Market Channel Analysis

• How effective are our sales channels?
• Do we have the right market channels for growth?
• Do we have the right number of feet-on-the-street?
• Do we have duplication of marketing costs?

Every company, regardless of their markets and products, has something in common -- the sales channel -- the invaluable link between your customers and your company. Although most marketers realize the importance of this asset, few spend considerable effort in evaluating the effectiveness of their sales channels. Millions of research dollars are spent each year on issues related to products, markets, manufacturing costs, and economic trends, while remarkably little is spent on analyzing a company's most valuable resource.

The issues facing marketing executives in today’s fragmented markets include the choices of sales channels and distribution channels. Each marketer is faced with a choice of several different potential sales channels, including:

Employee Sales Force Independent Manufacturer’s Reps Distributors Integrated Supply

Telemarketing E-Commerce Selling Direct Marketing (catalogs/mail)

Each channel has its advantages and disadvantages and many companies utilize several different channels. However, while sales channel selection varies with overall business strategy, measurement of effectiveness is a constant.

The Allegheny Marketing Group (AMG) utilizes a variety of methods to measure the effectiveness of our clients’ sales channels. When objectively evaluating the effectiveness of marketing channels, a number of factors can be instrumental, including:

• Cost Structure of Existing Channels
• Product/Market Segment Analysis
• Sales Productivity/Customer Penetration/Geographic Territory Analysis
• Benchmarking Competitive Sales Organizations

Case Study 1

An electrical equipment manufacturer observed that, while its sales were growing, it was not growing at its anticipated rate. The company had interviewed its largest customers and its sales force to determine why sales were not growing as anticipated. The company appeared to have the right products and its primary customers were satisfied, but why were sales not meeting expectations?

After a detailed review evaluating product segmentation, market segmentation, sales territory productivity, sales coverage, and competitor benchmarking, it became evident that the company’s current sales channel was not reaching the new, high growth segments. In addition, several sales territories were being under-covered, while others were over-covered. By reallocating resources, reviewing the sales support program, and focusing efforts on ineffective territories, the company’s long term growth was enhanced.

Case Study 2

A leading plastic container supplier was experiencing sales conflicts between its direct sales force and distributors. Although direct sales were increasing, distribution sales remained flat.

The Allegheny Marketing Group was contracted to determine what the sales level through distribution should be to maximize corporate profitability, to improve the company’s share position, and to develop a high quality distribution program. Through careful analysis of internal corporate information, primary research, and competitor intelligence, a program was initiated to increase the company’s share position by 2%, resulting in approximately $20 million of sales growth.

Case Study 3

A small division of a large industrial products corporation was struggling with growing their business. Before investing hundreds of thousands of dollars in new product development, manufacturing capacity, and marketing support, they wanted to investigate whether efforts should be directed toward adding sales channels and/or new products.

The company asked the Allegheny Marketing Group to help. By analyzing the end use markets, channel players, competitive set, and previous new product development efforts, it became clear that several options were available – each with varying levels of risk. The lowest risk option available was to more aggressively support their existing sales channel rather than developing a new channel. The existing channel was already reaching their target markets but needed to be managed to provide better results.