Introduction: Channel competitiveness is one of the core assets of an enterprise. Author: Hai You | Editor: Gou Gou
Channel competitiveness is one of the core assets of an enterprise. FMCG companies must continuously refine and adjust their channel strategies to optimize channel operations and better match product supply chain needs. Today, I will discuss ten key considerations in channel strategy.
Match the company's channel definition and mandatory SKUs The purpose of channel definition is to accurately describe channel characteristics, allowing sales teams to classify outlets based on common features, thereby more precisely matching mandatory SKUs and allocating resources. I have seen many companies' channel definitions: food and beverage companies may subdivide channels into hundreds of types, while rice, flour, oil, and condiment companies typically subdivide into ten to twenty types, with alcohol and daily chemical companies falling in between. It is important to emphasize that the granularity of channel definition depends on the organization's supervisory capability and the granularity of corresponding budget allocation; otherwise, it may not be worth the effort. I once saw a company with very detailed channel definitions and organized team training, but in practice, many channels had no differences in resource allocation or management. What is the value of such subdivision beyond increasing the workload of frontline staff? Perhaps it only serves to justify the existence of the channel department.
Once channel definitions are in place, the next step is SKU matching—which products must be sold in which channels? Many companies provide product recommendations, but these are essentially meaningless because frontline staff often ignore them. My suggestion is to focus on two points for channel-SKU matching, and also assess two points: first, the SKUs that must be stocked in each channel (proposed by the marketing team, approved by headquarters); second, the minimum number of SKUs per channel (e.g., for school channels, the minimum number of SKUs to stock, also proposed by the marketing team and approved by headquarters).
Channel breakthrough requires prioritization Generally, for new brands, channel priority is not a major concern; at the outlet level, you take what you can get. But for established brands, you cannot treat all channels equally. After a period of market presence, brands are associated with certain consumption scenarios by consumers. Channels matching those scenarios are strategic channels, and you must strive for the highest numeric distribution, weighted distribution, and display share. For example, Wanglaoji became famous with the slogan "Afraid of getting heaty? Drink Wanglaoji," and the matching scenario was hotpot restaurants. After product positioning, you must position the scenario, and finally the channel—hotpot restaurants must be Wanglaoji's top priority channel.
Set channel outlet coverage requirements It is not hard to see that channel coverage varies greatly among companies. I remember when I worked at Nongfu Spring ten years ago, a regional leader keenly observed that within a province, adjacent offices had similar annual sales but significantly different channel sales. This led to a vigorous campaign to build five SKUs for drinking water, aiming to improve SKU coverage across different channels and water types. Here is a suggestion for sales directors: when growth hits a bottleneck, besides looking outward, you should also study internal data—specifically, the channel coverage of subordinate units. Through internal comparison, you can identify growth opportunities and the paths to achieve them.
Develop channel execution standards What are execution standards? Merely having display requirements, case-cutting requirements, shelf and floor stack requirements is far from enough. We need to achieve two things: first, basic brand image building; second, consumption scenario building.
Brand image building aims to enhance brand influence. This typically involves brand elements. For example, Yinlu Foods' brand philosophy is "Bring love home," so all product displays must feature the company's unified "love" icon. This is the most basic channel execution standard.
Scenario building aims to stimulate consumers' purchase desire by telling them in what scenarios they should consume our products. For example, during the Spring Festival, unmarried men and women face a trial: families arrange numerous blind dates, especially for older singles, and parents are eager for them to meet potential in-laws. A huge pain point is that you should bring a gift when meeting the parents. Tiandi No.1 created a new consumer perception: a beautiful wish that resonates—"Carry two boxes of Tiandi No.1, and the auntie becomes your mother-in-law." If you go to the supermarket with your girlfriend to buy a gift, wouldn't you buy it? If you don't, you feel like you don't want the auntie to become your mother-in-law. Creating a consumer shopping scenario is very important. This is an upgraded version of channel execution standards.
