Basic considerations for choosing a 'high-fit' channel partner when you launch or expand a product

1. Marketing Essentials
2021
Professor Steven Litt
@StrategySteven
Ready to be a Marketing professional?
Choosing a Channel Partner
©2021 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

2. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
1. Geographic Fit
2. Roles that partner may be expected to fulfill eg Assisted Sale, critical admin duties
3. Likelihood of reaching your Target where they expect to find the item
4. Level of Shopper Involvement (’information-seeking’ behavior)
5. The price at which consumers see the item End-Price (see also ‘Calculating End Price’)
6. Margins for your firm & your channel partners (see also the deck on ‘Margin’)
7. Margin After Freight for your firm
8. Level and type of ‘service’ you must be set up to ‘service’ the Partner
9. Readiness of your product wrt Logistics Specifications (before shipping starts!)
10. Case Count, Turn Rate and corresponding expectations
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

3. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
1. Geographic Fit → this is especially relevant to:
• heavy low value items (patio sand, cat litter) and
• high volume, low value items (Peat Moss Bales, Puffed Wheat cereal)
• Items where geographic regulatory zones exist (eg Liquor Control
Board of Ontario)
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

4. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
2. Roles the partner may be expected to fulfill eg Assisted Sale, critical admin duties,
other ‘support’ eg displaying a demo model.
• How many people buy a phone or laptop without expecting Sales advice, counsel?
• How many would buy one without expecting to see, touch, try a demo?
• If Target is an advice-seeker (eg 1st time buyer, new to category buyer) then avoid
‘Self-Serve’ channels such as discount, dollar, mass merch, warehouse clubs, etc.
Advice is not their strong suit- they don’t staff, train or support that.
• If you expect a demo model to be displayed, then specialty chains, boutique
outlets & even warehouse clubs might (securely) display a high value item, but
mass merch, discount & dollar? Not likely.
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

5. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
3. Likelihood of reaching your Target where they expect to find the item
• Where would a serious golfer expect to shop to find the latest in High-Tech
sports gear?
• Probably not the Mass Merch channel.
• A global adhesive company got into a sticky situation when it skipped the
Golf Course, Clubhouse & Golf Specialty chains and opted to take a grippy
new golf glove to the Mass Merch channel first.
• They were so very confident in this Can’t Miss product.
• It missed.
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

6. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
4. Level of Shopper Involvement (’information-seeking’ behavior)
• A consumer preparing for dinner guests may buy Yellow Label olives
because they’re convinced “olives are all the same” yet might make a
separate trip to a specialty cheese shop, if highly involved in- and
convinced of the relevance of- the various category entrants in those
categories.
• Is you product in need of finding shoppers when/where they’re practicing
High Involvement behavior?
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

7. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
5. The price at which consumers see the item (see the deck on ‘Calculating End
Price’)
• Some items are highly price elastic &/or react strongly to being
available/featured at ‘hot’ price points
• Consumers can become ‘trained’ to expect certain category items at those
prices- esp if it’s a pantry-loadable item
• Whether to pursue an EDLP (EveryDay Low Price) partner or a High/Low
pricing partner might be a vital decision- which channel pricing approach
best matches your needs?
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

8. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
6. Margins for your firm & your channel partners (see the deck on ‘Calculating Margin’).
You might be able to learn of the channel partner’s ‘typical’ margin
expectations but you can only rarely alter them!
Find out if your firm has a threshold minimum level of return (ie ‘Hurdle Rate’);
its vital to predict in advance all ‘Inside Program’ Trade costs for a channel eg
• Volume Rebate
• Charity Donations (these are not strictly voluntary!)
• Damaged Goods Allowance
• Temporary Price Reductions
• Display Allowance
• Secondary Display Allowance
• Coop Rebate
• Other
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

9. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
7. Margin After Freight for your firm (aka ‘Delivered Margin’)
• Do you know who usually absorbs the cost of freight to deliver your item to their
warehouse or stores? Usually, you do, as a supplier!
• Learn to calculate Truckload Fit – how much of your product fits on a Truck? (note
regulatory limits of truck length/weight may vary by jurisdiction)
• Get Freight quotes to each Distribution Centre or ‘DC’.
• Predict the ‘DC Mix’ ie the % of shipments expected to go to each DC. Geographic Mix
will impact your margin if you’re covering the (national) freight cost.
• Determine if your Trucks will ‘volume out’ (peat moss or baby diapers, ie reach
capacity due to the volume of payload) or ‘mass out’ (each capacity due to the road
weight limits eg cat litter).
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

10. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
8. Level & type of ‘service’ → Prepare to ‘service’ your channel Partner!
Real examples of what this can mean, may surprise you…
• Fast Moving Consumer Goods firms fight for the ‘honour’ to be a Category Captain, an influential role
with some power over retail-level merchandising & listings. However, Category Captains are ‘on-call’ 24
-7 for a Buyer. They’re expected to conduct category research on consumer trends, to report on cross-
channel competitive activity, etc.
• A leading North American Pet Specialty chain has outsourced so many of the duties that used to be
internal, that the banner’s own staffers have no idea how to enter a New Item in their Product
Inventory system. The Supplier must do this, or hire a Rep Agency who can do it.
• A leading West Coast Grocery chain employs Buyers so afraid of forecasting that they expect Private
Label suppliers to do their weekly Private Label Promotion volume weekly forecasts for them.
Are you up to the task of servicing such Retailers?
If not, then consider hiring a Rep Agency or Broker, to help you with specialized – and
sometimes unusual- ‘service’ duties!
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

11. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
9. Readiness of your product wrt Logistics Specifications (before shipping starts!)
• Did you calculate the case dimensions? Pallet footprint? Are you familiar with the
minimum overhang/ under hang rules?
• Do you know the load-bearing weight capacity limits on a Case? A Pallet? A Truck?
• Did you check the pallet height limits?
• ‘Nonconforming’ items (snow shovels, garden spades, generators, etc), are those
unable to comply w 40” x 48” pallet shipping or classic (Union-regulated/ OSHA)
handling limits; that could be a nonstarter!
• Also: conduct a ‘ship-test’ before launch, to check for any unexpected case or
pallet ‘tilting’, corrugate collapse, etc
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

12. Deciding how to go to market? Decide what constitutes an
‘optimal fit’ channel partner, very early on.
Why? Because it impacts…
10. Case Count, Turn Rate, corresponding expectations
• Retailers run lean or Just In Time (JIT); they ‘turn’ inventory. A Typical Rule of Thumb: minimum
turn rate is 1 case per store per week
• Stores have no room ‘out back’ to put leftover stock; there’s no ‘backroom’
• Planogram/‘POG’ software predicts how many items fit on-shelf per facing.
• A banner’s store footprints/layouts vary; eg there’s inevitably a mix of ‘old’ formats, ‘compressed
footprint’ satellites, etc. Some stores may add a Post Office, a Cosmetics section or Senior Care
section; this cuts into space available for other categories. Many banners label their stores ‘A’
(biggest store format, highest sales volume), ‘B’ and ‘C’ stores; the difference matters! A high-
count case that is fine for an A store, may be an ‘excess inventory headache’ for a B or C store
• A high value case raises risk of theft. These tend to… “fall off a truck”. Typical Rule of Thumb:
FMCG cases should cost <$300 each.
• Any expiry-dated product must not be packed too many units/case. Returns are a hassle!
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

13. #10. Case Count, Turn Rate, corresponding expectations
A story!
My firm partnered with a Pharma firm used to shipping prescription items to
big hospitals. They needed a partner who serviced the Retail Drug channel, to
help launch their specialty antifungal.
They designed a 72-count corrugate for the new item. The case would meet
40” x 48” retail requirements, however,…. at $12 each, the case would cost
$864… and it would carry enough product to keep the average drugstore in
stock for…almost 3 years!
So….what were they thinking?
My Prescription guru partner was thinking of their world- the hospital channel.
We finish with this story to show the need for practical knowledge
(get it, or partner your way to it!).
→Consider hiring a proven industry partner! (broker, rep agency, wholesaler)
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

14. Launch Channel Selection
If you’re the marketer in the room when channel choice is discussed,
you may be bringing the most strategic POV.
Yes, you.
(Executives may be biased by a quarterly bonus structure, and Sales Pro’s may be
preoccupied with ‘shipping volume’ rather than ‘consumption volume’ targets to hit).
Bring the strategy! Protect the brand; protect a launch from failure.
Choose a high-fit channel! [often not the Biggest Volume channel!]
Tips: Channel Selection ‘in practice’
• Marketers: voice your choice; give your view, support it with data,
historical cases, market examples,… but maintain decorum especially
if others involved in the decision hold more senior titles.
• Get your hands dirty! Get into the chain’s stores; ‘feel the vibe’, see
the level of shopper involvement, merchandising options available,
role of merchandising, sales advice, etc.
©2021 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

15. SOURCES
• Steven Litt, StrategySteven.com accessed February 14, 2021
strategysteven.com
• Cover photo courtesy of Mandy S Photography
• Special thanks to Jean-Francois McKay, Matt Goodwin and Sue
Corbett of P&G, Brian Richardson of Kimberly-Clark, Rick
Franke of Alberto-Culver, Dan Mendoza, Ann Mergelas & Cathy
Miner of Schering-Plough; Josh Levi, Don Holmes & Steve
Rosenbaum of Alliance Data, Mike Habib of Kellogg,… These are
just some of the many Trade Marketing & Sales Professionals
who so patiently guided a Research/Marketing guy in the
professional way of sales. And my everlasting respect to the late
Craig Bundrant for his inspiring leadership, mentoring, patience
and creative insights. You are so very sorely missed.
©2020 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.