For example, should a company sell direct or use distribution brokers to represent its products to retailers? In some cases, it makes sense to make the investment in the sales organization and build the infrastructure to support the sales transaction, the billing, and the shipping, and take control of the relationship with the retailer.
If you are in control of this relationship you are going to have more time and more mind share from the retailer and that means a more profitable relationship with the retailer. Finding the right way to get your product on the shelves is a judgment that depends on the maturity and size of your company, but many organizations fail to find the approach that will drive optimum sales.
In many cases, organizations are naïve about the many terms and requirements retailers have that drive their buying decisions:
Retailers will think of any way possible to extract money from a supplier. Experienced players know how to negotiate and how and when to say "yes" or "no."
One approach is traditional retail marketing investment – the dollar amount that you pay to advertise your products directly. Another approach is that the supplier uses the retailer as an extension of its marketing campaign.
Over the past few years the big retailers have become increasingly willing to ask suppliers for marketing funds that are directed towards consumer advertising whether it is online, television or print ads. They then take that money for their own campaign around the product. The retailer gets its branding in the campaign and the supplier gets its product represented.
Fact-based selling and fact based presentation opportunities are more rare than they should be. A solid case for market viability is based on objective measures of market size and market potential that then translates into a product presentation that tells a story.
The data required to build your case usually includes syndicated data. In addition to market research products, market analyst presentations and even blogs have data that can help you to build a case for your product.
There is often a build-versus-buy decision involved with establishing your sales force. The decisions you make are based on the viability of the product line and its potential revenue and profit. For example, a product that is sold through a distributor is likely to yield 10 percent less than the same product sold on a direct basis.
If you go through a distributor, there’s a variable model to your expense with respect to P&L, because you don’t have to pay salaries to 20 people each month to represent the product. This is just one element of the decision-making process involved in building an effective sales force.