Class 3 Berkeley/Columbia channel
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Transcript of Class 3 Berkeley/Columbia channel
The Lean LaunchPad
Session 4: Channels
Professors Steve Blank,Jon Feiber, Jim Hornthal, Oren Jacob
https://sites.google.com/site/xmba296t/
XMBA296T
Channels
How does each customer segment want to be reached?
Through which interaction points?
2
Test Hypotheses: Channel
3
Two Critical Questions about Channels
First one is obvious: How do you want to sell your product?
4
1
Second one is subtle, but more important than the first: How does your customer want to buy your product?
2
How Do You Want to Sell Your Product?
Yourself
Through someone else
Retail
Wholesale
Bundled with other goods or services
5
üüüüü
How Does Your Customer Want to Buy Your Product?
Same day
Delivered and installed
Downloaded
Bundled with other products
As a service
…
6
üüüüüü
Nature of Product Impacts Channel: Atoms or Bits?
Access to customers changes dramatically
Logistics related to product complexity
People as products
7
Web Channels
8
Physical Channels
9
Types of Channels
OEM VAR Reseller Distributor
10
Direct Indirect Licensing
The Channel as a Customer
Some products are embedded in others (OEM)
Some products are resold by others (VARs)
Some products are distributed by others
Who’s the customer?
11
Distribution Complexity
12
Evangelists
ServiceTechnicians
Higher Value Added
Higher Volume
Direct Sales
VARs
Retail
Web, Telesales
Systems Integrators
Mainframes
MinisLANs
PC ServersDesktop PCs
PrintersKeyboards
Toner
WANs
Global Systems
Solution Complexity
Ma
rke
tin
g C
om
ple
xity
How Are Channels Compensated?
Commission
Percentage of sales price
Discounted pre-purchase
13
How Are Channels Motivated or Incented?
Money! – what makes them the most?
Training
Marketing to the channel
SPIF
14
Channel Economics: “Direct” Sales
15
Cost of Goods(Supply Chain)
Profit + SG&A + R&D
En
d C
on
sum
er
EU
D
isc
ou
nts
RevenueList
Price
Source: Mark Leslie, Stanford GSB
Channel Economics: Resellers
16
Cost of Goods(Supply Chain)
Profit + SG&A + R&D
En
d C
on
sum
er
EU
D
isc
ou
nts
Reseller
RevenueList
Price
Source: Mark Leslie, Stanford GSB
Cost of Goods(Supply Chain)
Profit + SG&A + R&D
Channel Economics: Distributors/Resellers
17
En
d C
on
sum
er
EU
D
isc
ou
nts
Reseller
Dis
trib
uto
r
RevenueList
Price
Source: Mark Leslie, Stanford GSB
Channel Economics: OEM or IP Licensing
Your Product Becomes Your Customer’s COGs
18
Source: Mark Leslie, Stanford GSB
En
d C
on
sum
er
ResellerProfit + SG&A +
R&D
Cost of Goods(Supply Chain)
EU
D
isc
ou
nts
Reseller
Dis
trib
uto
r
Mas
ter
Dis
trib
uto
r
Profit + SG&A + R&DCost of Goods(Supply Chain)
RevenueList
Price
Example: Book Publishing
19
PublisherNational
DistributorPrinter Wholesaler Retailer Customer
Book Publishing
Percent of Retail
20
For their efforts, distributors take an additional 10% of retail. That means you get 35% of retail, the distributor gets 10%, the wholesaler gets 15% and the retailer gets 40% less any
discount they offer the end customer
PublisherNational
WholesalerDistributor Retailer Customer
35% 15% 10% 40%
$7.00 $3.00 $2.00 $8.00 $20.00
Book Publishing Economics
21
PublisherNational
DistributorWholesaler Retailer Customer
Wholesale costs
Markup
Allowances
Payment guarantees
Payments
Bills
Credit guarantees
Payment guarantees
Return rights
Credits
Book Publishing Delivery
22
PublisherNational
DistributorPrinter Wholesaler Retailer
Merchandise titles
Sell magazines
Acknowledge returns
Determine allocations
Dispose of returns
Prepare film (content)
Establish identity
Create demand
Prepare galleys
Receive Schedules Print
orders Bundle
counts Film
Print and ship
magazines
Deliver orders
Bits vs. Atoms
23
Bits
Physical
Product
Web Physical
Channel
Product and Channel Are Bits
24
Bits
Physical
Product
Web Physical
Channel
Rapid Agile and Customer development
Fastest to acquire early customers and scale
Web 2.0 – Product and Channel Are Bits
25
Bits
Physical
Product
Web Physical
Channel
Google Twitter Facebook Zynga Cloud Services
Product Is Bits, but Channel Is People
26
Bits
Physical
Product
Web Physical
Channel
Rapid Agile and Customer development
Fastest to acquire early customers and scale
Rapid Agile and Customer development
Traditional sales channel
May require installation
Traditional Enterprise Software
27
Bits
Physical
Product
Web Physical
Channel
Google Twitter Facebook Zynga Cloud Services
Microsoft SAP Oracle
Physical Products Sold Over the Web
28
Bits
Physical
Product
Web Physical
Channel
Rapid Customer development
Logistics, shipping and manufacturing critical
Customer service
Rapid Agile and Customer development
Fastest to acquire early customers and scale
Rapid Agile and Customer development
Traditional sales channel
May require installation
Killing Traditional Storefronts
29
Bits
Physical
Product
Web Physical
Channel
Zappos Amazon Cafepress Netflix Consumer electronics
Google Twitter Facebook Zynga Cloud Services
Microsoft SAP Oracle
The Factories May Be in China
30
Bits
Physical
Product
Web Physical
Channel
Rapid Customer development
Logistics, shipping and manufacturing critical
Customer service
Rapid Agile and Customer development
Fastest to acquire early customers and scale
Longer customer feedback cycle
May require large capital requirements for scale
Rapid Agile and Customer development
Traditional sales channel
May require installation
We Still Make Things that Need Salespeople
31
Bits
Physical
Product
Web Physical
Channel
Zappos Amazon Cafepress Netflix Consumer electronics
Google Twitter Facebook Zynga Cloud Services
Cars Solar panels Wind turbines Bookstores Consumer electronics
Microsoft SAP Oracle