As Seen in CFO Studio Magazine Q1/Q2 2016 Issue
Take Control of Channels:
The CFO’s role in expanding access to consumers
Increasing channels for greater consumer access may be under discussion at your company. As CFO, you are asked to project future revenue and costs associated with proposed growth strategies. Four tactics that work:
•Acquisition is the most dramatic way corporations expand how consumers get their products. When the C-suite executives of Pepsico looked to increase channels, they decided to acquire prominent restaurant chains, like Pizza Hut and Taco Bell, where only Pepsi beverages would be consumed by diners. Imagine the depth of the projections and scenarios Pepsico’s CFO provided to guide such an important decision.
•Franchising can expand the ways products reach consumers —with more shared responsibility than acquisition involves. What a concept: Hard-working people pay your corporation for the privilege/right to run their business your way. Imagine you were the CFO of H&R Block leading the firm’s decision to add franchised locations.
•Vendor certification and licensing programs can also expand how your products/services can get into consumers’ hands. For decades, Microsoft achieved an incredible level of influence over value-added resellers (VARs), and made millions as they attracted, then squeezed, money, time, and commitment from thousands of tech firms. What would you do if you were the CFO of a competitor?
•Dealers and distributors can help manufacturers deliver product and serve consumers. The CFO plays a major role in establishing rules and roles for distributors. If you were the CFO for Philips Lighting or General Motors, would you recommend that distributors be viewed as best customers, as strategic partners, or as competitors?
Optimally, the method chosen to increase channels and consumer access depends on how your desired customer(s) prefer to find and receive your product. But many companies select channel strategies based on their past experience and comfort. If an executive has participated in even one successful acquisition (or franchise) during his/her career, that channel will likely receive favorable consideration.
Meanwhile, Risks Raise Costs
Because the tendency to default to familiar strategies can blind you to potential problems, it is worth the time and effort for you and other members of your C-suite to intentionally broaden the options you consider for increasing channels. And then, also consider the impact that eroding interpersonal relationships, unbridled use of social media, and increased corruption have on risks and costs.
In our evolving digital world, channels now include joint ventures with search engines, spokesperson contracts with teenagers on YouTube, and online subscriptions/ memberships. Those are examples of civil, ethical, fair approaches. But to gain increased access to consumers, some companies use hacking into databases, identity theft, and online reputation-bashing. That is a warning to CFOs that all channel-expansion plans must include money for crisis communications programs that work at the speed of social media.