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Channel strategy is about solving how a wine company's salespeople and channel partners actively sell products, and how to maximize the integration and utilization of sales resources.
Channel Determines Marketing Model
In current business operations, few companies can excel at both product and channel simultaneously. Those that do are high-growth companies. For example, Wanglaoji's rapid sales growth is not only due to brand positioning, single-product strategy, and advertising scenarios, but also its channel layout and control, which are core factors in doubling sales. Zong Qinghou's consecutive top ranking on the Forbes rich list is also attributed to his channels and his main products.
The core of channel management is solving how to make sellers actively sell your products.
Channel partners are people with a strong pursuit of profit. To make them actively sell your products, you must provide reasonable benefits. One benefit is high per-unit profit; another is the capital utilization profit brought by high turnover rates, as well as the brand's influence on the channel.
We must clearly recognize that channel partners' real product is not your product or other companies' products, nor is it the number of vehicles or personnel. Their real product is their distribution network. The larger the network, the greater their discourse power.
The main purpose of motivating channel partners is to ensure product visibility.
The 'Chenguang Partner Pyramid' channel strategy increased product visibility, turning a small pen into a business of over one billion yuan. It integrated direct sales and FMCG distribution models, with a philosophy of 'partners under the Chenguang system, each level responsible and contributing.' With a sales team of 48 people, it achieved sales of 1.3 billion yuan (2007 data) and deep distribution to third- and fourth-tier markets. Chenguang integrated a distributor team of over 4,000, all exclusive to Chenguang, directly managing over 35,000 Chenguang model stores, radiating to hundreds of thousands of sales terminals.
Product visibility determines both sales and brand awareness. Some may think visibility is a fast-moving consumer goods issue, but in fact it is an important parameter for any industry.
Why is Microsoft's product pirated so much? A big factor is Microsoft itself. The author once asked friends where they could buy Microsoft products, and most said they didn't know. Some even discussed that they wanted to buy but couldn't find it in many places, only online, but were afraid to buy.
Isn't that a visibility problem? Microsoft has high awareness; almost everyone who uses a computer knows it, but they can't buy it. Whose responsibility is that?
Look at Apple. Apple's awareness is also high. Why does it achieve such high market value? Besides product value, its visibility determines its sales. No matter the occasion, if you ask 'Do you know where to buy Apple products?' almost everyone knows.
Some industrial product companies say, 'We don't need visibility; we do one-on-one PR.' But when your network points are insufficient and your salespeople's coverage is inadequate, sales will still have problems. Increasing visibility can also boost sales.
So, how to achieve visibility? Mainly through distribution rate. How to achieve distribution rate? Through visit rate.
According to Robin Dunbar's 150 law, a secondary distributor can seriously cover about 150-200 retail terminals. Beyond that, coverage becomes shallow and distribution rate drops significantly.
Generally, in a region, the number of terminal outlets is calculated based on population, with an average of one retail terminal per 400-500 people. So, total population ÷ 400 (or 500) = number of terminal outlets. Depending on the product, the number 400 or 500 can vary, and after adjustment, it becomes the number of effective terminal outlets.
In distributor management and operations, many companies like to use ordering meetings, but most only target primary distributors and end there. Excellent companies also help push inventory down the channel, especially for FMCG. Only when products are moved into secondary distributors' warehouses does the channel truly become active.
Of course, not every company should blindly pursue visibility; it should be based on its own resources. For most small and medium enterprises, they should define their base market, strategic market, expansion market, and defensive market. In the base market, ensure visibility, but in other markets, don't over-demand it. So, several misconceptions must be emphasized:
First misconception: The higher the visibility, the better, meaning the wider and deeper the distribution, the better. Obviously, this is not for all companies or all products. If product value is insufficient, products may be distributed but not sold, ultimately causing losses.
Second misconception: The higher the distributor's profit, the better, and the more distributors, the better. These are not fixed concepts; they should be determined based on the company's resource status.
Although the author emphasizes product visibility, it should be developed based on reality. A beverage company told the author that they wanted to mobilize distributors to learn from Master Kong's deep distribution, so that people everywhere could buy their products. The author said, 'You're wrong. Your brand is not strong enough; the product might die before it's even distributed. Don't do anything foolish.'
In channel strategy, the author suggests companies achieve two alignments: First, align sales hotspots with channel diffusion. Only with sufficient purchase reasons can sales hotspots emerge, and only then can they help channel diffusion. When these two points align, you can increase volume and stabilize the market.
Second, align distributor density with profit. Distributor profit is not the higher the better, nor is density the higher the better. High density means distributors can't make enough profit; low density means the market isn't fully covered. The author served Saifeiya in developing the Shanghai market. With only two distributors in the vast Shanghai market, profits were sufficient, but the market wasn't fully covered. The company asked whether to develop dozens of secondary distributors into primary distributors. The author said no, because then primary distributors wouldn't have enough profit and no one would do the market. Eventually, the company chose over a dozen primary distributors for the Shanghai market.
