Customer-Oriented Distribution Model
Match your distribution channel to your buyer type -- five channels for five distinct customer pr...
The Customer-Oriented Distribution Model maps five distinct distribution channels to five buyer types, each with different purchasing behaviors, deal sizes, and support requirements. The five pairings are: (1) direct enterprise sales for the enterprise executive buyer -- high-touch, relationship-driven, large deals; (2) web-based self-service for the end-user buyer -- low-touch, try-before-you-buy, small transactions; (3) Sales 2.0 for the department manager buyer -- inside sales supported by web tools, mid-size deals; (4) traditional two-tier distribution for the design engineer buyer -- technical evaluation through distributors and resellers; (5) value-added resellers (VARs) for the small business owner -- local, trusted advisors who provide complete solutions.
The critical insight is that distribution channel choice is not a logistics decision -- it is a customer experience decision. Each buyer type expects to purchase through a specific channel, and using the wrong channel creates friction that prevents the sale. An enterprise executive expects face-to-face meetings and executive briefings. An end user expects to sign up online and start immediately. Forcing either through the other's channel guarantees failure.
For companies crossing the chasm, the distribution channel must match the buyer profile of the beachhead segment. This often requires building a new channel capability that did not exist in the early market, where direct sales to visionary executives was typically the only channel.
- {"title":"Channel Must Match Buyer Type","description":"Each buyer type has a preferred way to evaluate, purchase, and receive support. Forcing them through a mismatched channel creates friction that prevents adoption regardless of product quality."}
- {"title":"Channel Economics Must Work","description":"Each channel has a different cost structure: direct sales is expensive per transaction, web self-service is cheap per transaction. The deal size must justify the channel cost. Selling $50/month subscriptions through enterprise sales reps is economically unsustainable."}
- {"title":"Channel Choice Affects Pricing Strategy","description":"Distribution channels impose pricing constraints. VARs need margins. Direct sales need deal sizes that justify high-touch engagement. Web self-service needs frictionless pricing. Your pricing must work within the economics of your chosen channel."}
- {"title":"Crossing the Chasm May Require Channel Change","description":"The early market channel (often direct sales to visionary executives) may not match the beachhead segment's buyer type. Be prepared to build or acquire a new channel capability for the crossing."}
- Identify Your Beachhead Buyer TypeDetermine which of the five buyer types predominates in your beachhead segment: enterprise executive, end user, department manager, design engineer, or small business owner. This is driven by who has the budget and decision authority.Pro tipLook at how your beachhead buyers currently purchase the market alternative you are displacing. They will expect to purchase your product through a similar channel.
- Select the Matching Distribution ChannelMatch your buyer type to the appropriate channel. Enterprise executives require direct sales. End users require web self-service. Department managers require Sales 2.0 (inside sales plus web). Design engineers require two-tier distribution. Small business owners require VARs.WarningDo not select a channel based on what your sales organization already does. Select based on what your buyer expects. Build the channel capability you need, not the one you have.
- Align Pricing to Channel EconomicsEnsure your pricing model supports the channel economics. Calculate cost-per-transaction for the channel and ensure deal sizes provide adequate margins. Consider volume discounts, subscription models, or partner margins as needed.Pro tipWork backwards from channel economics: if VARs need 30-40% margins and your product costs $100, the end-user price must be at least $140-170. If that price is not competitive, the channel may not work.
- Build or Acquire Channel CapabilityIf your current distribution capability does not match the required channel, invest in building it. This may mean hiring inside sales reps, building a web self-service platform, recruiting VAR partners, or establishing distributor relationships.Pro tipStart with a small number of channel partners and prove the model before scaling. One excellent VAR partner who understands your beachhead is better than twenty who do not.
Salesforce's beachhead targeted department managers (sales managers at mid-market companies), which matched the Sales 2.0 channel: inside sales reps supported by web demonstrations, free trials, and online onboarding. This was dramatically different from the enterprise direct sales channel used by Siebel, their market alternative.
After conquering the testing beachhead (which used web self-service and technical evaluation), VMware's expansion into production data center virtualization required direct enterprise sales to IT executives making strategic infrastructure decisions. They built the enterprise sales capability as they expanded up-market.
Moore developed this model because he observed that companies crossing the chasm often defaulted to their early market distribution channel -- direct sales to executive visionaries -- even when their beachhead segment required a completely different channel. A product targeting small business owners through enterprise sales reps, or targeting end users through VAR partners, would fail regardless of how good the product was.
The five-channel model codified the relationship between buyer types and their preferred purchasing experiences, giving companies a framework for making channel decisions based on customer behavior rather than internal sales organization preferences.