July 2017 Newsletter – How to Multiply Your Profits

How to Multiply Your Profits

You may have seen the announcement last week that Amazon will start selling Sears Kenmore appliances. Not only that, they revealed Sears and Amazon will start working on fully integrating Amazon’s voice assistance, Alexa with Sear’s smart appliances.

This will allow people to control things like air conditioners with voice commands that will be synched with Alexa.

Neil Saunders, managing director of research firm GlobalData Retail said it’s a win for Sears, putting its products where customers are shopping. He went on to say because of Sears falling sales this is good step in finding “Other channels and routes to markets”.

This new relationship will provide Sears additional revenue because the service work and product warrantee services will be provided by Sears Home Services.

What is a Delivery Channel?Small Business Planning in Atlanta, GA

Sears and Amazon’s new venture is an example of a company developing additional Delivery Channels for its products/services. What is a Delivery Channel?

Delivery channels are the methods by which you deliver or distribute your product or service to your Customer. It is important to note there are several terms used for delivery channels. Sometimes these are called “sales channels,” “marketing channels”, or “distribution channels”. All these terms refer to how your product will be provided to your Customer; I will use the term “delivery channel.”

For instance, you could ship your product directly to a Customer, they could pick it up at your location, buy it from a retail store to whom you initially sold your product at wholesale prices, or, if applicable, they could download your product from your web site. Marketing-type delivery channels might involve doing direct sales to your Customer or developing, working with, and supporting a network of distributors.

Developing Multiple Delivery Channels

The more delivery channels you have, the more sales you can have by providing the same product to your Customers via multiple and alternative means.

For instance, the soft drink Coca-Cola® is delivered (sold) to their Customers in three basic ways:

  • Bottles, cans, or other containers purchased at stores
  • Fountain drinks purchased at restaurants, sporting events, or similar places
  • Bottles, cans, or other containers purchased via vending machines

Consequently, the Coca-Cola® bottling company can easily obtain additional revenue from the sale of one product, the Coca-Cola® soft drink, because it has multiple delivery channels. We have all seen this when a physical retail store chain establishes an online retail presence; it is just being delivered via a different channel.

Two Delivery Channel Decisions

Small Business Planning in Atlanta, GAThere are two decisions that involve this delivery channel area. First, which is the best and most appropriate delivery channel for your product? Second, which additional delivery channels justify their cost? Because there are additional costs to develop and maintain each delivery channel, you must compare your incremental revenue to your incremental costs to verify that the effort of creating additional delivery channels makes sense.

There is an added factor that must be considered when you explore additional delivery channels—will the marketplace be confused using the additional delivery channel so the overall message of your solution becomes distorted?

This issue of confusion is what Starbucks Coffee® faced when it introduced its VIA® product for making coffee at home compared to the product that was being delivered through its retail coffee establishments. That is, would VIA® be viewed as an alternative to going to a Starbucks Coffee® location and therefore cannibalize its sales, or be viewed as another delivery channel of the Starbucks Coffee® product and thereby grow overall sales?

Secondary Delivery Channels Benefits

Besides the additional revenue, there are two related secondary benefits that using multiple delivery channels can bring to your business. First, the same marketing efforts can be used to promote and drive multiple delivery channels. For instance, a television advertisement for a physical store can have a web site listed at the bottom and the words “shop online at” added at the end of the commercial.

Second, there is potential for a spillover effect when promoting one delivery channel when the same product can be purchased from a different delivery channel than the one being promoted in the advertising.

For instance, a soft drink advertisement shows the soft drink being served at a cool, relaxing, and pleasant pool party, which would encourage sales from a physical store delivery channel for take-home consumption. On a different occasion, the consumer passes a vending machine in the middle of a hot city, they remember the advertisement showing the pleasant pool party, and they purchase the same soft drink via a different delivery channel (the vending machine) because of the image that has been set in their mind.

Delivery Channel Assessment

To take advantage of new Delivery Channels an assessment is required of how you are providing your product to your Customer and whether you should expand your Small Business Planning in Atlanta, GAdelivery channels.

The determination of the delivery channel(s) for your product and the possible use of multiple delivery channels are influenced by the following factors:

  • How your Customer has traditionally purchased your product
  • The physical attributes of your product
  • Technology involving the delivery of your product
  • The amount of risk involved in the purchase (e.g., buying potato chips, which could easily be sold via a vending machine, compared to an automobile purchase)
  • The demographics/culture/religion of the purchaser
  • How you are able to reach the decision maker
  • The motives of the purchaser
  • The purchaser’s perceptions about your product
  • The ability of and knowledge of the purchaser
  • The attitudes toward your product
  • The lifestyle of the purchaser
  • How opinion leaders shape your market
  • How people’s roles and family influences affect various delivery channels
  • The social class of the purchaser
  • The culture and subculture of the purchaser

The bottom line of completing the above analysis is to maximize your revenue. So, you want to consider and possibly choose all the delivery channels you have available to generate the largest sales volume.

If you need assistance in fully developing your Delivery Channels, please contact us using the below information so we can show you to multiply your revenue and profits.

Fountainhead Consulting Group, Inc. is an Innovation and Business Planning firm. During the past 17 years we have shown over 1,200 companies how to achieve their goals by using our unique, comprehensive and systematic, innovation, business planning and growth Structure of Success™, Innovation Academy™ and FastTrak Innovation Program™ methodologies. Using the components in these methodologies, each month we examine an aspect of how to transform your business or organization into a true 21st Century operation.

Office phone: (770) 642-4220                                             

www.FountainheadConsultingGroup.com

George.Horrigan@FountainheadConsultingGroup.com

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