Determine business territory planning guidelines Many companies overlook this and create uniform rules that are essentially impossible to implement. The market is not a regular shape, and territory division is not a geometric area. You need to consider five dimensions:
- Relationship between population and outlet count: If you lack specific outlet data, you can predict based on population. For beverages, for example, the number of outlets that can be stocked is approximately population divided by 400.
- Brand strength differences: The granularity of territory division differs between strong and weak brand areas.
- Geographic area: Do not waste time traveling back and forth.
- Sales team configuration: The number of salespeople is related to financial targets (e.g., annual sales per salesperson) and service targets (e.g., ratio of outlets to maximum outlets per salesperson). Seek the optimal configuration of territory and personnel.
- Other outlet characteristics: Consider other influencing factors as well.
Design scientific outlet visit planning Outlet visit frequency is related to the precise use of human resources. For frontline salespeople, they earn income through outlet visits and performance. Daily working hours are limited, so companies must balance the contradiction between the number of outlets visited and visit frequency. If you visit more outlets, frequency inevitably drops; you need to balance. Many companies balance by designing one visit per week or two visits per week based on outlet sales, which seems scientific but is ineffective in practice. For example, on a single route, if some outlets are visited weekly and others biweekly, you might pass by one outlet while visiting another adjacent one. In urban markets, this is manageable, but in township markets, the next visit might require crossing a whole town. My suggestion: base these rules on market dynamics. For example, in strong brand areas, unify to one visit per week; in weak areas, unify to one visit every two weeks; in intermediate areas, one visit every ten days. Set daily visit plans as within-route and outside-route, with quantity rules, and give more visit autonomy to salespeople to improve efficiency.
Outlet management: rating system Company resources and budgets are limited, and salespeople's service energy is limited, so outlet investment must be tiered. How to tier? Some companies implement dynamic rating based on quarterly sales with promotion and demotion mechanisms; some use fixed management based on comprehensive sales of related product categories at the outlet; others classify by business area, shelf count, etc. There is no right or wrong—only the best match. It is worth noting: the purpose of rating is precise, differentiated management of outlets. If such a management mechanism cannot be achieved, rating is meaningless.
Clear regional battle map Many grassroots managers are "busy without direction." After working in a county for several years, they cannot clearly state how many towns, villages, or streets are in the market, let alone the population, outlet count, or outlet quality of each institution. If you are unclear about your own market and only focus on specific details while lacking a market-wide view, how can you effectively control the market? Therefore, I suggest creating a regional battle map that plans sub-areas, including population at each administrative level, outlet count, key customer count, coverage rate, and other relevant indicators, so that next steps are targeted.
Channel achievement and opportunity forecasting Why do channel achievement and opportunity forecasting? In annual budgeting, we commonly use two dimensions: product dimension (growth space for each product) and channel dimension (growth space for each channel). By the way, if a mid-level or lower leader only mentions growth in terms of a certain market or region, you can judge that he is likely "brainless." Channel achievement and forecasting are the best way for business growth self-reflection, typically done through horizontal and vertical comparisons. For example, a horizontal comparison between Office A and Office B can reveal differences and improvement methods; a vertical comparison between Office A and its parent region can reveal its shortcomings and improvement methods.
Dealer safety stock & shelf-life management In channel strategy, first focus on the dealer's reasonable inventory, then on the shelf life of dealer inventory. This is not just talk; there must be mechanisms. Brand teams that do not act responsibly use dealer stock pressure as a lifeline for achieving sales targets. This harms both dealer interests and the brand's market image, and must be stopped. I have three suggestions: first, change the assessment rules, gradually transitioning from company sales assessment to dealer distribution assessment, and finally to outlet sell-through indicators. Second, set category-specific safety stock based on monthly sales targets; shipments exceeding safety stock do not count as performance. Third, ensure reasonable stocking and FIFO (first-in, first-out). For example, if a dealer does not stock reasonably and places old-date products at the back and new-date products at the front, affecting the freshness of channel inventory, severe penalties must be imposed.
Extended reading: Hai You: Special contributor to New Distribution, senior researcher, offline channel marketing practitioner, designer of enterprise channel coverage models. He has provided channel consulting for over ten first-tier brands and earned a good reputation.
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