In the last two months, I covered the first two sections of the Business Model Canvas. This month, I’ll cover the third section, which is ‘Channels’, or the way that you reach your customers and deliver your value proposition.
Companies interact with their customers through communication, distribution and sales channels. Thus, channels are touch points which are important in the customer experience. Channels can serve several functions, including:
- Raising awareness about a company’s products and services.
- Helping customers evaluate a company’s value proposition.
- Allowing customers to purchase products and services.
- Providing customer support.
Channels have five distinct phases. Each channel can cover some or all of the phases. The five channel phases are:
- Awareness – How do you create and raise awareness about your products and services?
- Evaluation – How do you assist your customers in evaluating your value proposition?
- Purchase – How do you allow customers to purchase your products and services?
- Delivery – How do you deliver your value proposition to your customers?
- After sales – How do you provide customer support after the purchase?
There can be distinctions between direct and indirect channels as well as channels we own and partner channels. Direct channels could be your sales force and web sales. Indirect channels could be your retail stores, partner stores and wholesalers/distributors. Your sales force, web sales and your retail stores would be owned channels, and partner stores and wholesalers/distributors would be partner channels.
Channels that you own can be expensive to establish and operate; however, they typically lead to higher margins and better control. Partner channels can usually be established quicker; however, they have lower margins and limited control.
Let’s walk through a few examples:
- Food manufactures typically raise awareness about their products through media channels like print, web, television and radio. Their distribution model is typically indirect with partners, as they sell to distributors who in turn sell to the grocery chains.
- Dentists typically raise awareness about their services through print and web media, as well as creating relationships with other dentists who can refer them patients. Their patients may evaluate their services by inquiring about them online or coming in for an initial visit. Their services are delivered through a direct channel.
- A software manufacturer like EA Sports will develop their own software and create awareness through print, web and television. Their products will be delivered through partner channels such as online stores, big box retailers and even directly through their own web store. They provide their after sales support directly.
Now that we have walked through a couple of examples, here are a few questions to consider about your business:
- What channels are you using to reach your customers now?
- Through what channels do your customers want to be reached?
- Are your channels integrated? How are they integrated?
- Which channels work best?
- Which channels are cost efficient and why?
Over the next couple of weeks, take the time to answer the five questions I just presented. It also makes sense to do this with your management team. Your management team may have different insights about your channels, how to reach your customers, and how to best deliver your value proposition.