SHOULD YOU MANAGE DIRECTLY OR OUTSOURCE BUSINESS PROCESSES IN YOUR RTM MODEL?
Updated: Feb 8, 2022
For FMCG companies as well as for many other businesses, Route-To-Market models or configurations are based on a range of business processes to be covered and on a split of roles and responsibilities between producers / product owners and their RTM partners (e.g., distributors, wholesalers, centralised retailers, logistics providers, third-party sales, telesales, and merchandising agencies, etc.)
There are 10 major business processes within the scope of Route-to-Market:
1. NEW CUSTOMER GENERATION
processes and activities related to finding, prospecting, and signing up potential new customers
2. CUSTOMER CONTRACTING
processes and activities related to contractual formalisation of relationships with customers (e.g., new contracts, contract extensions, contract amendments, etc.)
3. CUSTOMER NEGOTIATION
processes and activities related to long-term (multi-year), annual and operational (tactical) negotiations with customers
4. ORDER GENERATION
processes and activities related to generating and registering customer orders (e.g., via sales representatives, telesales / call centres, B2B and / or B2C platforms, e-mails, etc.)
processes and activities related to invoicing customer orders
6. PAYMENT COLLECTION
processes and activities related to collecting receivables from customers (e.g., cash collection, bank payments, online payments, etc.) and dealing with overdue (bad) customer payments
7. IN-STORE EXECUTION
processes and activities related to positioning, displaying, and promoting products at physical stores and / or online platforms
8. PRODUCTS DELIVERY
processes and activities related to products delivery to points of purchase and / or to final customers / consumers
9. CUSTOMER SERVICE
processes and activities related to pre-, ongoing-, and / or post-servicing of products sold to customers and / or consumers (e.g., technical service, product usage advising, etc.)
10. COMPLAINT MANAGEMENT
processes and activities related to receiving, analysing, and resolving customer complaints
Most of businesses find it challenging to make decisions on which RTM business processes to execute themselves and which ones to outsource to their RTM partners. Outsourcing in many cases is seen as losing control over execution of a business process / activity.
The following criteria will help you make your decisions on the split of roles and responsibilities in executing RTM business processes between your own organisation and third-partly RTM partners:
A. Strength of Your Market Position
Consider your current market position. The stronger your product portfolio is and the higher your market share is, the likelier you can manage most of your RTM business processes yourself (benefitting from economies of scale) or will have to pay less to your RTM partners in case you decide to outsource (some of) your RTM business processes.
If you are just a start-up or entering a new market, in most cases it is likely that you will outsource most of RTM business processes to your RTM partners and give higher margins to them.
B. Core vs Non-Core RTM business processes
Take time to classify RTM processes and activities into core and non-core. The core processes are the ones that give you competitive advantage and, therefore, in many situations the core processes should be executed directly by your team. The non-core processes can be outsourced (provided the cost of outsourcing is reasonable).
C. Your Direct RTM Capabilities
Review your organisation and ensure that you have sufficient resources and capabilities to execute direct RTM business processes as well as to manage third-party RTM players, responsible for your outsourced business processes.
D. Strength of Your RTM Partners
Assess the strength of the chosen RTM partners for the outsourced RTM business processes. The assessment needs to cover relevant capabilities (e.g., commercial, logistical, financial, back-office, technical services, etc.) of your RTM partners as well as your importance (share of mind) to their business, their geographic and / or channel customer coverage, etc.
E. Customer Landscape and Level of Consolidation
Analyse your customer base and segment your customers. You might want to end up with differentiated RTM and service models for different customer segments or trade channels – e.g. Direct RTM model for top customer segments, Hybrid model - for mainstream customers, and Indirect RTM for less profitable customers.
F. RTM Costs
Map your RTM costs and compare the costs of running direct RTM business processes vs. outsourcing them to third party RTM players. Always consider alternatives to (partially) change your RTM set up, when required.
Do you want to assess the strength of your current RTM models? The RTM Navigator assessment can be a good starting point. Learn more…
Do you need to deep dive and redesign your RTM or to address some of your RTM issues? Please, get in touch and I will be happy to support you. For more information, visit www.sm-strategy.com
#RTMstrategy #RTM #routetomarket #distributormanagement #salesmanagement
SM STRATEGY d.o.o.