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So far, we've taken our business idea,
that is Project Management Software for

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Small Groups, and broken it down to
understand our value proposition and

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customer segments.

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So we know what we are selling and who we
are selling it to.

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Now in this section, we are going to

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look at how we are going to get our value
proposition to our customer segments.

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That is, we are going to take a deeper
look at our channels.

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Channels can be broken down into the
following sections,

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communication channels, distribution
channels and sales channels.

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All these channels together serve some
really important functions in our

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business model.

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They help raise awareness about our
product or service.

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They allow our customers to evaluate our
product and arrive at a decision.

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They allow our customers to purchase our
products or services.

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They deliver our value proposition to our
customers.

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And finally, they provide our customers
with support during the evaluation and

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purchase process, as well as post
purchase.

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When we think about the kinds of channels
we want,

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we need to make sure that our channels hit
on all the points I just mentioned.

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If we can't deliver on any one of those
points,

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it leads to a less than optimal experience
for our customers.

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When choosing our channels, there are two
ways we could go.

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We could sell directly to our customers.

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This is called an owned channel since we
are in control of the entire thing.

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An owned channel can be direct, where we
sell through our own website, or

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using a sales staff.

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Or it can be indirect, like if we operated
retail stores.

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It may be odd to think of a company's
owned retail stores as indirect.

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But since there is technically a middle
man between us and

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the company making the product, it's
considered indirect.

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We could get other companies to sell our
products or

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services through a partner channel.

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All partner channels are indirect, and

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include things like wholesalers,
retailers, or websites.

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Partner channels can be easier to manage,

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because you don't have to control every
little aspect.

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But they also lead to lower margins,

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since there are lots of people in between
you and the customer.

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Owned channels have higher margins, but
are a lot more involved.

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It's easier to understand the type of
channel by using examples.

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In our example industry, that is,

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Project Management Software, one of the
companies I like is Asana.

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Asana, sells through their own website.

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Therefore, Asana sells through an owned
channel.

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On the other hand if you want to buy a
Samsung TV,

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you can go into a local electronics store,
and find the one you need.

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In this case Samsung is selling its
products through a partner channel.

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This partner channel allows Samsung to
expand its reach.

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You can also have a combination of both
types of channels.

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Apple sells it's products through it's
website, retail store and

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sales force under it's own channel.

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They also partner with stores like Best
Buy and

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Target in the US to sell through indirect
channels.

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There are advantages and disadvantages to
the strategy you pick, so choose wisely.

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In our example, when Asana sells its
software on its own website,

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they get to keep all of the revenue.

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This is a characteristic of an owned
channel, the margins are higher.

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However, because you are in control of the
entire channel,

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you have to handle all aspects,

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including raising awareness, purchase,
delivery, and post purchase support.

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Samsung, on the other hand, uses a partner
channel.

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And its partner helps with most of those
aspects.

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They handle some of the marketing in their
cities, they provide the means for

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purchase, and offer some support.

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However, Samsung pays them for

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these services, making the margins a lot
lower than if they sold the TV themselves.

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Whatever strategy you go with, one of the
mistakes you could be

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making early on is to overreach on these
initial efforts.

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Don't try to maximize your sales by
hitting every channel.

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Until you know which channels works best
for

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you, you should pick the channel that
represents the greatest potential revenue

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and focus all of your channel efforts
around this.

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Also when developing a channel strategy,
keep in mind that your revenue model and

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pricing scheme are closely tied to the
channel.

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So you should explore these
simultaneously.

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When considering among the options of
channels, keep these points in mind.

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Do your customers already have any
expectations regarding your product, or

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service, and the channel.

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If I wanted to sell an Android app, I
could get more by selling it

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on an owned store, like my website, and
capture higher margins.

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But customers are accustomed to buying it
on the app store.

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I need to keep this in mind when selecting
the right channel for my business.

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What advantages does a particular channel
add to my sales strategy?

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How can I balance the cost of these
advantages with my bottom line?

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Are there any price issues or other
complexities regarding a given channel?

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When starting out, focus on one channel,
and

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conduct experiments to determine its
success.

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We'll talk more about experiments in just
a bit.

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There's a high chance you won't get your
channel right the first time,

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or you will have to refine your strategy.

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In my example,

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since I will be selling software as a
service, the choice here is pretty simple.

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I will have owned direct channels where I
sell straight from my website.

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Now I can also use a sales team to handle
the larger accounts first, but

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that would be spreading myself too thin.

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Instead, I am going to focus on the one
channel,

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until I know its return on investment.

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Regardless of the channel I choose, each
channel has five distinct components.

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Awareness, we need to reach out to our
customers and let them known who we are.

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Evaluation.

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Once they know of us, and end up on our
front door, we need to

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explain our value proposition to them in a
fun, engaging, and informative way.

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We need to show them how we solve their
problems.

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Then, if they're convinced, we need to let
them evaluate our product or service.

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No one is going to pay for our service
without any idea what they're paying for.

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They need to play around with the product
first.

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Let's look at how Asana achieves this
goal.

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[MUSIC]
>> Asana allows my team to collaborate in

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a way that they never have before.

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At the Sacramento Bee, we use Asana at the
same speed as a Word document.

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We're able to push tasks into the system
quickly.

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If a team member can, they will jump right
on it.

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If not, then they can push that over to
another individual.

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So it gets me out of the middle.

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>> Purchase, our channel should also make
it very easy for

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a customer to purchase the product, once
they have made their decision.

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For our product, since we're selling it
through the web site.

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We're going to create the product, so

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that it easily flows from an evaluation,
to purchase.

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The next step in our channel is delivery.

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We need to deliver our value proposition
to our customers.

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This can mean different things in
different industries.

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From physical delivery of the product to
your customers, or

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a well executed flow from purchase back
into the product.

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Each step in the channel should be
carefully considered,

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because it is a chance to delight our
customers.

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After the product has been purchased, our
job doesn't end there.

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Offering post purchase support is a
critical component in

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keeping customers happy and back for more.

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Our channel should offer means for

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post purchase support to take care of our
customers with any concerns they have.

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As I mentioned earlier,

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I'm going to offer my service through a
website, an owned channel.

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Similar to how Asana did it, I'm going to
display an intro video to

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quickly highlight to potential customers
their existing pain points,

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how I'm going to solve their problems, and
show a quick demo of the product.

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Once the video ends, I will move them
straight into the evaluation phase,

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by allowing them to play around in a
sample project.

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Each stage in a channel has its own
strategies, so it's very important to pick

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a channel and focus on the strategies that
will bring you the most benefit.

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For example, in my chosen channel, one of
the ways we

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can increase acquisition rates, is via a
free to paid evaluation strategy.

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This can help accelerate adoption at a
very low cost, but it makes it harder for

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me to determine who my actual paying
customers are.

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Now these nuances are specific to each
strategy, so

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it is best not to spread yourself too thin
by targeting multiple channels.

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We will get into more of these strategies
later on in the course.

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Your channel is the main point of
communication between you and

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your customer, and you need to make sure
you have all your bases covered.

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Let's recap.

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Channels cover three very important
aspects of our business,

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communication, distribution, and sales.

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There are two types of channels, owned or
partner channels.

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Owned channels have higher margins, but
are harder to manage.

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Partner channels have lower margins, but
allow easy distribution and greater reach.

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In addition, owned channels can be broken
down into direct and indirect.

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However, all partner channels are, by
their nature, indirect.

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Regardless of type of channel you choose,
all channels have five main stages.

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It is crucial that you think through your
approach for each stage.

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Awareness, evaluation, purchase, delivery,
and post purchase.

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Now, on to our next section.