Friday, January 22, 2010

Internet Sales vs. Channel Sales

In recent discussions with channel managers and internet marketing managers I've heard divergent points of view I'd like to open to public debate. According to the rules of internet marketing driven by analytics everything must be measured and all marketing expenses must be justified. This is also true for off-line marketing but measurement is not as precise. The beauty of e-marketing is that all internet touches are traceable -- pay per click, on-line ads, e-mail campaigns, downloads -- except when prospects buy your product or service off-line after learning about it from an e-marketing campaign without indicating the source.

Purchasing on-line is convenient for consumers and individual corporate buyers, but what about larger sales? That's where proponents of channel marketing and the direct sales team argue sales agent involvement is necessary for closing enterprise deals. Critics of the channel say reseller sales reps are just order takers that undercut pricing and reduce the company's gross profit margin. Channel defenders argue that the trusted adviser of a good reseller has the ear of technology buyers and can extend the publisher's/manufacturer's reach, assisting the vendor accelerate sales. Does this sound like Republicans and Democrats arguing about public policy?

Below are some questions that arise. What are your thoughts?

* Is it appropriate to keep spending marketing dollars on internet campaigns to the point of negative returns (because the real sales resulting are greater than that measured since some customers purchase off-line)?

* How do you effectively enforce minimum advertised pricing by resellers? How do you enforce MAP pricing if you use distributors? Should resellers' sales prices be higher than the manufacturer's on-line price?

* Is it effective for a manufacturer to state it has the lowest on-line price to encourage customers to purchase direct from its website?

* If you have effective on-line sales, should resellers even be allowed to sell your product on-line? Should customers only be allowed to purchase on-line direct from the manufacturer/publisher?

* What is an appropriate balance between e-marketing and channel marketing?

* If you believe resellers are order takers, what's the lowest acceptable margin you can offer?

* If you believe resellers help you sell your product, what's an appropriate margin to provide to encourage them to sell your product?

* How do you measure the effectiveness of your channel marketing expenditures?

* How do you determine the indirect impact of a manufacturer's e-marketing activities on channel sales?

Of course the first response to all of those questions is, "It depends." In my opinion the internet marketing team, the direct sales team and the channel sales team working together have important roles to play. How does your organization balance the roles and the allocation of marketing resources between the three?


Geeta Sethi said...

Internet marketing can take the lead if your product does not require much personal selling and if you are looking for a dis-intermediation model to build your business.

If your consumers spend a lot of time researching your category online, you must create a strong presence on the internet as that's the only medium where human attention span is increasing. The impact of internet marketing on offline sales can be measured through research and if your online campaign is conceived and managed well, it will most often give a positive ROI.

Peter Johnston said...

So none of your channel marketing should be done over the internet?

I disagree about measurement of internet marketing. While there are metrics on open rate, lead generation etc. this tells you nothing about how it affected awareness, image and market penetration.

If you are running an effective channel, you are helping them with their internet marketing and, if you do it through your system or help them set up stats for theirs then it is just as measurable.

Peter Johnston said...

It is a common problem - small (minded) companies trying to go direct and seeing that the intermediaries are costing them margin. Unfortunately they don't see that the work they are doing to gain business costs money to replicate.

Victor Giles said...

You should use both. The balance depends on: your market, your product and your marketing strategy. You also should consider the marketing campaign focus: to inform, to get interest or to sale.