To Market, to Market, but Which Route?

What is the best route to market for an industrial company across its products and countries: going direct with its salesforce, or using dealers, importers or a hybrid of these? Many companies find it difficult to make an informed decision, because they lack the exact cost to serve through each channel, and they don’t know most customers’ channel preferences. The Covid-19 pandemic has heightened attention to this issue, given that sales representatives aren’t traveling in the field.

One industrial equipment company that had seen its market share decline realized it needed a more coherent channel strategy for the 30 countries where it competed. In one small country, for instance, the fixed cost of a direct salesforce was no longer economically feasible. Analysis of each country showed that the most important criteria were total sales per territory and the geographic concentration of customers. Understanding the profitability of each type of channel in each country allowed the company to determine which model worked best. Based on the new mix of channels, the company identified an opportunity to reduce direct sales costs by 5% and improve profitability by 6%.