This document discusses different distribution channel models across multiple industries. It provides examples of distribution channels for books, medical devices, sensors, dental products, online rentals, and travel. For each industry, it outlines the key players in the distribution channel, how products flow through the channel, and considerations around costs, compensation, and incentives. The examples illustrate both direct sales channels as well as channels that involve multiple third parties like distributors, wholesalers, and retailers.
6. How Do You Want Your Product to
Get to Your Customer?
5
Yourself
Through someone else
Retail
Wholesale
Bundled with other goods or services
9. How Does Your Customer Want to
Buy Your Product from your Channel?
8
• Same day
• Delivered and installed
• Downloaded
• Bundled with other
products
• As a service
• …
10. Types of Channels
9
– Original Equipment
Manufacturer (OEM)
– Value Added Reseller(VAR)
– Reseller
– Distributor
Direct Indirect Licensing
11. How Do the Economics Work in
Different Sales Channel?
12. How Are Channels Compensated?
12
– Commission
– Percentage of sales price
– Discounted pre-purchase
13. Channel Economics: “Direct” Sales
13
Selling Expenses+
G&A +
R&D
End
Consumer
EU
Discounts
Your Revenue
List
Price
Source: Mark Leslie, Stanford GSB
Cost of Goods
(Supply Chain)
Profit
14. Channel Economics: Resellers
14
Cost of Goods
(Supply Chain)
Selling +
G&A + R&D
End
Consumer
EU
Discounts
Reseller
Your Revenue
List
Price
Source: Mark Leslie, Stanford GSB
Profit
15. Selling +
G&A +
R&D
Channel Economics: Distributors/Resellers
15
End
Consumer
EU
Discounts
Reseller
Distributor
Your Revenue
List
Price
Source: Mark Leslie, Stanford GSB
Cost of Goods
(Supply Chain)
Profit
16. The Channel as a Customer
16
– Some products are embedded in others (OEM)
– Some products are resold by others (VARs)
– Some products are distributed by others
– Who’s the customer?
17. Channel Economics: OEM or IP Licensing
17
Your Product Becomes Your
Customer’s Cost of Goods Source: Mark Leslie, Stanford GSB
End
Consumer
Reseller
Selling
+G&A
+ R&D
Cost of
Goods
(Supply
Chain)
EU
Discounts
Reseller
Distributor
Master
Distributor
Profit + SG&A +
R&D
Cost of
Goods
(Supply
Chain)
Your Revenue
List
Price
Profit
18. How Are Channels Motivated or Incented?
18
– Money! – what makes them the most?
– Training
– Marketing to the channel
– Special Performance Incentive Fund (SPIF)
21. Book Publishing
21
•Percent of
Retail
• You get
- 35% of retail
- the distributor gets 10%
- the wholesaler gets 15%
- the retailer gets 40%
- less any discount they offer the customer
Publisher
National
Wholesaler
Distributor Retailer Customer
35% 15% 10% 40%
$7.00 $3.00 $2.00 $8.00 $20.00
26. Channels (Direct)
• Direct to institutions
• Some formularies involved in purchase decisions
• Some doctors make purchase decision directly
• Device company/Doctor relationship is key
• Heavily influenced by :
• Clinical study results
• Regulatory approval
• Reimbursement
Hospitals
Pain Clinics
31. COST / PROFIT ANALYSIS
R&D
Maintaining
IP
End
user
Our revenue 4-8% revenues List price
Per unit cost and profit estimation
Licensing Revenue Model
Raw
materials
Manufacturing
&
Packaging
License
fee
Distribution
31
Univ.
License
fee
34. Individual
Doctors
Purchasing
Administrators
High value
medical products
(e.g. cardiovascular
stents)
Commodity
medical products
(e.g. latex gloves)
• Doctor education
• Direct feedback from doctors
• Very expensive
• No doctor education
• No customer feedback
• Inexpensive
Direct Sales
Distributors
MammOptics
Channel Strategies and Costs
Individual
Doctors
Purchasing
Administrators
35. Channel Strategies and Costs
MammOptics
5 dedicated sales people
$150,000 each/year
Hire nurses or technicians
with established
relationships
Early adopter feedback
Continue with core
group of sales people
Use women’s
healthcare equipment
distributor
Already established
network of customers
Sales strategy 1 Sales strategy 2
39. Margin - it is the difference between revenue and the
associated cost of sales
Market Share - the percentage of the total revenue or
sales in a market that a company’s business makes up
For example:
If there are 50,000 units sold per year in a given industry,
a company whose sales were 5,000 of those units would
have 10% share in that market