2023 Uzbekistan Startup Acceleration Program

Lecture 8. Channels

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© Copyright 2023. SOON CHUN HYANG UNIVERSITY all rights reserved

@Steve Blank “Business Model Canvas”

How does your Product �Get to Customers?

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© Copyright 2023. SOON CHUN HYANG UNIVERSITY all rights reserved

© 2012 Steve Blank

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© Copyright 2023. SOON CHUN HYANG UNIVERSITY all rights reserved

Where do I sell?�

where do i advertise ?��Are they through Physical Channels

or Web/Mobile ?

Channel

@Steve Blank “Business Model Canvas”

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© Copyright 2023. SOON CHUN HYANG UNIVERSITY all rights reserved

Physical versus Virtual Channels

How Do You Want Your Product to Get to Your Customer?

Yourself

Through someone else

Retail

Wholesale

Bundled with other goods or services

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Web Channels

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Physical Channels

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How Does Your Customer Want to Buy Your Product from your Channel?

• Same day
• Delivered and installed
• Downloaded
• Bundled with other products
• As a service
• …

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Types of Channels

• OEM
• VAR
• Reseller
• Distributor

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Direct

Indirect

Licensing

Distribution Complexity

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Evangelists

Service�Technicians

Higher Value Added

Higher Volume

How Do the Economics Work in Different Sales Channel?

How Are Channels Compensated?

• Commission
• Percentage of sales price
• Discounted pre-purchase

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Channel Economics: “Direct” Sales

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Profit + SG&A + R&D

End Consumer

EU Discounts

Your Revenue

List�Price

Source: Mark Leslie, Stanford GSB

Cost of Goods�(Supply Chain)

Channel Economics: Resellers

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Cost of Goods�(Supply Chain)

Profit + SG&A + R&D

End Consumer

EU Discounts

Reseller

Your Revenue

List�Price

Source: Mark Leslie, Stanford GSB

Channel Economics: Distributors/Resellers

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Profit + SG&A + R&D

End Consumer

EU Discounts

Reseller

Distributor

Your Revenue

List�Price

Source: Mark Leslie, Stanford GSB

Cost of Goods�(Supply Chain)

The Channel as a Customer

• Some products are embedded in others (OEM)
• Some products are resold by others (VARs)
• Some products are distributed by others
• Who’s the customer?

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Channel Economics: OEM or IP Licensing

Your Product Becomes Your Customer’s Cost of Goods

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Source: Mark Leslie, Stanford GSB

End Consumer

Your Revenue

List�Price

How Are Channels Motivated or Incented?

• Money! – what makes them the most?
• Training
• Marketing to the channel
• SPIF

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Book Publishing �Channel Example

Example: Book Publishing

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Publisher

National Distributor

Printer

Wholesaler

Retailer

Customer

Book Publishing

• Percent of �Retail

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• 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

Book Publishing Economics

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Publisher

National Distributor

Wholesaler

Retailer

Customer

Wholesale costs

Markup

Allowances

Payment �guarantees

Payments

Bills

Credit �guarantees

Payment �guarantees

Return rights

Credits

Book Publishing Delivery

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Publisher

National Distributor

Printer

Wholesaler

Retailer

Merchandise titles

Sell magazines

Acknowledge returns

Determine allocations

Dispose of returns

Prepare film (content)

• Establish identity
• Create demand

Prepare galleys

Receive

• Schedules
• Print orders
• Bundle counts
• Film

Print and ship magazines

Deliver orders

Medical Device �Channel Example

Product flow/Channel

.

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Pump + Controller

Support Services

Bundled Kits

Electronic Records

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

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Hospitals

Pain Clinics

Farm Sensor Industry�Channel Example

Channel Model: Service Provider

OEM

Us

Large farm

USDA/EPA

Small farm

Product

Money

Nutrient Data

Licensing/sales

Channel Model: Service Provider

OEM

Us

Large farm

USDA/EPA

Small farm

Product

Money

Nutrient Data

Licensing/sales

Product

Service

Dental Product�Channel Example

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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

Univ.

License

fee

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End User

Health-Care Providers:

Hospitals

Practitioners

Clinics

Insurance

Agencies

Customer segment: Large corporations

J&J, GSK, 3M

DMX

R&D

Products

Procedures

IPs

$$$

~$40

$$

University

4-8% royalty

2-4% license fee

Licensing of Technology Ecosystem

Medical Device �Channel Example 2

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

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Direct Sales

Distributors

MammOptics

Channel Strategies and Costs

Channel Strategies and Costs

MammOptics

5 dedicated sales people

$150,000 each/year

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Hire nurses or technicians

with established

relationships

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Early adopter feedback

Continue with core group of sales people

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Use women’s healthcare equipment distributor

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Already established network of customers

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Sales strategy 1

Sales strategy 2

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Dental Product 2�Channel Example

Channels

Private Practice

Dentist

Purchasing

Department

Big Distributors

Institutional

Dentist

Direct Sales

Channels

Private Practice

Dentist

Purchasing

Department

Big Distributors

Institutional

Dentist

Direct Sales

80% Market Share

30% Margin

Channels

Private Practice

Dentist

Purchasing

Department

Big Distributors

Institutional

Dentist

Direct Sales

80% Market Share

30% Margin

Continuing

Education

Courses

Magazines

& Email

Trade

Shows

Online Rental�Channel Example

Listings Provider

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Tenants

Landlords

Property

Managers

Service Providers

Potential Landlords

Realtors

Web Info

Show, Advise, Valuate

Sell, Advise

Maintenance

Furnishing

Listings,

Checks

Rent Payment

Moving

Craigslist

Padmapper.com

Rent.com

Apartment.com

Forrent.com

Credit Checks

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Safetenantcheck.c

Erenter.com

Payment Facilitator

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Rentpayment.com

Clearnow.com

Online Cheque

Listings,

Checks

Rent Payment

Maintenance Finding

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Zoospi.com

Redbeacon.com

Taskrabbit.com

Schedule Tools

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Yelp.com

Angie’s List

Setster.com

Find information

Servicemagic.com

Zoospi.com

Rentpost.com

Rentjuice.com

Buildium.com

Rentingsmart.co

Propertyware.com

Rentjuice.com

Propertyware.co

Rentingsmart.co

Buildium.com

propertymanagemnt360

Maintenance Ratings

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Trulia.com

PM Tools

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Dental Product 3�Channel Example

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COST / PROFIT ANALYSIS

Direct Sales Revenue Model

* Competition

• NuPro prophy paste (Novamin $50)
• NuPro desensitizer (Novamin $93)
• MI varnish (Recaldent $100)
• Gluma desensitizer (Glutaraldehyde $130)
• Health-Dent desensitizer (Fluoride $49)

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End User

Customer Segments;

Health-Care Providers:

- Hospitals

- Practitioners

- Clinics

Insurance

Agencies

Product Sales & Distribution

Formulations

& Packaging

Raw Materials

Manufacturing

DMX

R&D

Products

Procedures

IPs

$$??

$6/pk

$5/pk

$$??

University

-32%($27)

$?

Direct Sales Ecosystem

R&D &

Regulation

$40/pk