The sooner you can figure out what drives their behaviour, the sooner you can get them on the path to driving in more sales.

1. Motivation

It’s been proven time, and again that increased motivation leads to improved performance. When you prove to your channel how much you value them, you are rewarded in the form of higher productivity, increased sales and greater end-user satisfaction.

2. Provide them with the support they need

Distributors need constant support with day-to-day activities. This will include marketing materials, samples of your product, and sales data. All of which will all be used to pitch your product to buyers. The best support you can offer your channel partners is a commitment of your time and focus to ensure they are receiving everything they need to be successful.

3. Create an incentive program

A carefully designed and well-run incentive program can rouse a sales force, motivate marketing staff, or reinvigorate an uninspired channel network. Any of these objectives are reason enough to use incentives. Work with your distributors to set sales targets that are attainable, yet challenging to keep them interested.

Be Flexible: offering various rewards is a good rule of thumb, but is especially important when you aren’t familiar with the corporate culture of the particular sales force you are trying to motivate.

Reward good behaviour: while increasing sales is always the end goal, time and effort have their merit and should be rewarded as well.

Consider rewarding certain educational pursuits that demonstrate a long-term commitment to professional growth and development. These pursuits may include product training, certification or attending industry seminars and conferences. Incentive programs provide a way for suppliers to fight for the mindshare of their distributors much the way those same distributors compete for the mindshare of consumers.

4. Keep up communication

Suppliers can’t mount a leaderboard at a partner’s office, so consider promoting a program with regular communication. Email updates are always good. Consider even crafting two types of messages, one aimed toward executives and one toward frontline sellers, to get buy-in at all levels of your partner’s business.

Communications that signal the program launch and deliver regular updates to network partners build the brand and drive participant awareness, interest and enrolment. Ongoing discussions promote product sales and encourage participant engagement.

5. Train them

Distributors won’t be motivated to sell a product that they are not familiar with, so take the time to have every new distributor thoroughly trained. The training should focus on how the product works, what it’s made out of, and what unique features and benefits partners should be aware of.

Be sure to discuss how the product may be positioned to buyers, and whether the distributor should work with staff to train them on the product as well. When your channel partners know more about your product, they will become more confident about selling it, and thus be more effective when pitching it.

6. Don’t forget to track and analyse

Your program data is crucial to the understanding of how your program is driving business activity and determining the changes that will improve performance. Your program should be tracking the behaviours of your channel partners (and potentially end-users), and as a result, could yield early warnings about the market and competitive developments.

Track results: return on investment is a key metric to monitor. This will ensure that both sides are keeping up their ends of the deal. Volume, market share, or growth of strategic accounts can all be measured factors as well.

Importance of Motivation to Distribution Channel Members

Marketing products through indirect channels such as retailers or distributor outlets is an efficient way for your business to serve large numbers of customers that your sales force could not reach. An effective distribution strategy can boost revenue and profitability, while poor channel performance can have the opposite effect, according to Marketing MO. To encourage channel members to stock and market your products, you must motivate them.

1. Build Preference for Your Brand

Motivational tools help to ensure that channel members give preference to your products over your competitors. Distributors and retailers typically carry a wide range of products from many different suppliers. They must therefore make decisions about the level of sales and marketing resources they allocate to each product or manufacturer. Motivation plays an important role in winning channel members’ mind share, according to the business school MMC Learning. By winning mind share, you can ensure that channel members recommend or actively promote your product.

2. Add Value to Your Product Offer

Motivating distributors and retailers is an important strategy for influencing channel members’ behavior, according to the marketing consultancy Pure Channels. Offering training programs or marketing support to members adds value to the relationship between supplier and channel by helping them to improve their performance and grow their own business. A strong relationship makes it easier to launch new products or marketing campaigns through the channel, helping to build your own revenue and profit.

3. Increase Sales through the Channel

Financial incentives are an important source of motivation to channel members. By offering discounts on purchases above an agreed level or rewarding sales above target with bonuses, you can encourage channel members to stock and sell more of your products. Financial incentives can help you launch new products, increase sales of existing products or widen your distribution base, because channel members recognize that they will benefit from cooperating with you.

