Redefining the sales channel strategy towards value

3 Jan

Telco Operators are struggling to maintain EBITDA margins as SAC keeps growing in a pricing restrained environment. A more effective channel approach is needed! This is the first of a series of articles that will detail our recent experience in supporting telecom operators to improve their channel strategy towards value.

First of all, a distinction should be done between emerging and mature markets, as sales and distribution strategies cannot be the same in market maturity scenarios that vary significantly one to the other.

As an example, in African or Asian markets where there’s still some room for market share growth, challengers normally disrupt the market by starting price wars through the recurrent launch of promotions or cheaper tariffs. That’s because they are still concentrated on acquisition as soon as there’s organic room for growth in the market. This behavior normally derives in engaging in complex pricing wars and throwing SAC at the channel with limited value return.

On the contrary, in mature markets such as Europe, operators that already invested in reach and capillarity in the past, experiment heavy sales structures that no longer work in an era where streamlining and becoming cost effective is a must. As a result operators’ margins are continuously increasingly under the pressure of reducing retention and portability costs.

Net, net, the problem is shared (heavy SAC or SRC investments on the channels bringing less return than expected) but the solution required is different.

Whilst there are no two identical markets, I would like to share a recent case of one of our clients explaining their situation and diagnosing how we thought the operator should react at a channel level:

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Summarizing the slide, there’s a huge improvement opportunity to turn around current EBITDA and margin levels if operator focus on value and they find the right balance between cost of sale and customer acquired. No easy game. Most of the operators we work for think they already found the balance but believe me, there’s ALWAYS room for improvement.

I will detail our approach in future topic-centric essays, but my suggestion to CCOs always pivots on 3 key levers:

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First, diagnose the real problem your channel has. Most of the operators incorrectly diagnose their channel performance problems, applying measures that make no real result in the short/mid-term. A simple example:

Did you know that the top-1 headache reason is lack of sleep? You can normally tell that if you have had insufficient sleep that a headache will start. If you take an aspirin, you will solve your problem in the short term, but unless you have a proper night’s rest, you will wake up and throughout the day, a headache will form again. Aspirins can be effective short-time measures, but will not solve the real issue.

Second, operators should build an effective transformation plan. Its effectiveness will depend on the operator’s ability to identify inefficiencies derived of real problems and prioritize the measures required. Once done this, the devil is in the details, aka implementation. It’s not easy to transform a sales organization so you will need a CEO-empowered, well-communicated and pragmatic plan to succeed in any channel performance improvement program. This is not just a question of an operator’s desire: distributors, exclusive and non-exclusive dealers, online and offline, direct and indirect channels should be all pushing in the same direction to make it happen. I will share my lessons learnt in a detailed essay just detailing this, perhaps, the most difficult exercise to conduct.

Finally, ensure that you enable the monitoring and control capabilities required to repeat this exercise on a monthly basis. Again, it’s not just a question of reporting and monitoring tons of KPIs; it’s a question of understanding those KPIs that are really necessary and ensuring we can get them on a periodical basis to support our decision-making processes.

That’s all. If you manage to succeed in reaching these three goals, you will soon see short-term results. Will detail the essence of these goals in future articles. Until then, feel free to comment and contact me for further info.

Source: http://consultantvalueadded.com/2013/01/03/redefining-the-sales-channel-strategy-towards-value-i/

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