KCRA Intelligence: Commercial Execution—Channel, Category & Sales Management Consulting

• u0007Strategic planning: making the "where to play" participation strategy, "how to win" competitive strategy, and financial strategy consistent with an overarching strategic ambition.

• u0007Commercial planning: developing go-to-market strategies for business units and individual brands that are in line with the participation, competitive, and financial strategies.

• u0007Operational planning: devising sourcing, manufacturing, and distribution strategies to deliver the business unit and brand go-to-market strategies.

Commercial planning establishes the conditions that drive a company's selling expenses, operational planning its cost of goods sold. Together with the general expenses they share, the commercial and operational planning thus drives a company's overall operating expense position.

Although they usually run these planning processes separately, companies seek to integrate them through integrated business planning (IBP) processes that establish the parameters of strategy execution for the current year and typically over a two- to three-year horizon, and sales and operations planning (S&OP) processes that coordinate that execution on a monthly basis.

The Marketing and Sales System

Companies develop and execute their commercial plans through their marketing and sales functions. These functions combine to form a system that consists of the following components:

• u0007Insights, segmentation, value proposition, brand and market positioning: the research and data insights that describe customer behaviors and needs, and the brand and market positioning designed to respond to them

• u0007Channel, category & sales: the channel strategy, route-to-market, merchandising, and sales coverage and engagement model designed to maximize the revenue generated by the commercial plans

• u0007Pricing and value capture: setting price regime, architecture, list prices, and discount schemes to maximize the value captured from commercial plans

• u0007Customer experience, communications and relationship: designing the customer journey, structuring and developing content for messaging and communications with customers, and managing the customer relationship from initial contact through sales, consumption, and service to build customer engagement, trial, and loyalty

• u0007Assets, governance and operating model: the management infrastructure that enables the consistent performance of commercial execution, pricing, and customer experience

The Object of Commercial Execution

The objective of commercial execution activities is to maximize revenue while minimizing selling expenses. Companies accomplish this by adjusting the three levers.

• u0007Where? Determining the channel mix, integrating new channels and designing the distribution routes-to-market, migrating customers across channels, and allocating resources to different channels consistent with their respective roles

• u0007What? Tailoring product offerings, promotion spending and visual merchandising to channels.

• u0007How? Tailoring the selling model whether oriented toward transactional, features and benefits, or insights-led sales techniques to customers and channels

Companies must strike a delicate balance as they adjust these levers, inasmuch as they determine both the revenue generated by satisfying customer needs and adapting to their preferred behaviors and the costs of serving them. Ultimately, then, commercial execution is a critical contributor to the profit a company actually realizes, given its strategic and operational plans and market and brand positioning.

• Naima Hoque is an analyst for Kennedy's strategy and operations management consulting service lines. While beginning her career as a consultant at Ernst & Young, Naima has primarily held equity research positions focused largely on technology-driven companies at Fidelity Management & Research Co., Columbia Management Group and two start-up hedge funds.

• Nathan Simon is the lead analyst for Kennedy's strategy and operations management consulting service lines. He has over 10 years of experience in internal and external consulting roles, and most recently managed an independent consulting practice geared toward aligning clients' strategies and organizational structures and processes. As part of this venture, Nathan partnered with a Harvard Business School professor on research designed to measure the performance of organizations' internal coordination systems.