4. Improve Performance with Structured Programs

If you have a network of distributors or retailers, you will probably find that performance and commitment to your brand varies across the network. By setting up a structured channel program that offers different benefits at each level, you can motivate members to improve their performance. The program might take the form of a tiered structure, with tier 3 members receiving basic benefits and tier 1 members receiving a wide range of benefits that help them grow their business. The benefits might include different bonus or discount levels, marketing and training support, joint promotions and exclusive products. To reach higher tiers, you can set requirements such as stocking certain products, achieving sales targets, participating in training programs and agreeing to participate in promotions.

Conflict resolution skills are required for a wide range of positions across many job sectors. This requirement is based around the fact that conflict tends to reduce productivity and create a difficult work environment, leading to unwanted turnover in staff and reduced morale.

Individuals who are able to resolve conflicts are often excellent mediators, rational, and able to manage difficult personalities from a place of empathy.

Conflict resolution is the process by which two or more parties reach a peaceful resolution to a dispute.

In the workplace, there can be a variety of types of conflict:

• Conflict may occur between co-workers, or between supervisors and subordinates, or between service providers and their clients or customers.
• Conflict can also occur between groups, such as management and the labor force, or between whole departments.

The Conflict Resolution Process

The resolution of conflicts in the workplace typically involves some or all of the following processes:

• Recognition by the parties involved that a problem exists.
• Mutual agreement to address the issue and find some resolution.
• An effort to understand the perspective and concerns of the opposing individual or group.
• Identifying changes in attitude, behavior, and approaches to work by both sides that will lessen negative feelings.
• Recognizing triggers to episodes of conflict.
• Interventions by third parties such as Human Resources representatives or higher level managers to mediate.
• A willingness by one or both parties to compromise.
• Agreement on a plan to address differences.
• Monitoring the impact of any agreements for change.
• Disciplining or terminating employees who resist efforts to defuse conflicts.

Kenneth Thomas and Ralph Kilmann developed five conflict resolution strategies that people use to handle conflict, including avoiding, defeating, compromising, accommodating, and collaborating.

This is based on the assumption that people choose how cooperative and how assertive to be in a conflict. It suggests that everyone has preferred ways of responding to conflict, but most of us use all methods under various circumstances. It is helpful to understand the five methods, particularly when you want to move a group forward.

Thomas-Kilmann Conflict Mode Instrument

The Thomas Kilmann Conflict Mode Instrument is a model for handling conflict:

Conflict Management Styles

Here are the five conflict management styles according to Thomas, K.W., and R.H. Kilmann:

1. Accommodating

This is when you cooperate to a high-degree, and it may be at your own expense, and actually work against your own goals, objectives, and desired outcomes. This approach is effective when the other party is the expert or has a better solution.  It can also be effective for preserving future relations with the other party.

2. Avoiding

This is when you simply avoid the issue. You aren’t helping the other party reach their goals, and you aren’t assertively pursuing your own. This works when the issue is trivial or when you have no chance of winning. It can also be effective when the issue would be very costly. It’s also very effective when the atmosphere is emotionally charged and you need to create some space. Sometimes issues will resolve themselves, but “hope is not a strategy”, and, in general, avoiding is not a good long term strategy.

3. Collaborating

This is where you partner or pair up with the other party to achieve both of your goals.  This is how you break free of the “win-lose” paradigm and seek the “win-win.” This can be effective for complex scenarios where you need to find a novel solution.This can also mean re-framing the challenge to create a bigger space and room for everybody’s ideas. The downside is that it requires a high-degree of trust and reaching a consensus can require a lot of time and effort to get everybody on board and to synthesize all the ideas.

4. Competing

This is the “win-lose” approach. You act in a very assertive way to achieve your goals, without seeking to cooperate with the other party, and it may be at the expense of the other party. his approach may be appropriate for emergencies when time is of the essence, or when you need quick, decisive action, and people are aware of and support the approach.

5. Compromising

This is the “lose-lose” scenario where neither party really achieves what they want. This requires a moderate level of assertiveness and cooperation. It may be appropriate for scenarios where you need a temporary solution, or where both sides have equally important goals. The trap is to fall into compromising as an easy way out, when collaborating would produce a better solution.