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Channels9:19 with Pasan Premaratne
Our channels are the means through which we deliver our value proposition to our customer segments. In this video we're going to look at the important aspects of channels and the implications for our business.
So far, we've taken our business idea, that is Project Management Software for 0:00 Small Groups, and broken it down to understand our value proposition and 0:04 customer segments. 0:09 So we know what we are selling and who we are selling it to. 0:10 Now in this section, we are going to 0:14 look at how we are going to get our value proposition to our customer segments. 0:17 That is, we are going to take a deeper look at our channels. 0:21 Channels can be broken down into the following sections, 0:25 communication channels, distribution channels and sales channels. 0:29 All these channels together serve some really important functions in our 0:34 business model. 0:38 They help raise awareness about our product or service. 0:39 They allow our customers to evaluate our product and arrive at a decision. 0:43 They allow our customers to purchase our products or services. 0:47 They deliver our value proposition to our customers. 0:51 And finally, they provide our customers with support during the evaluation and 0:55 purchase process, as well as post purchase. 0:59 When we think about the kinds of channels we want, 1:02 we need to make sure that our channels hit on all the points I just mentioned. 1:05 If we can't deliver on any one of those points, 1:09 it leads to a less than optimal experience for our customers. 1:12 When choosing our channels, there are two ways we could go. 1:15 We could sell directly to our customers. 1:19 This is called an owned channel since we are in control of the entire thing. 1:21 An owned channel can be direct, where we sell through our own website, or 1:25 using a sales staff. 1:29 Or it can be indirect, like if we operated retail stores. 1:31 It may be odd to think of a company's owned retail stores as indirect. 1:35 But since there is technically a middle man between us and 1:38 the company making the product, it's considered indirect. 1:41 We could get other companies to sell our products or 1:45 services through a partner channel. 1:47 All partner channels are indirect, and 1:50 include things like wholesalers, retailers, or websites. 1:52 Partner channels can be easier to manage, 1:56 because you don't have to control every little aspect. 1:58 But they also lead to lower margins, 2:01 since there are lots of people in between you and the customer. 2:03 Owned channels have higher margins, but are a lot more involved. 2:07 It's easier to understand the type of channel by using examples. 2:11 In our example industry, that is, 2:15 Project Management Software, one of the companies I like is Asana. 2:17 Asana, sells through their own website. 2:21 Therefore, Asana sells through an owned channel. 2:24 On the other hand if you want to buy a Samsung TV, 2:27 you can go into a local electronics store, and find the one you need. 2:30 In this case Samsung is selling its products through a partner channel. 2:34 This partner channel allows Samsung to expand its reach. 2:39 You can also have a combination of both types of channels. 2:43 Apple sells it's products through it's website, retail store and 2:46 sales force under it's own channel. 2:50 They also partner with stores like Best Buy and 2:52 Target in the US to sell through indirect channels. 2:55 There are advantages and disadvantages to the strategy you pick, so choose wisely. 2:59 In our example, when Asana sells its software on its own website, 3:04 they get to keep all of the revenue. 3:08 This is a characteristic of an owned channel, the margins are higher. 3:10 However, because you are in control of the entire channel, 3:15 you have to handle all aspects, 3:18 including raising awareness, purchase, delivery, and post purchase support. 3:19 Samsung, on the other hand, uses a partner channel. 3:25 And its partner helps with most of those aspects. 3:28 They handle some of the marketing in their cities, they provide the means for 3:31 purchase, and offer some support. 3:35 However, Samsung pays them for 3:37 these services, making the margins a lot lower than if they sold the TV themselves. 3:39 Whatever strategy you go with, one of the mistakes you could be 3:44 making early on is to overreach on these initial efforts. 3:47 Don't try to maximize your sales by hitting every channel. 3:51 Until you know which channels works best for 3:55 you, you should pick the channel that represents the greatest potential revenue 3:57 and focus all of your channel efforts around this. 4:02 Also when developing a channel strategy, keep in mind that your revenue model and 4:05 pricing scheme are closely tied to the channel. 4:09 So you should explore these simultaneously. 4:12 When considering among the options of channels, keep these points in mind. 4:15 Do your customers already have any expectations regarding your product, or 4:20 service, and the channel. 4:23 If I wanted to sell an Android app, I could get more by selling it 4:26 on an owned store, like my website, and capture higher margins. 