Develop your distribution strategy

May 15, 2013

Plans must expand their distribution channels and engage new customers

Health plans are grappling with a multitude of new product distribution opportunities in the market including state exchanges, variations on private exchange models, and new retail opportunities. Plans wonder about the risks and how it will change their business.

The questions are the right ones. Retailers have developed approaches to tackle the dilemmas of multi-channel distribution and management. Here are the big lessons from the retail world, and how health plans should incorporate them to distribute products in new ways.

1 Choose Your Partners Wisely

Health plans across the country will need to find partners to access new channels to distribute product. Choosing the wrong distribution partners wastes time and resources and worse, your reputation and future prospects can be damaged when organizations do a poor job of representing your brand in the market or targeting the wrong customer segments.

Develop partnership guidelines that focus on key success criteria. Then use pilot projects to gain learning and validate the partnership.

  • Develop your channel strategy, a set of priorities and plans for all the places you want to sell products. Consider partnerships outside your current broker relationships like traditional retail or new online channels. It is inevitable that a major source of new customers will come from channels that are not built yet.

  • Ensure that you and potential partners are aligned on pursuit of your key target market segments.

  • Make the big product and pricing decisions before engaging partners to help keep you focused on partner fit.

  • Determine whether potential partners have appropriate support systems in place to support a great customer experience.

  • Communicate sales and service expectations clearly and often.

These lessons are still utilized today by retailers looking to expand distribution. For instance, when a global beverage retailer branched out from private label stores to supermarkets, they had to identify the best partner stores, understand the competition, and what grocery store customers look for in that environment. Their roadmap called for a limited initial product release to test the waters, zeroing in on the best channel partners and the best marketing approaches. The lessons then dictated that they expand the roll out methodically and continue to make small changes along the way--optimizing sales and enhancing their brand image.

2 Engage Consumers Like Your Business Depends on it

New product distribution channels will add layers of complexity for consumers to navigate. They can also dilute the value of your customer experience and brand. It is important to standardize and simplify your product and message as much as possible when product distribution is not completely in your control. The best plans will make their strategic positioning much more visible, and consumable.

Focus on delivering an experience that meets consumer’s information and engagement needs:

  • Tell a story. Consumers need information about your trustworthiness as well as your products. Give them simple explanations that capture how your product benefits them. Help them through the selection and buying process with easy-to-understand content and support.

  • Gather customer intelligence and use it. Before you distribute, test products with consumers in the target market. Note where they get lost in the process and build up your support content around it. Update products as needed before you go to market.

3 Measure and measure again    

Expanding distribution means looking at measuring and managing success differently. Start by understanding the questions you need to answer on a per channel basis.

  • Are customer satisfaction and support costs in line with expectations?

  • Is each partner delivering sales as per plan?

  • Is each partner selling product to the target market segments as expected?

  • What are the differences in cost associated with each partner?

Then roll up that information into your aggregate plan. Review this information on a regular basis and make changes when needed. In the retail world, senior managers at Amazon.com plan channel strategy annually and meet weekly to go over reports that show the business measured across all distribution channels. They analyze how channels are trending, what products are selling well, and where changes need to be made to deliver on the business goals.

4 Use technology to relentlessly drive down costs

Expanding distribution means increased pricing pressures as the market becomes more competitive. Technology can’t solve for all pricing pressures, but you can limit the impact by automating distribution tasks wherever appropriate:

  • Standardize the integration process across your partners as much as possible. Expensive one-off integrations are costly to build and maintain.

  • Integrate efficiently with partner call centers to reduce customer frustration.

  • Drive sale and support services online for consumers.

Again lessons from retail come into play here. Consumers have become so enamored with shopping online that major retailers like Nordstrom and Wal-Mart are trying to replicate the online experience in their stores. Many are deploying mobile check out, electronic shopping, information kiosks, and self-checkout in an attempt to meet consumer’s demand to replicate the online, self-service experience-a great example of utilizing technology to meet consumer needs and saving money in the process.

5 Keep pushing beyond your comfort zone

Steps one through four help put your organization in position to anticipate and respond to market changes. Yet, the landscape will evolve rapidly; new competitors will no doubt emerge; consumer and employer needs will become more specific and change over time as demographics shift. Those who don’t learn these lessons will be slow to distribute product effectively and to respond to market changes as they occur. Successful retailers are those who successfully deliver products to the customers who want them an engage meaningfully with them create loyal customers.

Paul Lambert is president, Point B Management Consulting
Mary Haggard is senior associate, Point B Management Consulting