The latest economic crisis necessitates the need for companies to revisit their sales channels. Why? The drastically effected marketplace has altered factors like sales potential, competitive landscape, customer preferences, partnerships, etc. As these factors are the foundation for the initial strategies used in designing sales channels, the changing environment dictates companies revisit their plans around acquiring and cross / upselling to customers.
You can download PDF version of this whitepaper here.
The chaotic situation that the economic crisis has dragged companies into recently brings with it not only threats, but opportunities. While some global companies are on the verge of collapse (or already have), others are prospering and expanding. Example – In January 2009, the United States’ second largest electronics chain – Circuit City – declared bankruptcy, liquidating all its assets, closing down its 567 stores and letting go 34,000 employees. Within one week of this devastating collapse, AT&T announced that it was entering into a multi-billion dollar acquisition deal.
A majority of companies, unfortunately, feel they are closer to facing Circuit City’s situation than AT&Ts. The natural reaction in such times is to examine cutting costs, with every department and their respective activities taken under a microscope.
In the case of sales channels, cuts are often made around commissions and support systems, overlapping branches / dealers shut down, long-term projects discontinued, budgets slashed, trainings stopped, etc., all in order to make the numbers look good in the short-term.
While numbers may in fact look better in the short-term, the long-term impact may be devastating. Such initiatives need to be conducted in a much more coordinated and systematic manner. We propose a 5-step approach to revisiting your sales channel strategies – an approach that takes into consideration both the short and the long term, and thus, the overall health of your sales channels, both during and after the crisis.
1. Revisit Strategies
Based on the changing factors in the marketplace, companies need to revisit their sales strategies, particularly in relation to other core objectives such as retention and satisfaction, and fine-tune them. The focus here is on the importance of acquisition during the downturn, and whether your company stands to grow or maintain its customer base. For example, in an environment where your competitors are struggling due to the downturn, aggressiveness is key to winning their customers, with targeted campaigns focusing on their relevant weaknesses.
Companies need to assess their situation (their customer base, their competitors, market conditions, pricing, etc.) in a systematic manner and determine what are the strategies to focus on during and after the downturn. With this first step complete the company can then take the next steps around redesigning their sales channels.
2. Review Channel Usage Statistics
Once the strategies that need to be pursued are identified, companies should then examine their existing sales channels to ensure alignment with the strategies. If, for example, one sales channel is particularly effective at upselling a specific product / service and your sales strategy dictates the pursuit of this objective, then the channel should be invested in rather than downgraded.
Customer behavior around the usage of the channels should also be examined here, taking into account their preferences –it is quite possible that their behavior and thus the usage of the channels has changed significantly since last examined. Whereas dealers were the preferred method of contact for customers at a certain point, the internet may have proliferated in usage.
Finally, the costs associated with the channels should be examined. There may be new alternative sales channels that could be used in place of certain existing channels, ensuring a more significant return on investment. The decisions here need to be carefully weighed, considering the already significant investments made into existing channels vs. the shift to more cost effective ones that may require infrastructural investments around training, process & system design, etc.
3. Optimize Coverage
Based on the channel usage statistics, sales via each channel on a geographic basis should be examined, particularly around the brick-and-mortar sales outlets. These channels are traditionally the most costly ones, requiring operational support in the form of resources and investments. The downturn will have had a more significant impact on sales in certain regions, providing an opportunity to resize the company’s physical presence in those specific locations.
It is important not to “cut off an arm” here. Rather, if the sales presence in the region is bloated, some cutbacks can be made. Ultimately once the downturn is over, there will be a need to still have a proper presence in the region. Shutting down too much of the sales operations will cause your company to lose on potential sales in the future, post-downturn.
Alternative sales channels such as shop-in-shop dealers and outbound call centers should be strongly considered when conducting the optimization effort, as these channels are less costly in relation to traditional brick-and-mortar ones.
4. Optimize Staffing
Once the sales channel presence is optimized, it is then time to examine within. HQ support and management functions need to be assessed in light of the shift in the sales channel. Based on the overall optimization effort, similar resizing efforts need to take place within the sales organization.
Once again critical here is to avoid going overboard. Too strong of a pursuit in reducing headcount and costs could leave the channel headless, with a demoralized shell of a staff left behind to boost up sales during and after the downturn. Those in HQ viewed by the regional sales teams as critical to ongoing efforts need to be identified, and, kept on board.
5. Review Channel Support Methods
With a revised management and regional sales effort in place, the support given to sales operations should be considered at this point. Again as tempting as it may be to reduce sales target premiums or operational support items, the channel needs to be kept propped up during the downturn. Sales representatives need to be kept motivated around their efforts, and any reduction in support here will lead to significant demoralization. As it stands, their sales are likely to be under the prior quarter / year’s results, and thus their overall earnings decreased.
The downturn ultimately provides a great opportunity for companies to reassess their overall sales strategies, channels, presence, budgets, etc. This opportunity, if tackled in a systematic manner, can go a long way towards preparing the channels for the downturn and afterwards. Moderation is the key here – scale down too far and risk losing after the downturn – scale back too little and you might not make it through it.