4:29 But customers are accustomed to buying it on the app store. 4:33 I need to keep this in mind when selecting the right channel for my business. 4:37 What advantages does a particular channel add to my sales strategy? 4:42 How can I balance the cost of these advantages with my bottom line? 4:46 Are there any price issues or other complexities regarding a given channel? 4:50 When starting out, focus on one channel, and 4:56 conduct experiments to determine its success. 4:58 We'll talk more about experiments in just a bit. 5:01 There's a high chance you won't get your channel right the first time, 5:04 or you will have to refine your strategy. 5:08 In my example, 5:10 since I will be selling software as a service, the choice here is pretty simple. 5:11 I will have owned direct channels where I sell straight from my website. 5:16 Now I can also use a sales team to handle the larger accounts first, but 5:20 that would be spreading myself too thin. 5:24 Instead, I am going to focus on the one channel, 5:26 until I know its return on investment. 5:29 Regardless of the channel I choose, each channel has five distinct components. 5:31 Awareness, we need to reach out to our customers and let them known who we are. 5:37 Evaluation. 5:42 Once they know of us, and end up on our front door, we need to 5:43 explain our value proposition to them in a fun, engaging, and informative way. 5:47 We need to show them how we solve their problems. 5:51 Then, if they're convinced, we need to let them evaluate our product or service. 5:55 No one is going to pay for our service without any idea what they're paying for. 6:00 They need to play around with the product first. 6:04 Let's look at how Asana achieves this goal. 6:07 [MUSIC] >> Asana allows my team to collaborate in 6:09 a way that they never have before. 6:10 At the Sacramento Bee, we use Asana at the same speed as a Word document. 6:12 We're able to push tasks into the system quickly. 6:17 If a team member can, they will jump right on it. 6:20 If not, then they can push that over to another individual. 6:23 So it gets me out of the middle. 6:26 >> Purchase, our channel should also make it very easy for 6:29 a customer to purchase the product, once they have made their decision. 6:32 For our product, since we're selling it through the web site. 6:36 We're going to create the product, so 6:40 that it easily flows from an evaluation, to purchase. 6:41 The next step in our channel is delivery. 6:45 We need to deliver our value proposition to our customers. 6:48 This can mean different things in different industries. 6:51 From physical delivery of the product to your customers, or 6:54 a well executed flow from purchase back into the product. 6:57 Each step in the channel should be carefully considered, 7:01 because it is a chance to delight our customers. 7:04 After the product has been purchased, our job doesn't end there. 7:08 Offering post purchase support is a critical component in 7:11 keeping customers happy and back for more. 7:14 Our channel should offer means for 7:17 post purchase support to take care of our customers with any concerns they have. 7:19 As I mentioned earlier, 7:24 I'm going to offer my service through a website, an owned channel. 7:25 Similar to how Asana did it, I'm going to display an intro video to 7:29 quickly highlight to potential customers their existing pain points, 7:33 how I'm going to solve their problems, and show a quick demo of the product. 7:37 Once the video ends, I will move them straight into the evaluation phase, 7:41 by allowing them to play around in a sample project. 7:45 Each stage in a channel has its own strategies, so it's very important to pick 7:49 a channel and focus on the strategies that will bring you the most benefit. 7:53 For example, in my chosen channel, one of the ways we 7:57 can increase acquisition rates, is via a free to paid evaluation strategy. 8:00 This can help accelerate adoption at a very low cost, but it makes it harder for 8:05 me to determine who my actual paying customers are. 8:10 Now these nuances are specific to each strategy, so 8:13 it is best not to spread yourself too thin by targeting multiple channels. 8:16 We will get into more of these strategies later on in the course. 8:20 Your channel is the main point of communication between you and 8:24 your customer, and you need to make sure you have all your bases covered. 8:27 Let's recap. 8:31 Channels cover three very important aspects of our business, 8:33 communication, distribution, and sales. 8:36 There are two types of channels, owned or partner channels. 8:40 Owned channels have higher margins, but are harder to manage. 8:43 Partner channels have lower margins, but allow easy distribution and greater reach. 8:47 In addition, owned channels can be broken down into direct and indirect. 8:52 However, all partner channels are, by their nature, indirect. 8:57 Regardless of type of channel you choose, all channels have five main stages. 9:02 It is crucial that you think through your approach for each stage. 9:07 Awareness, evaluation, purchase, delivery, and post purchase. 9:11 Now, on to our next section. 9:16
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