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Channel Focus

china business - mr. miguel p. suterio Jul 25, 2010

More consumer goods manufacturers are shifting from a geographical based sales structure to one that is channel-focused.

Companies are now evolving such that Regional/Area/Territory Sales Managers who, in the past, used to be in charge of specific geographical territories are now evolving into Channel Managers, who are now in charge of specific channels of trade distribution.

But as new organizational charts are drawn up and new titles printed on business cards, one question remains: Will a channel-focused reorganization deliver business results?

In order to answer this, companies must first assess whether there is true channel-focus in the organization. Or is it merely a superficial one?

The true essence of channel-focus must incorporate the following elements:

1) Intimate understanding of the shopper’s perspective. The main reason why a unique channel exists is because unique shopper needs exist. An example is the petrol convenience store. Motorists who fuel up in the forecourt and are in need of a quick snack, refreshment or convenience item are the primary reason why this trade channel exists. As such, the perspective, the shopping mission and context of these motorists must always be kept in mind in developing strategies specific to this channel. An intimate understanding of the shopper’s perspective will allow companies to develop relevant channel classifications as opposed to the broad ‘Modern Trade-General Trade’ or ‘Key Accounts-Distributors’ classification.

2) Intimate understanding of the trader’s perspective. It is critical to keep in mind that for each type of trade channel a specific profile of trader exists. Companies must take into consideration the trader’s level of capitalization, desired return on investment, operational complexity, marketing savvy, span of personal control, level of risk, etc. These must all be taken into account when developing trader-related activities as opposed to shopper-related. Examples are the Institutional Food Service Channel Trader (school canteens, military institutions, etc.) and the Hospitality Food Service Channel Trader (hotels, resorts, etc.). Both are food service entrepreneurs, yet each has business needs unique and specific to their channel type. A strategy that is hinged purely on low acquisition cost may work well with the former, but not necessarily the latter.

3) Intimate understanding of trade operations. Another crucial element is a deep understanding of trade operations. It is critical to identify channel operating costs, margin needs, source of stocks, margin architecture, etc. in order to truly appreciate the nuances of each channel. This will ultimately allow more robust and realistic strategies to be planned and implemented.

4) Relevant channel classification. An intimate understanding of the shopper, the trader, and trade operations will allow a company to develop relevant channel classifications based on what will greatly impact the business. This means that companies will now have a greater ability to influence the trade and the shopper as their approach will be more specific to the shopping mission and the trading context.

5) Focused, aligned, and differentiated strategies for each relevant channel. It is not enough that relevant classifications are created. What is more important is to be able to capitalize on these through strategies that are focused, aligned and differentiated per channel as well as specific to the company’s brands. This is embodied in the Brand-Channel Strategy. This strategic document is the collaboration of the tripartite entity of Marketing, Trade Marketing and Sales.

6) An organization that can execute strategies. Having a channel-focused organization does not necessarily mean that each channel warrants its own set of managers. It simply means that a company takes deliberate action in the development and implementation of strategies in a manner that is based on and takes full advantage of the specific nuances of trade channels.

This means that companies, which choose to employ a geographical sales infrastructure in areas where it is more effective and efficient to do so, can still execute a channel-focused strategy—as long as the competencies of the team are solid.

In order to effectively implement strategies, the organization must be prepared, motivated, and capable of executing to the letter. This requires a re-evaluation of the company’s knowledge and skill base, systems and processes, and rewards and remuneration programs. All of these must be geared up to support a channel-focused organization.

When all these elements come together to enable an organization to have a true channel-focus, it can achieve its targets.

In the end, true channel-focus is not about changing a company org chart and slapping on Channel Manager titles on boxes. It is about having an intimate understanding of shoppers, traders, and stores—and capitalizing on it to deliver business results.

(China Business Philippines 07/10)