[MUSIC] So obviously products do not sell by themselves. How's you want to go about thinking as to what is the best strategy to the word market? Certainly there are many possibilities for how to go about it. One can go via a wholesaler and distributor before you reach the end user, for example. Or via an agent or a broker and eventually a distributor to get to the end user. I can think of coming up with my own stores, or franchising the stores, or going via a smaller network of retailers. Go directly online, go directly by constituting my own sales force, or even an indirect sales force. As you can see the decisions are not simple, they are complex. So how should one go about thinking about this problem? At the most basic level, we should be able to ask ourselves three questions. First of all, who is better at generating the demand for our product or service? Second, who is better at distributing and reaching the capillarity that we need to have with our product or service to be able to meet our financial,or marketing plans and third is who is better at the after-sales services. As you can see there is multiple ways to answer this three fundamental questions and typically hybrid model of distributions are the most common form. So now let me go to important considerations. First and foremost, it is really useful to think of a channel as a collection of functions, what are those functions about? The list can be very long all the way from physical possession of the product to after-sale service, to offering financing, to education, to bearing some of the risk, to the pre-sale services, etc., etc., etc. Typically speaking, for every additional function that you request of your channel partners to perform, normally you would have to pay. So once I have thought about all these functions hopefully the following framework that I call the four Cs is going to help you think in terms of the trade off that need to be executed in order to serve customer's wills. First of all is the capacities, this is the list of functions that the channel must perform in order to be able to approach customers. And particularly, how close is a channel design to the target different needs? Also, there is the coverage. I may have an idea or a certain financial plan as to the kind of or the percentage of the total proportion of the market that I need to cover in order to be able to meet my objectives. Also there are cost considerations. What are the sales per transaction, the profitability per transaction, and the cost per transaction? And different channels will operate in different sort of cost structure because there is differences in efficiencies, and obviously in cost. And finally, last but not least, there are control issues. For example, I may be concerned about a partnered network that allows me to meet certain criteria. For example, a certain criteria might be that I have uniformity on pricing. To the more channel partners that I go, the more difficult to meet this criteria. Or what potential conflicts do I foresee in the future? Think of for example, of all the Starbucks that have opened inside Barnes and Nobles or other bookstores. And Amazon, raising the game as far as dominating the book-selling category, are all those investments worth, what kind of troubles would those cause in the future. And what are the risks? That it entails going with certain kind of partners or other kind of partners. So these four Cs are necessarily trade-offs. There is no optimal way to do it. But it's important for you to think about the capacities, coverage, cost, and control issues going forward, in order to be able to properly think about the designing of your distribution strategies. [MUSIC]
