Among the multiple options to determine a strategy that will allow sales and profit growth, one that offers the most opportunities is to “rethink” the manner in which products get to the final consumer.
This obeys a very simple principle: “status quo”, that means, it is easier to maintain the same sales practices that have always generated good results, than to experiment or explore different alternatives that modify the¿ conditions of the current operation.
This document provides the foundations of which factors generate the opportunity to redefine the Go-to-Market strategy. Additionally, it presents a vision and a focus to follow in order to execute this redefinition
MARKET ENVIRONMENT
The truth is that very few businesses can boast of having dominated the manner in which they get their products to the final consumer. Regardless of the sector (consumer, construction, automotive, textile, pharmaceutical, etc.) most of the markets change so often that the formulas and conditions that were successful at some point, will not necessarily survive the passing of time. This is the first paradigm that top management must surpass by asking the following question: Are there forces within the commercial channels that are moving and which require research in order to capitalize on opportunities?
The factors present in the market environment and that have a direct impact on profitability or the effectiveness of the Go to Market strategy are (there may be more, but these are the most frequent):
- Entrance of new competition methods. These may be characterized by presenting new value offers to the final consumer. Said value offer may include variations on the brandpresentation- price relationship that may allow the consumption patterns within a particular channel to evolve, affecting the preference toward the company’s products.
- Growth in the number of SKUs (Stock Keeping Units) offered. This growth can come from a number of sources (for example, product innovation or a growing segmentation of consumers and their reasons for buying). However, the fact that there are a greater number of products to commercialize and supply to the market opens the door to rethink whether the execution is sufficiently effective.
- New service needs in the channel. Regardless of the channel being referred to, the fact is that what we previously called service, is now much more complex to understand and to satisfy. Today, service is perceived, in most cases, as the integration of a series of activities that a supplier must execute in order to satisfy the business needs of a channel. These activities represent a cost or even, in some cases, an investment for the company; thus, with greater complexity of variables and more demand for service it can be expected that the cost of service will also increase, and this can open opportunities to segment or “rationalize” the services offered.
- Change in the capabilities or the power of the channels. Just as the business changes, so do the clients. It is a fact that the players in each channel evolve, for good or bad. These new capabilities can represent opportunities to grow the business with them or to make decisions that will lead to an eventual reduction in the business based on them (depending on each case). The point is, that a business cannot assume that what made the channels that it managed successful in the past, will be maintained in the present and much less persist in the future.
IMPACT ON THE BUSINESS
Irrespective of whether there are one or many additional factors to those mentioned previously, what we must not lose sight of is that they have a direct impact on business results, especially on sales and profit. The following questions help to identify the impact:
- Why are we not reaching sales quota?
- What is making my margins decrease?
- Why, despite all of my efforts, aren’t the clients satisfied with the service offered?
The logic in all of this is simple, and the following figure describes this.
VISION OF A SOLUTION
For businesses facing the issues just described, at Sintec we recommend carrying out a simple exercise, that could represent a certain degree of complexity, for two reasons: (1) lack of specific and detailed information about the variables analyzed, and (2) a resistance by the business units to be open to questioning the current methods of operations and the pro’s and con’s of the current clients.
a) Having overcome these two points, the objective of this exercise must be, primarily, to identify the attractiveness of the viable channels in order for the products to reach the final consumer.
Below we present a graph that attempts to propose, in a quantitative manner, a method to determine the attractiveness of the channels served by the business. The starting point is to understand what elements must be evaluated before thinking about the specifics of which formulas or variables will be used to measure them and what sources of information are available for this purpose..
This vision must allow the creation of a consensus within the organization about the direction to follow in redefining the Go to Market strategy. It is important to emphasize that this consensus has two key elements in order to be successful; the first is to have the measurement of the attractiveness of each channel for the business, in an objective manner. The second is to redefine the following elements:
ELEMENT 1
Determine whether there exists the opportunity to redefine the mix and priority of the channels used for the business. Here we seek to clarify with whom we would like to establish a commercial relationship, what strategic and economic value there is for the business and what role it plays in the commercial strategy.
ELEMENT 2
Determine the adequate value proposition to maximize business results. By value proposition we mean:
- Model for capturing demand
- Distribution model to follow
- Offer of product portfolio – price
- Commercial conditions and policies to display.
CONCLUSION
In this article we tried to clarify the point that “traditional” commercial strategies, how to take products to the final customer, that has been
successful in the past, do not necessarily guarantee a formula for success toward the future. Thus, it is necessary to open the possibility of new formulas or strategies that will allow the analysis of the operation and the market environment in which it competes, always seeking to generate value for the consumer, the channel and the business.
Finally, the greatest challenge for any company is to recognize that these changes are current, irrespective of the market that surrounds them, and given this, to have the ability to readapt / evolve their Go to Market Strategy.
Oscar Lozano
oscar.lozano@sicweb.wpengine.com
Rubén Zamudio
ruben.zamudio@sicweb.wpengine.com
About Sintec
Sintec is the leading consulting firm focused on generating profitable growth and developing competitive advantages through the design and execution of holistic and innovative Customer and Operations Strategies. Sintec provides a thorough and unique methodology for the development of organizational competencies, based on three key elements: Organization, Processes and IT. Furthermore, Sintec has successfully carried out more than 300 projects on Commercial Strategies, Operations and IT issues with more than 100 companies in 14 countries throughout Latin America. Our track record of more than 25 years makes Sintec the most experienced consulting firm in this area of expertise in the region.
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