For products requiring pre-sale, in-sale, and after-sale services, it's also important to align the company's service radius with the market. If service can't keep up, don't touch that market, otherwise negative impacts may occur before the market is developed.
How to Conduct Market Layout
Companies should build two markets: a model market and a base market. The model market can bring confidence to the overall market, bringing new models and growth points. The base market can provide blood for the model market and other markets, continuously supplying cash flow and operational experience.
Layout with territory as the main line
Generally, the base market should achieve 'three highs': high distribution rate, high share, and high profit margin.
The primary task of market layout is to build the base market, and then expand outward from it to firmly occupy the market. Therefore, the overall market layout should follow the structure of 'base market + hinterland market + radiating market,' continuously advancing to form a stable market pattern.
First, build the base market to generate cash flow and provide various support. The base market should have a solid product portfolio system, a stable terminal management system, and strong channel ratios. The author's research found that brands stable in the market all have their base markets, forming strong barriers.
Hengshui Laobaigan Liquor made Hengshui and Shijiazhuang its base markets, with Shijiazhuang alone contributing 800 million yuan in sales in 2012. Shan Zhuang Lao Jiu made Chengde its base market, unshakable for over a decade. With Chengde's cash flow, it was more relaxed in attacking Shijiazhuang and Tangshan markets. Gujing Gong, Yingjia, and Kouzijiao all established base markets in Hefei at different price points. Hubei's Baiyunbian firmly occupies the Wuhan market. Baintian Hutu started from Foshan in Guangdong and gradually made Guangdong its base market.
Similarly, every stable brand has a base. If you do market like 'enclosing land,' the market is easily unstable and sales won't be large.
The hinterland market is a semi-mature market outside the base market, with the potential to become the number one brand. Once you invest effort in intensive cultivation, it can become a new base market. The radiating market is a distant market outside the hinterland, using a high-profile approach, lurking and cultivating, seeking rapid rise opportunities.
According to the approach, first build the base market. After it matures, invest heavily in the hinterland market, turning it into a base market, then the radiating market becomes the hinterland, and so on. Alternatively, based on one base market, according to national layout needs, invest heavily in another semi-mature market to build a new base market, then follow the hinterland and radiating market model for rolling development.
Layout with brand as the main line
Brand-focused layout mainly occupies a certain price band, forming a national monopoly and layout. This approach emphasizes profit over sales volume. It requires heavy investment in brand building, with high requirements for overall brand planning and category segmentation, especially for high-end products.
Of course, the most stable method is the combination of base market and brand layout. With a base market generating cash flow, plus achieving national expansion of a certain price band product.
Yanghe Blue Classic is an example of this combined layout. It made Jiangsu its base market, contributing cash flow and providing 'ammunition' for national market layout and expansion. It formed a brand monopoly led by 'Dream Blue,' 'Sky Blue,' and 'Sea Blue,' becoming the fastest-growing brand in the golden decade of baijiu, and one of the few brands to reach ten billion yuan.
Terminal Sell-Through Strategy
Recently, the author found that products in various industries have terminal sell-through problems to some extent. Besides terminal self-inspection, improvements should also be made from the product perspective.
Sometimes all terminal work is done well, but sell-through still has problems, which clearly indicates product issues. For example, product selling points lack sales power, or the product is too imitative, causing consumers to switch to mature brands.
To achieve terminal sell-through, improvements are usually made from several aspects:
Improve product purchase reasons
Go deep into terminals to study whether the product's purchase reasons are attractive to buyers. If it's hard to move customers, refine the sales script based on original selling points. The script should be simple, discovering points that move buyers at the terminal. Refine a script of no more than three sentences, then teach these simple sentences to terminal staff.
Focus on 20% of stores to generate performance
This is also the focus principle. By concentrating efforts on 20% of stores, build confidence in other stores, create a hot-selling atmosphere, and thus achieve sell-through in the entire region.
Use of sell-through materials
Basic work is key to terminal sell-through. Place product displays in the best positions, such as at 1.5 meters high, which is best for visibility and convenience. Also create stack displays to create a hot-selling atmosphere.
Also do posters, POP, display racks, banners, etc., to occupy the commanding heights of the terminal with overwhelming advantage.
Build good terminal relationships
Think about it: who influences sales at the terminal? Obviously the store owner and staff. Since they play a key role, make them familiar with the product and willing to recommend it to consumers.
People are willing to introduce familiar products, so terminal script refinement is key. First, it should be easy to remember and say; second, it should have characteristics so they can promote without effort. This completes the first step. Additionally, treat them differently: give small favors to staff each visit; for the owner, besides small favors, constantly remind them of the profit benefits of selling your product.
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